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International Perspective: Will that be Cash or Contactless? (MAG Quarterly- Volume Four, Issue One)

By Catherine Johnston, ACT Canada

March 3, 2016

Will emerging trends north of the border play out at the POS across the US?  The following is a sneak peek at the latest study of payment trends in Canada.  This information was recently published by the Canadian Payments Association (CPA) and although it looks at trends from a Canadian perspective, you can relate them to what you are seeing in your own stores to gain insights on emerging payments. At the end of this article you’ll find some statistics to help you with a US/Canada comparison.

The retail payments data was gathered from payment service providers, consultants and researchers from the Bank of Canada to provide an overview of the most common consumer and business payments in 2014.

The study shows that while the payments market has continued its steady transition to electronic payments with incumbent payment providers and bank-led networks leading the space, the data also shows a payment system in transition. Traditional forms still account for the majority of Canadian payments, but there is fast growth in the number of transactions using newer channels including e-wallets, contactless technology and e-commerce platforms.

The Evolving POS – “Will that be cash or e-payment, contact or contactless?”

The CPA paid particular attention to the transitions made at the POS. Different payment methods used there have seen certain changes in usage. In total, over 15 billion payments worth about $822 billion were made at Canadian POS in 2014.

  • The most drastic decline happened on both the volume and value of cash transactions at the POS. In 2014, cash was used for around 25% fewer POS transactions (in both value and volume) than in 2008. A Bank of Canada study the same year stated that 23 per cent of Canadians don’t think they will be carrying cash in 10 years and 54 per cent don’t anticipate using cheques (checks).

In spite of the popularity of cash, prepaid, debit and credit cards combined surpass cash transactions by accounting for approximately 45% of the transactions volume.

Debit and credit card transactions are happening at a large volume with a significant growth over the years. Credit cards are accountable for most of the growth as they gained over 900 million transactions since 2011 and expanded to 57% of the total value of POS transactions. Credit card growth has mostly been successful in the lower-value transactions segment.

Two main reasons are suggested by the CPA to explain the credit card growth at the POS:

  • Credit cards provide an effective enticement for use, with about 75% of cardholders’ primary credit cards having some form of reward-incentive.
  • Credit cards have a sizeable head start in the expanding payment channels of contactless and e-commerce, and appear to be successfully leveraging this position.

Contactless payments account for 7% of all consumer debit and credit card transactions performed at the POS, equating to over 650 million total transactions. Of these in 2014, credit cards dominated the contactless channel, being used in about 7 out of 10 contactless transactions and accounting for over 90% of the value of contactless transactions.  However, the CPA suggests that debit cards have a great potential to become a larger source of contactless transactions moving forward as they demonstrated a quick progress given that credit cards had a multi-year head start.

E-commerce only accounted for about 3% of all of the POS payment value in 2014, or about $26 billion. Even though it represents a very small portion of POS value, e-commerce is considered an important part of Canadian commerce with many expecting it to become a significant part of the shopping and payments experience in the coming years. Again, credit card transactions dominated the e-commerce channel and are accountable for about 90% of the volume and 85% of the value of e-commerce in Canada.

From the Consumers’ View

Myths about contactless still influence some Canadians.  The most popular and damaging of them are:

  • Electronic thieves can steal card data from a distance
  • Contactless cards continuously emit radio waves
  • Contactless cards are easily duplicated
  • Contactless cards are vulnerable to identity theft
  • Electronic pickpocketing involves big-dollar thefts

It is impossible to know how many Canadians are shying away from contactless, but we are seeing annual growth and time will prove these myths to be just that – misleading fables.  On the other hand, the 2014 Canadian Bankers Association study stated that 57 per cent of Canadians value making purchases with a mobile device and 61 per cent value contactless payments. 

From the Merchants’ View

MAG members have access to a paper called: Stakeholder Impact of Contactless Certification Report. It outlines the current situation and recommends 3 steps that could be taken to make contactless as easy to manage as contact related to terminal certification. There are additional business considerations which will influence when or whether individual merchants deploy contactless.


CPA has concluded that credit card payments are becoming dominant in the new payment channels and are continuing to take a greater share of the payments made to merchants. New players and payment niches might take hold quickly and the trends observed in 2014 might take off in new directions, impacting existing payment instruments and the payment environment.

I would conclude by saying that the theory that everything is changing faster than ever before is not correct.  Technology and innovation makes more change possible, but it still takes a very long time to go from the possible to the inevitable.  In the interim, the more dialogue between stakeholders and the more robust the value proposition is for each, the more likely the innovation will actually take its place in the market.

The Stats and Just the Stats…


The Bank of Canada produced a study in 2015 which compared the use of cash with the United States and Australia.  In a cross-country comparison involving seven countries, Bagnall et al. (2014)* found that, although cash use is the lowest in Canada, Australia and the United States, it has not disappeared. In all three countries, cash accounted for 40 per cent or more in volume shares and between 14 per cent and 23 per cent in value shares. It is important to note that cash shares continue to decline in all three countries. Compared with its 2010 survey, both the value and volume shares of cash in Australia declined, but in Canada and the United States, only the volume share decreased.

*12 Bagnall et al. (2014) compare 2009 MOP Survey data for Canada with 2010 and 2012 data for Australia and the United States respectively.

Credit and charge card circulation
Visa and MasterCard credit cards in circulation Canada in October 2014: 72 million.

American Express cards in circulation in Canada in 2013: 4.12 million credit cards, plus 530,800 charge cards (which must be fully repaid each month).

EMV smart-chip financial cards (credit, charge or debit) in Canada: 151.9 million in 2013 or 85.7% of total cards.

Contactless EMV smart-chip financial cards in Canada (e.g. Visa payWave or MasterCard PayPass): 26.1 million in 2013 or 14.7% of total cards

Financial cards without EMV smart chips in Canada: 25.3 million in 2013 or 14.3% of total cards


Canadian Market

The most common Canadian consumer and businesses transactions totaled 20.7 billion transactions, worth $8.6 trillion.

Two new payment channels emerged in Canada in 2014:

  • Contactless payments accounted for over half a billion transactions at the POS
  • Online transfers grew to account for over 80 million payments

Catherine Johnston, CEO
ACT Canada: stakeholders driving payment evolution and digital identity