The 5 Biggest Payment Trends in Canada Right Now

What’s your favourite way to pay?

If you’re like most Canadians, you don’t carry (much) cash, you prefer to tap your card or pay with your phone, you’re quite fond of the e-transfer, and you’d rather pay in installments than all at once.

The biggest payment trends of the year are inextricably entwined with the global pandemic that continues to rage across the country. With more people staying within the confines of the home, and general concerns about spreading COVID-19 when visiting brick-and-mortar stores, it’s no surprise that consumers crave flexibility when it comes to payments.

Let’s break down the five most popular methods in 2020—and consider what the future holds for 2021 and beyond.

Electronic Payments

It’s been a few years since cash was cool. Why carry a dirty wad of bills or pick through a palm full of coins when you can whip out a card to complete a transaction in a fraction of the time? For millennials and younger generations, electronic payments via credit or debit card have become the payment method of choice. But in the wake of a global pandemic, they also seem to have become everyone’s favourite way to pay.

An Ipsos Canada Payments study found that there was a significant shift away from cash in the first quarter of 2020. In March, there was a 3% drop in consumers using cash. By June, there was an additional 5% dip.

“Typically, it takes years to shift just a few points. For instance, from 2014-2019, cash usage declined by 4% … In comparison, we have seen an 8% decline in cash usage in the first six months of 2020. That is staggering movement,” says Heidi Klein, Vice President, Ipsos Canada.

Whether it’s by credit or debit card, more consumers prefer the simplicity of an electronic payment.

Contactless Payments

Speaking of electronic payments, 2020 has also seen an extreme rise in contactless payments. This refers to the act of tapping your credit or debit card onto a card reader, avoiding the need to punch in a PIN on a keypad.

While this has been a convenient option for savvy shoppers with chip cards for years, it really took hold this year as we all wanted to keep our hands to ourselves to avoid spreading COVID-19. In fact, contactless payments became so popular in 2020 that the tap limits for Mastercard, Visa, and Amex were raised from $100 to $250, allowing even more flexibility as consumers paid for larger purchases like groceries, electronics, and home maintenance supplies.

Consumers learned that contactless payments, particularly when using a digital wallet, are more secure than swiping magstripe cards. Combined with the flexibility, convenience, and speed of tapping to pay, this extra security tipped many cardholders of all generations in favour of contactless payments.

Mobile Payments

In the mid-2000s, U.S. bank Capital One Financial used the ad slogan, “What’s in your wallet?” A more relevant question in 2020 might be, “What’s in your digital wallet?”

That’s because more consumers are paying for merchandise with their phones and other smart devices aka their digital wallet. This convenience means more consumers are leaving their actual cards at home. And with more than 31 million smartphone users in Canada today, there’s a lot of potential for that number to rise exponentially.

Payments Canada reports that mobile phone payments continue to rise in both online and offline point-of-sale purchases. At 44%, 18-24-year-olds make up the largest group of mobile payment users, but 25-34-year-olds (34%) and 35-44-year-olds (23%) aren’t far behind.

JP Morgan report predicts that digital wallets will take a 22 per cent share of the payments market by 2021—which makes a strong case for retailers to make it easier than ever for shoppers to pay with their smart devices in-store and online (via Apple Pay, PayPal, and other e-commerce digital payments).

E-Transfer Payments

When is the last time you sent an e-transfer to a friend, service provider, or even a retailer? If you’re like most Canadians, you’ve done this fairly recently. In April, e-transfer transactions reached a record level at 61.3 million, according to an Interac study. First-time users boosted those numbers by growing 43% since mid-March.

“COVID-19 is accelerating a new era in payments driven by the changing needs of Canadians and Canadian businesses, and for many, these convenient ways to pay will have a stickiness factor that will influence a long-term shift in behaviour,” William Keliehor, Chief Commercial Officer, Interac, said in a statement.

The JP Morgan study reports that bank transfers are used for 12% of payments and are growing rapidly. What does this mean for retailers? It might be time to consider e-transfers as a method of payment for users who may not use digital payments or carry cash. If we’ve learned nothing else about payments in 2020, it’s that flexibility is critical.

Buy Now, Pay Later Payments

Another result of #pandemic life was the explosion in popularity of online shopping this year. Retailers scrambled to ramp up e-commerce marketing and ensure a smooth customer experience for all consumers. Throughout it all, more and more people chose to buy in interest-free installments.

“This growth of buy now, pay later adoption during COVID-19 accelerates a trend that was already underway,” PayBright President CEO Wayne Pommen noted in a blog post earlier this year.

“Canadians value payment flexibility—without hidden fees and charges—as well as a highly convenient checkout process. They are also drawn to the ‘lower perceived level of risk’ associated with a payment method that does not have the drawbacks of credit cards.”

Trends in PayBright-funded purchases showed consumers were investing in home-related purchases like new mattresses, electronics, musical instruments, home fitness equipment, small appliances (breadmaking, anyone?), and more.

“Digital sales and payment flexibility will play a big part in the success of Canadian retailers in 2020 and beyond,” predicts Pommen.

As we inch our way to 2021, most of us are hoping next year will signal the end of the pandemic and the return to a more “normal” way of life.

No matter what happens, this year’s payment trends aren’t likely to go away. Once consumers put away their cash and begin to appreciate the convenience of electronic and mobile payments, not to mention the flexibility of paying in installments, they’ll want to keep the perks they’ve come to enjoy.

It’s up to retailers to adapt and give customers the payment options they demand.

This article is provided for informational purposes only. It is not an exhaustive review of this topic. The content is not financial or investment advice. No professional relationship of any kind is formed between you and PayBright. While we have obtained or compiled this information from sources we believe to be reliable, we cannot and do not guarantee its accuracy. We recommend that you consult your personal finance professional before taking any action related to this information. PayBright is a provider of Buy Now, Pay Later (BNPL) solutions. BNPL providers offer plans with a variety of terms and conditions, including interest rates, fees, and penalties, and have different standards for qualifying for loans. Laws and regulations governing BNPL providers vary by jurisdiction. We recommend that you compare and contrast plans, read the fine print, and conduct detailed research into any BNPL provider before using their services.