Changing how Canadians pay

By Cyri elle Chir on and Viktori a Galociova

The payments ecosystem is rapidly evolving in Canada and around the world in response to the growing demand for digital payment options. Globally, contactless and mobile payments are becoming the norm as consumers become more familiar with digital options in many aspects of their lives, not just with financial services.

This trend is prominent in Canada where electronic payments, such as debit and credit cards, continue to rise while paper-based methods of payments (i.e. cash and cheques) decline each year. According to the 2019 Canadian Payment Methods and Trends report, published by Payments Canada, and which highlights payment consumer trends, debit and credit cards are the top two methods of payment in terms of the total volume share in Canada (29 and 28 per cent, respectively). Cash takes third place, with the total number of transactions at 21 per cent.

The diminishment of cash and cheques Although cash remains a popular choice for low value payments, for example paying for a morning coffee, in the last few years contactless debit and credit payments have been growing significantly.

As a result, our report showed that the volume of cash payments dropped by 9 per cent from 2017 to 2018 while their value declined by 7 per cent over the same period, and by 40 per cent and 32 per cent respectively since 2013. Not surprisingly, automated banking machine (ABM) volume has plummeted by 40 per cent and the value of their transactions by 11 per cent from 2013.

Overall trends are likely to rise even more as a result of a new Payments Canada rule that aims to enable a broader range of pointof-sale debit card acceptance. A key driver behind its creation is to accommodate the use of point-of-sale debit payments for transit. The new rule will also enable other possible use cases, as examples, payments at parking meters, for on-board purchases (airline/ferry/ train) and for vending machine purchases.

Similarly, cheques and paper have declined by 29 per cent from 2013 to 2018. However, their transaction value increased by 10 per cent over that period.

The cheque/paper volume decline is caused by more and more Canadians choosing to use Interac e-Transfers and other methods of

payment in lieu of cheques. At the same time, we find businesses are still using cheques: which is where most of the value is carried.

Explosive online transfer growth Outside of the rise in contactless payments, the highest growth in consumer use can be attributed to online transfers (which includes mostly Interac e-Transfers), growing by 52 and 44 per cent since 2017 in terms of volume and value, respectively.

Online transfers are commonly used as a convenient way to send money to friends, and to make payments such as rent. They also have become a popular means of sending money internationally; about 17 per cent of Canadians have transferred funds to recipients in other countries in the past six months. Most Canadians send money internationally in order to pay for goods or services or to send money to family and friends using PayPal or via their financial institution.

For Canadians, the U.S. is the most popular destination for international funds transfers. And about one in four customers who make international transfers are sending less than $100 per month.

B2B payments digitization In the past we’ve seen consumers digitizing their payments more quickly than businesses. This in part could be because it’s easier for consumers to change their behaviours. However, businesses are now catching up as 38 per cent of total business expenditures are completed with electronic funds transfers.

Looking ahead, our prediction is that we will see an increase in business adoption of digital payments, over legacy payments options, such as cheques, as a result of the implementation of ISO 20022 across Canada's modernized payments system.

Payments Canada will continue to invest in research and data in 2020 as we monitor ongoing trends on how Canadian consumers and businesses choose to pay for everyday expenses. The speakers at this year’s Payments Summit, which is taking place May 25-27, will touch on these trends, how best to respond to the challenges and to move on the opportunities presented in them.

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