Convenience and rewards steer Canada towards credit cards

The Canadian Payment Methods and Trends report 2017 also brings to the fore the online and mobile banking payment solutions that overtook paper in Canada. Besides, social media payments are ready to become the new cool payment method, thanks to new partnerships in fintech.

In 2016, more than 21.3 billion consumer and business payments worth more than USD 9 trillion. In 2017, analysis shows the continued dominance of credit cards at the point-of-sale, totalling more than USD 462 billion in 2016.

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 saw considerable growth as more transactions shifted to online and in-app channels – such as the payment experience of Uber or iTunes – where more than 90% 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.

When it comes to online banking, Interac e-Transfer (which accounts for about 90% of the volume in this category) and PayPal, topped all payment methods in rate of growth. In 2016, transactions were up by nearly 48% to 177 million and value increased by 51% to USD 68 billion. Also, about 10% of online transfers were made by businesses, compared to fewer than 5% in prior years.

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.

Alipay and WeChat Pay in China are heralding the rise of social media payments. While there is still a long way to reach 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 developing at high speed.

Current pilot projects are leveraging traditional payment methods such as credit and online transfers on social messenger services. It is likely that the use of Facebook, Google, and Apple messenger services will hold the most promise for social media payments in Canada.

Other important data 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. 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 5% and is the second most widely used payment method in this space, followed closely by credit cards. In 2016, debit represented USD 226 billion or 28% 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 USD 4 trillion.