Cash continues to be the preferred method of payment for the majority of Canadians, but its popularity isn’t worth much.
According to Payments Canada’s latest “Canadian Payment Methods and Trends” report, released Thursday, the total value of Canada’s cash transactions is a drop in the bucket compared to other payment types, and it’s losing ground fast to various electronic, card-based, and online transactions.
“As payment methods and channels continue to evolve in the POS [point-of-sale] and remote environments, bringing about new payment options, it is important to remember that users have already demonstrated a high drive towards ever faster and more convenient transactions,” authors Michael Tompkins and Viktoria Galociova, both members of Payments Canada’s research unit, wrote in the report.
Overall, the organization found that while cash represented 32.4 per cent of all payments conducted last year, those payments represented only 1.3 per cent of the total value of money exchanged. Even the volume of cash payments has declined by nearly a third since 2008, Tompkins and Galociova wrote.
By contrast the most valuable payment category, cheques and paper, represented 44.7 per cent of the total value of money exchanged, despite representing only 4.2 per cent of payments. This is because while fewer cheques are being written, they’re for increasingly higher amounts – in fact, the average cheque’s value grew by 10 per cent between 2014 and 2015, to more than $46,000, the researchers wrote.
Payments Canada, which owns and operates Canada’s payment clearing and settlement infrastructure, including systems, bylaws, rules, and standards, analyzed 20.9 billion transactions, worth more than $8.9 trillion, to produce the report.
Online and electronic payments growing
Of course, if you’d been following breakthroughs in contactless, mobile, and online payment methods over the past half-decade, you’d expect to see more growth in digital platforms – and you’d be right.
The volume of online transfers grew by 47 per cent between 2014 and 2015, the highest rate of growth among the methods analyzed, even if they only represented 0.6 per cent of all transactions and 0.5 per cent of their total value.
Prepaid, debit, and credit cards are also driving electronic payment growth, Tompkins and Galociova wrote, with debit payment volume growing by 5.5 per cent and credit card payment volume growing by 5.3 per cent. The researchers attributed the latter to convenience and rewards programs, citing Ipsos Reid data that indicates 82 per cent of credit card holders receive rewards from their primary credit card, and that 50 per cent of cardholders use their primary card because it offers rewards.
Meanwhile, Canadians have increased their monthly use of credit cards by 21 per cent, while lowering their average balance by 12 per cent, indicating they used their credit cards for convenience rather than borrowing purposes, the researchers noted. More of us are paying off our monthly credit card balances too – 68 per cent in 2015, versus 55 per cent in 2011.
Finally, electronic funds transfer (EFT) payments represent not only the second-most valuable payment method (by a thin margin) but one of the fastest-growing methods by volume, expanding by an average of five per cent in volume and more than eight per cent in value every year since 2008, Tompkins and Galociova wrote, making it very close to passing cheque and paper items as the largest single segment of transaction value.
Other highlights from the report:
- Canadians conducted an estimated 120 million online transactions worth $45 billion last year.
- Since 2011, the volume of cheque and paper items has decreased by 25 per cent, while ABM transactions have decreased by about 20 per cent.
- Cash use has also declined by 20 per cent since 2011, and it has the lowest average payment size – $17.50 per transaction.
- Credit cards are now used in 58 per cent of all POS transactions.
- Contactless payments grew by 70 per cent, both in volume and value of transactions, 2015.
- While cheque use continues to decline overall, their value has actually grown by more than two per cent on average every year since 2008.
You can check out the full report here.