Interview with Cyrielle Chiron, Payments Canada
A Changing Landscape
The end-of-year survey by Payments Canada demonstrates how much the COVID-19 pandemic continues to impact Canadians’ spending and purchasing habits. The survey results show the pandemic continues to accelerate several trends we’ve seen over the last few years — including the adoption of digital and contactless payments in Canada.
The study provides a moment-in-time perspective on Canadian spending behaviour compared to pre-COVID-19, and acts as a follow-up to the May 2020 study conducted during week five of the pandemic.
Key findings from the survey include:
• 44 percent of Canadians say COVID-19 has changed their payments preferences to digital and contactless long-term
• 61 percent of Canadians are spending less overall
• 47 percent report tapping their debit and credit cards more often than pre-COVID, compared to 53 percent at week five of the pandemic
• 42 percent are uncomfortable handling cash in general
• 29 percent are using food delivery services such as Uber Eats and Instacart more often than pre-COVID-19 (up 3 percent) and 41 percent reported tipping more (up 12 percent)
To gain more insight, we talked to the association’s Cyrielle Chiron, Head, Research and Strategic Foresight.
Q: What are the key changes in the trends between the Canadian Payments: Methods and Trends 2020 and 2019 reports? And what are the drivers?
A: The Canadian payments ecosystem continues to be influenced by domestic and international innovation, payment system modernization and regulators’ efforts to define the payments industry of the future. Canadian consumers and businesses have made it apparent that when it comes to payments, efficiency and convenience are vital.
The Payments Canada ‘Canadian Payments: Methods and Trends 2020’ (CMPT) report analysed the 22 billion payment transactions made in 2019, totalling CA$9.9 trillion in value. It found that Canadians continue to adopt new and evolving digital payments methods and channels. There was a large surge in electronic payments and a continued shift away from paper-based payment methods in 2019, which we expect to continue. We also saw credit card use exceed debit for the first time ever, growing 16 percent in volume and 11 percent in value in 2019. Contactless payments also grew dramatically in 2019, by 15 percent in volume and 20 percent in value.
The annual CPMT report is focused exclusively on 2019 payment methods and trends and does not reflect any impacts of COVID-19 on payments behaviour. However, Payments Canada released separate research on the impact of COVID-19 on payment trends in Canada earlier this year. The study found that the COVID-19 pandemic deeply impacted the global payments industry, as millions of businesses and consumers shifted their payment behaviour.
Q: With COVID-19 vaccinations on the horizon which of the trends that you have seen in 2020 resulting from the pandemic, do you expect will be temporary? And which ones will be permanent?
A: Payments Canada collected data from April 17-19, 2020 and September 8-16, 2020 to evaluate COVID-19’s impact on Canadian payment preferences. The latest data indicates that a number of payment trends observed in April 2020 have prevailed including: less spending overall, increased use of electronic payments and e-commerce; a preference for contactless and online/mobile banking; and a decline in the use of cash and cheques. While these trends have been observed in our CPMT report for several years, COVID-19 has further accelerated them.
In terms of digital payment preferences continuing after the pandemic, 44 percent of Canadians say that COVID-19 has changed their payment preferences to digital and contactless for the long-term.
Beyond the continued shift toward digital and contactless payments, Payments Canada is building the foundation for the next generation of payments to ensure Canadian consumer and business needs for more control, speed, convenience and affordable payments methods are met, including with the launch of Canada’s real-time rail in 2022.
Q: You reported that cash, cheques, and prepaid are in decline. Do you see this continuing or bottoming out and why? What roles do you see for these payment methods?
A: While cash continues to decline, it will remain a payment option for the foreseeable future due to its store of value, anonymity and lower cost. Interestingly, Canadians reported mixed sentiment around the extent to which Canadians expect to use cash payments once the pandemic recedes. We found that 34 percent of Canadians don’t expect to return to using cash payments to the same extent they did pre-pandemic, while 31 percent expect to return to using cash payments more often as the economy recovers, even though they have favoured using either digital or contactless payments since the onset of the pandemic.
Prepaid cards remain a less popular payment but continue to have a high year-over-year POS growth rate. As noted in the CPMT, young (those aged 18-34) and unbanked Canadians are the most common users of prepaid payments products. This is driven by a lack of access to traditional banking products, such as debit and credit cards. However, prepaid cards are starting to be used by a wider base, as those who seek security and anonymity for purchases have turned to prepaid cards as an alternative to cash.
Business payments will continue to be a large driver of commercial cheque use. Of note, in 2019, 82 percent of all the cheque and paper items exchanged between Canadian financial institutions were images, and more consumers and businesses took advantage of digital deposit technology — a further testament to the rise of electronic preferences.
With the launch of Canada’s Real-Time Rail (RTR), our new real-time payments system, in 2022, we anticipate that commercial cheque use will be impacted. Underpinned by the ISO 20022 data standard, the RTR will support payments information travelling with every payment and act as a platform for innovation, enabling the introduction of new and enhanced payment products and experiences. Access to data-rich digital payments will support businesses being able to drop the cheque. The system will be operated by Payments Canada and regulated by the Bank of Canada.
Q: The COVID-19 pandemic has led to less Canadians shopping — and transacting — in other countries, notably the US. Have you seen any data on that point and if there has been a decline do you expect it to be temporary or permanent?
A: While we can’t comment on Canadian shopping trends in other countries, we do know that Canadians are spending less overall. In our most recent survey on the impact of COVID-19, 61 percent of Canadians reported that they are spending less than they were pre-pandemic. Payments Canada will continue to monitor this trend.
Q: What impact, if any, will the COVID-19 pandemic have on your Payments Modernization program, and in meeting your goals in 2022? Will there be any changes in your strategy and if so what are they?
A: We remain confident in meeting our goal to launch a real-time payments system in 2022. While COVID-19 has accelerated the digitization of payments, an always available system that delivers funds in seconds—providing a real-time capability—is required for Canada to keep pace with international counterparts, and to meet the needs of Canadians. Operated by Payments Canada and regulated by the Bank of Canada, the real-time rail (RTR) will allow Canadians to initiate payments and receive irrevocable funds in seconds, 24/7/365.
You can learn more about the modernization of payments in Canada, or about our research on Canadian payment trends, at www.payments.ca.
Payments Canada has released new data on Canadian payment trends since the onset of COVID-19, showing that Canadians continue to spend less overall, and are maintaining a digital-first mindset with continued preference for contactless payment methods. The study provides a moment-in-time perspective on Canadian spending behaviours compared to pre-COVID-19, and acts as a follow-up to the May 2020 study conducted during week five of the pandemic.
The new data indicates that a number of payment trends observed in May 2020 resulting from the pandemic continue, including: the increased use of electronic payments and e-commerce; a preference for contactless and online/mobile banking; and a decline in the use of cash and cheques. Canadians report mixed sentiment around the permanency of these payment preferences.
Although approximately 34 percent of Canadians report they do not expect to return to using cash payments to the same extent as pre-COVID once the pandemic recedes, 31 percent of Canadians expect to use cash payments more often as the economy recovers, even though they have favoured using either digital or contactless payments since the onset of the pandemic. While cash may be reintroduced into Canadian wallets, 44 percent of those surveyed report that COVID-19 has changed their payments preferences to digital and contactless for the long-term.
“In this most recent research, about 60 percent of Canadians report that they continue to spend less than before the pandemic,” said Tracey Black, President and CEO, Payments Canada. “Businesses across Canada are focused on how to best meet consumer needs as the pandemic continues. For many retailers, this includes building and leveraging an online presence and offering convenient and secure payment options for customers at point-of-sale.”
“There’s no doubt that the COVID-19 pandemic continues to accelerate the adoption of digital and contactless payments with a widespread shift away from paper-based payments,” said Cyrielle Chiron, Head of Research and Strategic Foresight, Payments Canada. “This is a trend we have seen over a number of years, including through Payments Canada’s recently released Canadian Payments: Methods and Trends 2020 report that showed a surge in electronic payments, which represented around 77 percent of all transactions in 2019. The reality is that Canadian consumers and businesses want more efficient, faster and more secure payment options, so we can expect this trend to continue long-term with a focus on payments innovation.”