On September 29, 2021, Payments Canada released its annual report on payment methods and trends in Canada. [PDF] (the “CPMT”), which analyzes 20 billion payment transactions (totaling $ 9.4 trillion) in Canada in 2020 for trends in the payments landscape. The study results confirm that, as previously reported in our newsletter titled “How COVID-19 Has Accelerated the Removal of Species,” the global COVID-19 pandemic (the “pandemic”) has continued to accelerate the rise. digital payments. and other progressive payment trends.
In preparing for the CPMT, Payments Canada compiled data from multiple sources and worked with payment service providers, payment consultants, and researchers to compare the 2020 data with data from previous years. It should be noted that the CPMT examines payments by payment method (paper, card and electronic) against previous payment trend reports, which contrasted results in a point-of-sale context versus a remote environment. . This allows CPMT to better capture the growth of emerging channels such as e-commerce.
Digital / contactless payments
The shift from cash to contactless and digital payments persisted in Canada throughout the various stages of the pandemic. The CPMT confirms that while alternative payment methods were already on the rise, the pandemic has accelerated the trend towards contactless payment. For the purposes of the CPMT, contactless payments are considered to be contactless credit card payments, mobile payments (payment with a telephone or portable device) as well as digital or electronic payments.
Due to the effects of the pandemic in Canada (including door-to-door orders, physical business closures, and remote interactions due to health and safety concerns), Canadians have continued to move towards more ‘online shopping, and to favor the use of contactless and digital payments over cash.
As many Canadians actively seek to avoid handling cash and touching point-of-sale payment terminals, the rise in contactless payment has been supported by increased availability of contactless and digital payment options. , a general increase in contactless transaction limits (from $ 100 to $ 250 for some credit cards) and the introduction of new payment alternatives, such as QR codes through PayPal.
Regarding digital and contactless payments, the CPMT notes that:
- 43% of Canadians said the pandemic changed their long-term digital and contactless payment preferences;
- 67% of Canadians made more online retail purchases in March 2021, a significant increase from the 38% who did so in March 2020; and
- 58% of Canadians used less cash during the pandemic and 40% said they were uncomfortable with cash.
Cash, checks and paper
Despite changing payment preferences and trends mentioned above, CPMT notes that cash remained the third most used payment method by Canadians in 2020, accounting for around 17% of transaction volume. However, this figure represents a decrease of 17% compared to the volume of cash transactions in 2019.
The continued use of cash is linked to a number of factors. For example, the CPMT also notes that more than a third of Canadians who regularly use cash as a means of payment received a portion of their monthly income or compensation in cash or coins (an 8% increase over rates from 2019); and concludes that those who are paid in cash are more likely to pay in cash. Additionally, he finds that there has been an increase in the odd-job economy over the past year (with 13% of Canadians participating in the odd-job economy in December 2020 compared to 11% in March. 2020), and that 27% of odd-job workers in Canada are paid in cash. Additionally, the use of cash by Canadians aged 18 to 34, who were generally more likely to use digital or technological payment methods, also accounted for 29% of regular cash users. This could be because this age group was more likely to have lower incomes and not be banked.
The use of checks and papers continued to decline in 2020, both in volume (with a decrease of 26% compared to 2019, representing less than 3% of the total volume of payments in 2020) and in value (with a decrease of by 15% compared to 2019, representing 32% of the total value of payments in 2020).
Use of debit, credit and prepaid cards
Debit cards and credit cards remain the two most popular payment methods, despite declining transaction volume and value over the past year. In 2020, the use of debit cards decreased by 9% in transaction volume and 3% in transaction value, and accounted for 28% of payment volume and 3% of payment value.
Credit cards remained the most popular payment method despite an 11% decrease in payment volume and an 8% decrease in payment value; representing 30% of the total volume of payments and 6% of the total value of payments. Credit card use was boosted by rewards programs, with 88% of credit cards offering a rewards program overall, the most common being cash back (41%), travel (22%) and retail rewards (15%). Despite the decline in the volume of credit card payments and the value of payments in 2020, the use of credit cards has followed an upward trend over the past five years.
Prepaid cards were more likely to be used by young Canadians and unbanked Canadians. Although prepaid cards are a less widely used payment product, as a payment method they continue to be redefined with virtual prepaid products and in some cases are also associated with retail rewards programs.
Electronic Funds Transfers (“EFTs”), which include transactions made through a deposit or operating account held at a Canadian financial institution, have become an increasingly popular payment method for Canadian consumers and are the mainstay of payment. main type of payment in terms of the total value of the transaction. . CPMT notes that the impact of the pandemic has caused businesses to change the way they send and receive money, and EFTs are favored by businesses because of the speed and convenience they offer. (both businesses and consumers).
The CPMT found that the use of EFT among consumers continued to be driven by recurring payment setups and online bill payments, especially for utility and utility bills.
Online transfers, which are defined as electronic payments made between end users, including businesses, through online services and providers, which are either pre-funded or linked to a deposit or operating account held in a Canadian financial institution, have also experienced continued growth. In 2020, there were 800 million online transactions for a total of $ 249 billion. The CPMT also found that over the past year, online transfers:
Additionally, CPMT predicts that due to factors such as speed, convenience, security, and ease of tracking and splitting expenses, online transfers are poised to overtake debit card transactions in the near future.
Another growing trend discussed by the CPMT is the increase in purchases of goods and services made through storefronts and web applications (i.e. the e-commerce environment). As predicted in light of the pandemic, the product categories that saw the strongest year-over-year growth included personal care products and home entertainment, while travel and social subscriptions saw the strongest growth. a decrease. The CPMT finds that in 2020, there were 477 million e-commerce payment transactions in Canada, worth $ 56 billion. This figure reflects:
- the creation of new online stores by Canadian retailers increases by 20%;
- 11% of companies are investing in digital platforms, either for the first time or to increase their digital presence;
- 37% of businesses more often accept Interac e-Transfer payments;
- 15% of businesses accept PayPal payments more often; and
- 90% of Canadians who made a purchase online and almost half of all Canadians (47%) used e-commerce platforms more frequently to purchase a wider range of products throughout the pandemic.
The CPMT also finds that in terms of e-commerce demographics, young Canadians and those with household incomes over $ 80,000 were more likely to make frequent online purchases. Credit cards continued to be the preferred choice for e-commerce transactions, followed by PayPal.
The CPMT also mentioned digital currency. Digital currency refers to a wide range of electronic money, which includes digital currencies / cryptocurrencies such as Bitcoin, as well as stablecoins and central bank digital currencies (âCBDCsâ). The CPMT notes that few Canadians understand what digital currency is or have used digital currency to purchase goods and services, and states that the main reasons Canadians are not yet using digital currency are due to safety and security issues and a lack of knowledge. He also notes, however, that awareness of digital currency has increased dramatically during the pandemic, due to factors such as bigger offers, use cases, and extraordinary reviews. In addition, at least 80% of the world’s central banks are exploring the potential introduction of digital currency, and global use of digital currency is expected to increase. In fact, in a timely development on this front, the Hong Kong Monetary Authority issued a technical white paper on October 5, 2021, regarding the possible issuance of a CBDC, an “e-HKD”, and aims to provide a first look at the issue by the middle of next year. As a result, there is a need to better educate consumers about digital currencies, including the security implications of these currencies. As discussed here and in our previous newsletter, the pandemic has accelerated the move towards a more fully digital society, including the shift from paper payment forms to electronic payment methods. This leads, among other things, to the potential issuance of a CBDC, and the Bank of Canada is working with other parties to assess the economic, functional and technical design options of a CBDC.
Although the pandemic resulted in a reduction in economic activity and the overall volumes and values ââof payment transactions declined, it also played a significant role in exacerbating pre-existing payment trends in Canada. CPMT demonstrates a constant evolution towards contactless payment and an increase in alternative payment methods such as mobile wallets, EFTs and online transfers.[i]