How Mobile Payment Works in Canada -

Mobile payments are made using a smartphone or tablet instead of cash or a card.

This form of electronic payment has become increasingly popular in Canada: In 2020, nearly one-third (29%) of Canadians said they had made a purchase using a mobile payment or a digital wallet, according to a 2021 report by Payments Canada[1].

Knowing more about the apps that make mobile payment possible, and what it’s like to use them, can help you decide whether mobile payments are right for you.

What is a mobile payment?

A mobile payment is made using an app on your smartphone or tablet. Information stored on your device is used to complete a purchase. Mobile payments reduce the need to use a traditional form of payment like cash, or a physical debit or credit card.

Types of mobile payment apps

In general, the term “mobile payment” can refer to three main digital payment methods.

Banking and payment apps

Most banks in Canada have their own apps that customers can download to their phone or tablet. These apps allow clients to accomplish banking tasks just about anywhere. Common features include mobile money transfers such as Interac e-transfers to any recipient’s email address.

Wise and the PayPal are examples of non-bank mobile payment apps that allow you to send and receive money electronically.

In-app payments and e-commerce apps

Some mobile payment apps allow you to buy a specific service and pay for it within the app using a linked payment source like a credit card. Examples of this kind of in-app e-commerce are the Uber and Starbucks apps, where you can place orders using your stored credit card information.

Digital wallets

Sometimes called e-wallets, digital wallets allow you to store payment information from all of your credit and debit cards on your mobile device. Digital wallets are possibly the “truest” example of a mobile payment because they function in exactly the same way as a physical payment card, and can be used at any merchant that offers contactless payment. Common wallet apps are Google Pay, Apple Pay and Samsung Pay.

It’s worth noting that a digital wallet is a very different form of mobile payment than a mobile banking or payment app. The latter will only let you send or receive money virtually to other people. Banking and payment apps don’t typically allow you to make purchases at physical stores.

How mobile payment apps work

Mobile payments work differently depending on which type of payment you’re using and which app you choose.

Banking, payment and e-commerce apps

With banking, payment and e-commerce apps, you’ll first download the app, then enter your bank account information. Once your information has been authenticated, you can sign in to your account just as you would when you access your bank or PayPal account online using your computer.

You can do almost all your banking via your mobile phone and even deposit cheques. You can also follow the steps to send money as you would using your bank account online, although the specific steps depend on your particular bank or payment app. Often you just need a recipient’s email address to send them money using an e-transfer.

Digital wallets

Digital wallets work a bit differently because you can use them to make in-person payments at brick-and-mortar stores. To get started, you can download the mobile wallet app and add your credit and debit cards. You can even upload loyalty and gift cards to your e-wallet.

To make a purchase, hold your mobile device above a contactless terminal just as you would with a credit card. Digital wallets rely on technology called Near Field Communication, which allows digital devices to communicate with one another when in close proximity. Your e-wallet uses this technology to communicate your payment card details to a merchant’s payment terminal.

Mobile payment vs. digital wallet

A digital wallet is one type of mobile payment. Rather than accessing only a single account (as you do with a banking app) or ordering a service within an app using stored payment information, a digital wallet allows you to make a variety of payments from any of your debit or credit cards you’ve loaded into the e-wallet.

In many ways, a digital wallet app functions just like a physical wallet, but instead of carrying around a handful of payment cards, you just need your mobile phone to complete transactions.

Unlike most mobile payment apps, a digital wallet is a much more flexible form of payment because you can make purchases with any merchant that accepts contactless payment.

Popular mobile payment options in Canada

Apple Pay. The digital wallet offered by Apple is one of the most popular forms of mobile payments in Canada. A unique feature is that you can enable Face ID to secure your wallet from unauthorized transactions. You can use Apple Pay with most major financial institutions in Canada, and it comes pre-loaded to Apple devices like iPhones.
Google Pay. Compatible with most Canadian banks’ credit and debit cards, Google Pay also Android users to add gift cards, loyalty cards, event tickets and even boarding passes.
PayPal. A popular payment app that lets you send and receive money domestically (for free) and internationally (for a fee). You can also use PayPal to make purchases with some online retailers.
Banking apps. Banking apps allow you to do many financial activities like paying bills, sending e-transfers, and depositing cheques using your mobile device, and are an especially common offering at online-only banks.

Payments Canada, “Canadian Payment Methods and Trends 2021 report,” accessed December 16, 2021.

DIVE EVEN DEEPER

How Direct Deposit Works and How to Set It Up in Canada

Direct deposit is a fast, convenient alternative to waiting for a paper cheque to arrive in the mail, and it requires no work on your end after the initial setup.