Convenience and rewards are the dominant themes in this year’s Canadian Payment Methods and Trends (CPMT) report by Payments Canada.
Credit cards are clearly paving the way for friction-free payments and luring new customers with lucrative rewards programs, online and mobile banking are gaining the trust of Canadians as electronic finally overtakes paper, and social media payments are just around the corner, thanks to new partnerships in fintech.
“There were more than 21.3 billion consumer and business payments made in 2016 worth more than $9 trillion, so even small changes in behaviours can have a big impact,” said Anne Butler, Vice President Policy, Research, Legal and General Counsel. “The annual analysis of how these payments were made provides important insights for Payments Canada and our financial institution participants as we collaborate on the ongoing modernization of Canada’s payments architecture.”
This year’s analysis shows the continued dominance of credit cards at the point-of-sale, totalling more than $462 billion in 2016. In fact, Canada has become a global leader in credit card use as growing numbers of Canadians – including businesses – use their credit cards for larger portions of their monthly spending to earn rewards. Credit cards experienced growth as more transactions shifted to online and in-app channels – such as the friction-free payment experience of Uber or iTunes – where more than 90 per cent of transactions are completed via credit cards. At the same time, more Canadians are choosing to tap their cards or phones at the point-of sale in lieu of cash or chip-and-PIN. This growing trend, since the introduction of mobile wallets to Canada in 2016, has served as an added boost for both credit and debit cards.
Another intriguing area of change is with transactions made online, including online banking, where user confidence is clearly building. Online transfers, such as Interac e-Transfer (which accounts for about 90 per cent of the volume in this category) and PayPal, topped all payment methods in rate of growth. In 2016, transactions were up by nearly 48 per cent to 177 million and value increased by 51 per cent to $68 billion. Also noteworthy is the growing use of online transfers by businesses. About 10 per cent of online transfers were made by businesses, compared to fewer than five per cent in prior years.
At the same time, electronic funds transfers (EFT), often associated with payroll and consumer bill payments, surpassed cheque value for the first time in 2016. Despite hitting this milestone, EFT use declined overall as more and more Canadians set themselves up for recurring bill payments – such as car insurance and utility payments – on their credit cards to earn rewards.
If China’s Alipay and WeChat Pay are any indication, a trend to watch is the rise of social media payments. While they have yet to hit the mainstream in Canada, the increased collaboration between new-entrant fintechs and Canadian financial institutions suggests a new level of convenience for banking and payments is on the way. Current pilot projects are leveraging traditional payment methods such as credit and online transfers on social messenger services. It is likely the use of the more ubiquitous Facebook, Google, and Apple messenger services will hold the most promise for social media payments in Canada.
Other noteworthy data points from the 2017 Canadian Payment Methods and Trends report include:
● Cash continued its decline but remains the most widely used payment method, making up more than a third of the total volume at the point-of-sale. Interestingly, in 2016 cash showed signs of stabilizing (or at least declining at a slower rate) than in the past.
● Debit use at the point-of-sale grew by five per cent and is the second most widely used payment method in this space, followed closely by credit cards. In 2016, debit represented $226 billion or 28 per cent of all point-of-sale value. Both debit and credit card growth was lifted by the increasing convenience of being able to tap a card or phone at the point-of-sale.
● Cheque use continues to decline slightly but the total average value of cheques remains on an upward trend. Fewer cheques are being written but for increasingly higher amounts. In 2016, the 798 million cheques written totalled almost $4 trillion.
The CPMT report was compiled by Payments Canada with the help of payment service providers, payments consultants and researchers to help build a comprehensive understanding of the Canadian payments landscape in 2016.