Telcos Fade Even Further From the Mobile-Wallet Scene With the Collapse of Suretap

The failure of Suretap Wallet L.P., the Canadian mobile-payments service controlled by five telecommunications companies, raises further questions about the role, if any, telcos will play in this business, experts tell Digital Transactions News.

Suretap, which announced Friday it will shut down effective Aug. 26 after barely more than a year in the market, is the latest casualty of a rapidly moving winnowing process that only last year claimed two other payments ventures controlled by mobile carriers—Softcard in the United States and Weve in the United Kingdom.

The telcos behind Suretap—Rogers Communications Inc., BCE Inc., and Telus Corp., plus Virgin and Koodoo, brands controlled by BCE and Telus—command most of the wireless market in Canada and operate retail locations where consumers can be coached on how to load and use the application on their new phones. And the mobile-wallet market is still new enough, and fluid enough, that the Suretap carriers could try again. But observers doubt they will.

Indeed, once-burned telcos aren’t likely to make more efforts to market mobile-payments products, according to former insiders. “Personally, I think they’re done with it,” says Spencer White, chief operating officer at Atlanta-based Sionic Mobile Corp., and formerly an executive with AT&T Inc. and with Softcard, which was owned by AT&T, T-Mobile International AG, and Verizon Communications. “The carriers are more likely to go deep in other areas. They’re focused on [the Internet of Things] and big data.”

They’re also focused on businesses like identity management, which can enhance the security of payments and which mobile network operators are uniquely suited to deliver for a fee. “Mobile devices are different from laptop and desktop computers,” says Almis Ledas, who has served since November as president of Suretap and is also chief operating officer at Enstream, a technology joint venture of Rogers, BCE, and Telus. “Mobile companies can and do keep track of where users are and have a billing relationship with them.” Ledas estimates operators can identify the “discrete user” of a device in 60% of cases.

Ledas sees only a small impact from Suretap’s demise. “I’m not aware of any [mobile network operator] that has predicated its P&L on success in payments,” he says.

The withdrawal of wireless firms from mobile payments comes just a few years after the companies were thought to hold the upper hand in negotiations with financial institutions because they controlled the mobile phone’s secure element, where encrypted payment credentials were housed. For years, in fact, while near-field communication offered great promise for mobile transactions, the technology languished while telco and bank executives scrimmaged over pricing and revenue issues.

But telcos aren’t the only ones that have stumbled in this business. In June, a consortium of 40 major retailers called Merchant Customer Exchange LLC ended a pilot for its CurrentC wallet in Columbus, Ohio, with no plans for a rollout. And general-purpose wallets from Alphabet Inc., Apple Inc., and Samsung Electronics Co. Ltd. have struggled to win consumer adoption and usage.

Apple Pay’s arrival in Canada earlier this year, though, had much to do with the demise of Suretap, experts say. Apple’s mobile-payments service has won support from five major Canadian banks, including Canadian Imperial Bank of Commerce, the only independent financial institution supporting Suretap. “That fragmented an already small market,” says Catherine Johnston, chief executive of ACT Canada, an Ajax, Ontario-based payments associations focused on chip and mobile technologies.

On top of that, the NFC-based Suretap didn’t have an immediate revenue stream. While Softcard developed a business model that depended on payments from issuers to have their cards loaded in the Softcard wallet, Suretap hoped to ultimately levy fees for matching customers with providers through its loyalty platform, Ledas says. “It appeared to be very hard to get banks to pay for access,” he says.

The wallet app had been downloaded by 180,000 users by September, the last time the venture released a number, and that doesn’t count the handsets that came preloaded with the app. Ledas tells Digital Transactions News no more than 100,000 had registered for the service.

And the game was about to become even more expensive. While Suretap had just introduced a rewards program, it likely faced ever-rising costs. Observers say consumer incentives and offers can’t be modest efforts these days with so many more wallets operating, including ones from powerful financial institutions that no longer have to rely on telcos to grant access to the secure element. Royal Bank of Canada, for example, in December 2014 introduced a wallet that relies on host card emulation, a cloud-based provisioning technology.

“You have to literally buy the business,” notes Aaron McPherson, an independent payments analyst. “The fact [Suretap] is getting out suggests they didn’t have the stomach to do what it takes.”

Ledas says the venture’s parents see greater opportunity in other businesses. “We felt we can focus on areas where we can make a difference, such as subscriber verification and identity-management services,” he notes. As for Suretap, he says, “We couldn’t build a vision of the future where it could recover its costs.”