Canadians Embrace Contactless Payments, but They’re Still Wary of Using Mobile Devices

Like their American cousins, Canadians are rapidly adopting newer payment methods. In fact, they’re doing so even faster than U.S. consumers in some respects.

The report, “Canadian Payment Methods and Trends: 2019,” released last week by Payments Canada, says contactless payments grew 30% year-over-year in 2018. Card- and mobile-based contactless transactions totaled 4.12 billion with a value of C$129.9 billion at the point of sale. Debit payments represented nearly 60% of contactless volume, often as substitutes for cash.

Also on the contactless front, nearly 35% of Canadians used smart phones or other mobile devices on a regular basis for payments in 2018, but usage still lags that of contactless cards. “Concerns about security remain the key barrier of usage, with less than a third of consumers expressing their belief that mobile payments are safe and secure,” Ottawa-based Payments Canada said in a news release. Payments Canada oversees the country’s settlement and clearing systems.

In the United States, contactless payments are still a small fraction of purchase volume, though industry executives expect them to increase rapidly as banks crank out new EMV chip cards of the dual-interface variety that support both contact and contactless payments, the latter through near-field communication technology. Visa recently reported that 100 million Visa-branded contactless cards have now been issued in the United States, and the network expects 300 million to be circulating in a year. Canadian issuers added contactless capability to their cards earlier than their U.S. counterparts, and merchant acquirers did likewise in activating contactless-accepting POS terminals. 

With contactless payments mushrooming, Canadians seem to be abandoning cash even faster than Americans. A new Federal Reserve Banks report says debit cards in 2018 for the first time surpassed cash as the most-used payment type. But Payments Canada says debit card transactions overtook cash transactions at the point of sale in 2016, and POS credit card transactions surpassed cash in 2017. All debit transactions—POS, card on file, contactless, and online—exceeded all cash transactions in 2017.

Cash payments have declined by 40% in five years, the report says. Cash represented 26% of total Canadian POS payment volume last year, down from 44% in 2013. 

Debit card transactions grew 4% year-over-year in 2018 to represent 38% of POS volume, up from 31% in 2013. Debit’s dollar volume also rose 4%. Prepaid card transactions jumped 9%, with value up 10%, through prepaid cards still account for only 0.2% of total payment value.

Credit card transactions increased 5% and accounted for 34% of POS volume, and their value rose 4%. Payments Canada says Canada trails only South Korea in credit card volume per capita.

Payments Canada obtained data for the report from the country’s Automated Clearing and Settlement System, which it operates, as well from external payment-services operators, market research, and input from industry experts.