Despite being one of the highest banked populations in the world, Canadians are increasingly turning to alternative payment tools, including mobile, PayPal and prepaid.
A new study, “How Canadians Pay Today”, commissioned by the Canadian Prepaid Providers Organization (CPPO, www.cppo.ca), revealed that the use of these means, led by prepaid, has increased by 14 per cent since 2016.
Detailed findings and trends include:
- As cash purchases continue to slow, consumers are ready for non-traditional banking. Nearly two-thirds (65 per cent) of consumers have made fewer cash purchases than the year before, compared to 58 per cent in 2016, especially Millennials (75 per cent). While the vast majority (99 per cent) of Canadians have bank accounts, around three in ten (29 per cent) want to sidestep traditional banking in favour of new tools that offer convenience and cost savings;
- Credit and debit cards remain popular, but adoption of alternative payment tools is on the rise. Credit and debit cards are used most frequently by Canadians (40 and 33 per cent respectively), followed by cash (18 per cent). However, 73 per cent—up from 59 per cent in 2016—have started using other payment technologies, including PayPal (55 per cent), prepaid cards (27 per cent), Apple Pay (11 per cent), Google Pay (seven per cent) and other mobile payments (seven per cent). But prepaid cards saw the highest growth, jumping 17 percentage points since 2016. Among those using these tools, six in ten (61 per cent) of Canadians say they are comfortable with their security;
- Canadians are turning to new tools and apps to help them budget. More than four in ten (43 per cent) Canadians struggled to stay within their budgets in the past year and 23 per cent often have running balances on their credit cards. Canadians find that certain tools are useful in helping them stick to budgets, including easy-to-use online tools that track spending (46 per cent) and budgeting apps (43 per cent) as well as reloadable prepaid cards free of interest charges and overdraft fees that limit spending (34 per cent). Three in ten (31 per cent) currently use apps to manage their finances. Moreover, nearly half (46 per cent) with children under 18 years old would give them spending allowances on prepaid cards to help control and monitor their spending; and
- Evolving workplace arrangements and technology call for real-time pay. Statistics Canada estimates that 2.18 million Canadians are taking part in some form of temporary work1. Evolving workplace arrangements and technology are shaping payment expectations among the workforce. Six in ten (62 per cent) Canadians said they feel more loyal to a company that pays them in real time and 39 per cent would prefer to be paid via prepaid cards. Prepaid capabilities are rapidly replacing cheques as a less expensive and more secure option for issuing payments, incentives and disbursements. A third of workers (33 per cent) prefer to receive incentives through a prepaid card to enjoy real-time fund availability and flexibility in redeeming their pay.
The CPPO is the voice of the rapidly growing $3.8 billion Canadian prepaid payments industry. Prepaid has grown rapidly as a major form of electronic payment without involving credit. It is being used to power new FinTech and PayTech solutions aimed at improving customer experience, financial inclusion and faster payments delivery through its ease of use and ubiquity of acceptance.
“As Canadians increasingly opt for non-traditional banking solutions, they are raising the bar for a faster, frictionless experience and added convenience in the entire payments industry,” said Peter Read, CPPO chairman of the board. “Prepaid has emerged as a popular foundation for innovations in bank account replacement, money transfer, in-app payments and more.”
1 BMO Wealth Management, “The gig economy: achieving financial wellness and confidence”, Insight, July 2018.