Épisode 33 : Rapport canadien sur les modes de paiement et les tendances des paiements et les paiements en temps réel

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Seulement disponible en anglais.

Elizabeth (Liz) Dempsey:
Hi everyone. Welcome to another episode of The PayPod. I'm Liz Dempsey, Lead of Event Communications and Content at Payments Canada, and I'll be your host today. Each year, Payments Canada publishes a very important piece of research, the Canadian Payment Methods and Trends report, which provides a holistic overview of the payment landscape in Canada. The report also really digs into payment behaviors, which is so valuable not just for Payments Canada, but for the entire ecosystem. Today I'm joined by my colleague and friend Stephen Yun, the author of the CPMT, and we're talking about the current and future states of payments in Canada. Stephen, it's always such a pleasure to talk about payment data with you. 

Stephen Yun:
Thanks for having me, Liz. Looking forward to this.

Liz Dempsey:
Great. Let's get right into questions, and I'm going to start with this. So this is a big report with a lot of really interesting research behind it. Were there any findings that stood out to you in particular this year, Stephen, and why?

Stephen Yun:
Well, yes, I can think of three things that stood out for me.

Number one, we talk a lot about online transfers in our CPMT report. Online transfers have been the fastest-growing payment type in Canada over the last several years. They largely consist of Interac e-Transfer payments. What's interesting is that if you track the past five-year volume and value growth rates of online transfers, they've been decreasing over time. What this suggests is that usage has become widespread and is approaching market maturation. It's expected that the past five-year volume and value growth rates of online transfers will continue to decline and eventually flatten in the future. In other words, you won't expect to see the same triple-digit growth rates that we've been seeing in previous years that online transfers have been exhibiting. That being said, Interac has done a good job of continuing to create new ways to grow Interac e-Transfer usage, namely in the B2B payment space. 

Another thing that stood out in my eye when I was looking at this year's results was that the prepaid card segment is definitely gaining momentum. The five-year growth rate of prepaid cards is second only to credit cards within the card space. Since 2019, prepaid card volume and value have grown by 7 per cent and 24 per cent respectively. The total number of prepaid cards in circulation increased by 30 per cent during this same period almost matching data of credit cards at 33 per cent. The growth in the prepaid card segment is being driven by the increased usage of open-loop prepaid cards. Looking ahead, the trend towards more fintech operators expanding into open-loop prepaid cards in Canada is expected to continue. Many of these entrants have introduced reloadable prepaid cards that are targeted at younger consumers and positioned as a more economical and effective way for this demographic to manage spending than credit or debit cards. Growth within the open-loop prepaid card market will also come from commercial and government-funded programs, which have seen strong growth.

 And finally, the other thing that struck my eye when I was looking at this year's results was that many believed that the worst of the pandemic is behind us. The majority of Canadians were less concerned about COVID-19 since the start of the pandemic than ever before, and this sentiment was reflected in their payment attitudes and behavior. Fifty-one per cent of Canadians were unconcerned about COVID-19 while fewer than one in four Canadians, about 23 per cent, were concerned. To give you an idea of how this sentiment affected Canadians' payment behavior, consumers became less concerned about not being able to pay using contactless methods. There was a significant drop in the proportion of Canadians who said they avoided shopping at places that didn't accept contactless payments since the start of the pandemic; so 17 per cent in 2023 compared to 38 per cent in 2020. Consumer avoidance of using cash due to virus transmission concerns also decreased. There was a significant drop in the proportion of Canadians who said they were uncomfortable handling cash since the start of the pandemic; so 22 per cent in 2023 compared to 42 per cent in 2020. Canadians returned to pre-pandemic purchase habits, such as going to a physical store to buy food and groceries. But what hasn't changed is Canadian's affinity for digital payments, such as Interac e-Transfer, mobile or tap-to-pay card payments and buying many of their goods online such as clothing, household items, and health and beauty products.

Liz Dempsey:
Wow, so interesting to hear about that recalibration of Canadian consumer payment behavior. So let's talk about the big innovative trends in payments. The research and data are really fascinating, and I don't even feel we've scratched the surface on certain trends like GenAI. What are the big innovations in payments and what is the research telling us?

Stephen Yun:
Certainly, GenAI is being talked about a lot these days. Our research reveals that both consumers and businesses believe the single most beneficial application of GenAI when it comes to payments will be improved fraud detection and prevention. For example, analyzing data patterns, anomalies and potential threats to help identify and prevent fraudulent activities in real-time. Forty-five per cent of consumers and 44 per cent of businesses indicated this would provide the most benefit for them.

Other ways in which GenAI will deliver value-added benefits to consumers include such things as providing price discounts and tailored rewards on the basis of their customer lifetime value, and helping consumers quickly search for products and automate the process of reordering frequently purchased items. For businesses, other ways in which GenAI will deliver value added benefits include automating payment processing and creating personalized experiences for their customers, such as generating personalized recommendations, targeted advertisements and automatically offering preferred payment options.

Another payment innovation on the Canadian horizon is account-to-account payments at the point of sale, also known as pay-by-bank. It lets consumers pay merchants directly from their bank account rather than relying on payment cards or digital wallets. The growth and evolution of real-time payment systems globally has spurred the adoption of pay-by-bank, offering an alternative to traditional credit and debit card payments. Our research shows that over a quarter of Canadians, around 27 per cent, would likely use pay-by-bank if it was available and its most important perceived benefit is that it offers enhanced security as you don't need to provide your credit or debit card details on the merchant's website to make a payment, which reduces the risk of fraud and helps to protect customer data. I find pay-by-bank especially intriguing. It represents an online payment method that ticks several boxes for consumers. It offers enhanced security as consumers do not need to provide their credit and debit card details to make a payment. This reduces the risk of fraud and helps to protect consumer financial data. It offers faster payment processing times — transactions are processed either in near real time or real time — which means consumers can track their spending and bank account balances more effectively. And it may be more convenient for consumers who do not have a credit or debit card or who prefer not to use one when making online purchases. Pay-by-bank may especially appeal to consumers focused on managing their finances while paying down revolving debt. Some Canadians avoid using credit cards altogether to stay out of debt or a debt buildup, but it may be hard to convince consumers to switch to pay-by-bank when they're already comfortable with using debit cards as a way of using funds on hand for making online payments. Future consumer uptake of pay-by-bank may come down to incentivizing Canadians for choosing this payment method. Our research shows that the uptake of pay-by-bank and retail may be especially desirable for consumers when rewards such as cashback offers, discounts or reward points that could be redeemed for store merchandise are offered. The data shows that 60 per cent of Canadians would be more likely to pay for their online purchase using pay-by-bank if they were incentivized. Retailers and businesses may be motivated to offer rewards to customers for using pay-by-bank over credit and debit cards for purchases or bill payments because of the cost savings from avoiding interchange fees. Being able to pay for in-store purchases using account-to-account transfers is also something that many Canadians want. Forty-five per cent of Canadians indicated they would be interested in being able to make payment to a merchant using Interac e-Transfer for an in-store purchase. So, consumer interest and adoption of pay-by-bank may extend to both online and in-store payments.

Finally, there's one other big innovation in payments that I'd like to mention, and that's cashierless stores. We've seen the rollout of retail stores in Canada that eliminates the checkout process, so consumers no longer have to wait in line to pay for their purchases. For example, at some food and drink stores inside Scotiabank Saddledome in Calgary and Scotiabank Arena in Toronto, customers can now tap a credit or debit card or payment-enabled phone to open a gate, grab items off the shelves and leave without checking out. Their payment card is charged instantly with no cashier and no checkout involved. To make it all possible, the ceilings at the store are covered in a web of cameras and the shelves are lined with sensors. The system then uses computer vision, machine learning and artificial intelligence to track when an item is picked up or put down, add the item to a virtual shopping cart and charge the customer. This technology is another example of how AI is being applied to make the payment experience easier for Canadians. Our research shows that 41 per cent of Canadians would be interested in shopping at a cashierless store. I think we'll see payment innovations such as cashierless stores become more mainstream in the future because it makes the payment experience more frictionless for consumers while keeping payments safe and secure.

Liz Dempsey:
So Stephen, now the burning question. I think we can all say that the introduction of real-time payments or the RTR payment system is going to have a huge impact on payment trends. That's the “what”, but from a research perspective, how and why will irrevocable real-time settlement change the payment landscape in Canada?

Stephen Yun:
Well, Liz, that's a really great question.

Our research tells us the majority of Canadians and businesses would use real-time payments for sending and receiving payments if it were available. But it also shows that real-time payments usage intent is higher among businesses than consumers.

So you may ask yourself, why is that? Well I think the benefit and value of real-time payments resonate more with businesses than consumers because businesses encounter more payment situations in which the importance of making payments on time is critical. For example, paying a vendor, employee payroll, sending a tax payment to the government or paying rent. There are also a number of situations in which businesses would use real-time payments to receive money, such as customer bill payment, refunds for cancellations, returns or overpayments and receiving government payments such as loans, grants or emergency benefits. Another key reason why real-time payments are appealing to businesses is that payments are irrevocable, meaning payments received this way would have little to no risk of chargebacks. Our research shows that guaranteed payments is the number one reason why businesses would accept payments using real-time payments, with 38 per cent of businesses citing this reason for its use. Chargebacks are bad for business because they not only result in lost revenue but can also damage the relationship between a business and its customers. Disputes arising from chargebacks can lead to negative reviews, decreased customer trust and potential loss of future business opportunities.

More efficient cashflow management represents another value-added benefit of using real-time payments for businesses. From our research, we know that delays in incoming and outgoing payments and cashflow management issues are the two biggest payment challenges experienced by businesses over the past six months. So the adoption of real-time payments would help businesses greatly improve the health of their financial operations.

When I think about the RTR payment system and how it's going to impact the payment landscape, I think it'll act as a lightning rod for ushering in more innovation around fighting fraud within the payment industry. This is something that interests businesses a lot. Our research shows that the possibility of real-time fraud monitoring is something that would encourage businesses the most to send or receive real-time payments with 37 per cent of businesses citing this reason for its use. This form of fraud detection involves proactively finding fraudulent activities as they occur using AI algorithms as opposed to relying on post-transaction analysis. So it represents an evolutionary advancement in the way the payment industry fights fraud today.

When it comes to consumers and their interest in using real-time payments, our research shows that there's a significantly greater proportion of consumers than businesses, 26 per cent versus 12 per cent, who don't know whether they would use real-time payments for sending and receiving payments. This result helps to explain why businesses are more likely than consumers to use real-time payments overall. I think there are two prevailing sentiments among consumers who fall into the camp of the undecideds. One has to do with the idea of, “why fix something if it isn't broken”, and the other has to do with the idea of, “let's wait and see”. For many Canadians, they're satisfied with the current digital payment options available to them, such as Interac e-Transfer, EFT, credit, debit and prepaid cards, and some Canadians are happy using cash and still want it available. Our research indicates the number one reason why Canadians are either unsure or unlikely to switch to real-time payments is because they prefer to use established payment methods, at 32 per cent. About one in 10 Canadians who aren't interested in switching to real-time payments also mentioned that they simply don't see a need for real-time payments. For me, this is an important insight because it says that there are close to 10 per cent of Canadians who aren't seeing the potential use cases for real-time payments. So it's incumbent on the industry as a whole to raise awareness and educate Canadians on the value and benefit of real-time payments.

Related to this awareness and education campaign will be the need to address some of the main questions and concerns raised by Canadians about real-time payments. For example, our research shows that the top three questions and concerns that consumers have about real-time payments are: Number one, “how do I know it's safe and secure to use?” Number two, “will my financial institution cover any money loss from payment fraud involving real-time payment transactions?” And finally, the third question is, “will real-time payments be free or will I have to pay a fee per transaction?”

Liz Dempsey:
So we've talked about innovation in real-time payments, which is all great, but the research is still showing that what Canadians really want are payment choices.

Stephen Yun:
That's right. Digital payment options continue to be on the rise and are gaining in popularity. Canadians desire more payment options that make their lives easier and deliver tangible value. But at the same time, Canadians also want continued access to tried and true payment options that they've used in the past due to their ease of use and dependability. Satisfaction and familiarity with electronic retail batch payment options such as Interac e-Transfer, EFT and card payments means that these payment options aren't going away, nor do Canadians want them to. For the moment, the majority of Canadians also have no desire to stop using cash. Our research shows that 55 per cent of Canadians have no plans to go completely cashless and still want to continue using it. There are several reasons why cash is used by Canadians. Many people still rely heavily on cash, particularly the elderly, the unbanked and those who use cash for small payments. And cash is seen as a reliable, widely accepted, safe and secure backup payment option, as well as a stable store of value in case of emergencies.

Our research also shows that the introduction of a digital Canadian dollar would have minimal impact on cash use among Canadians. Almost two in three Canadians, about 63 per cent, would continue to use cash if a digital Canadian dollar was issued by the Bank of Canada. When you consider that cash use saw a 15 per cent increase in transaction volume in 2023 compared to a year ago, it's a reminder that cash as a payment method is still a growing concern among Canadians. Payment choice also figures prominently when we look at the causes for why Canadians abandoned a purchase at the register or checkout. Our research shows that almost one in 10 Canadians, around 8 per cent, have abandoned a purchase at the register or checkout because they weren't able to pay using the preferred type of payment method, in the last six months. This figure is significantly higher among 18 to 34 year olds at 14 per cent, compared to other age groups.

This finding speaks to the importance of businesses to offer payment options desired by consumers, especially young Canadians, given that population projections suggest millennials will become the largest generation in Canada before the end of this decade.

Liz Dempsey:
Interesting. So my last question, Stephen, before we go, is what does all of this tell us about the near-term future payment trends?

Stephen Yun:
Well, Liz, when I think about future payment trends in the near term, we're going to see the following things happen. 

Number one, I believe that mobile wallet use among consumers will continue to rise in Canada. The first mobile payment app to appear in Canada was launched back in 2012. Since then, Canadians have been slow to adopt mobile wallets for making payments, but that's now changing driven by several factors. Banks, big tech companies and fintechs all have released their own mobile wallet versions that are device agnostic. In other words, they can operate on iOS and Android devices. Another reason is that these payment apps have become more sophisticated in securing the user's payment information. For example, a mobile wallet may encrypt your payment information and store it in the cloud. The cloud is an internet-based secure network. Many payment apps use biometric or multi-factor authentication for payment authorization and tokenization for payment processing. And some mobile wallet providers, such as Apple and Google, have also introduced their digital wallet products, for example, Apple Wallet and Google Wallet, which represents the next step in the evolution of the mobile payment app. A digital wallet app allows an individual smartphone to truly be a virtual wallet by allowing the user to empty the entire contents of their wallet; not just their debit or credit cards, but also their health card driver's license loyalty, rewards cards, transit pass, et cetera, which makes the digital wallet a much more compelling value proposition. And it's likely that the future generation of digital wallets will have other services built in, like couponing, loyalty and geo-based offers.

Another thing that I think we'll see in the near future in terms of payment trends is the rise in the use of virtual payment cards, which are digital representations of consumers' debit, credit or prepaid cards. Like a physical payment card, it can be stored on a mobile wallet. The rise of virtual payment cards is closely tied to the fortunes of mobile wallet use in Canada. Virtual payment cards are beginning to gain more consideration as the Canadian payment ecosystem moves towards a cashless society where digital and contactless payment methods are becoming mainstream. Several global providers currently offer virtual payment card services in Canada, including banks and fintechs. So for example, RBC, Wise, KOHO and Wealthsimple. Virtual payment carts offer several advantages over their plastic counterparts. A virtual payment card works like your regular physical card, but instead of being a piece of plastic, it's available through your smartphone, so you don't need to carry a physical card around with you. Once approved for a virtual payment card, you can immediately start using it instead of having to wait for a plastic payment card in the mail. Many virtual cards produce one one-time use card numbers for each transaction to protect your financial information. And virtual card numbers offer a secure way to make online payments because they can be set for one-time transactions or multiple use, which provides an added layer of security when it comes to protecting your online payment transactions. The bottom line is that a virtual payment card can be used to make online purchases, transfer money or a link to a mobile wallet app like Apple Pay or Google Pay. By adding a virtual payment card to a mobile wallet, you can make contactless payments in physical stores. 

And finally, when the RTR arrives in Canada, we'll likely see the emergence of pay-by-bank, which I talked about earlier. Many Canadians are making more online retail purchases than ever before and are looking for ways to make their online payment experiences more frictionless and safe and secure. Pay-by-bank addresses these needs by offering enhanced security as consumers don't need to provide their credit or debit card details to make a payment. It eliminates the need for consumers to enter card details or other payment information for every purchase, making the checkout process faster and easier. And it may also be more convenient for consumers who don't have a credit or debit card or who prefer not to use one when making online purchases.

Liz Dempsey:
Thank you so much, Stephen. I learned so much today, and we'd love to have you back next year to discuss the 2025 report. So, can we say same time next year?

Stephen Yun:
Thanks for having me, Liz. And yes, that'd be great. See you next year!

Liz Dempsey:
Great! Just before we go, be sure to stay connected to all things payments. Visit our website payments.ca and sign up for our newsletter, the Exchange. And be sure to visit thesummit.ca for the latest information on next year's conference happening in Toronto from May 6 to 8 2025. I'm Liz Dempsey. Thanks so much for joining us for this episode of The PayPod.