Canada’s Efficient and Secure Payments System
- 94% of Canadians have a debit card to use at retailers or at ABMs to make transactions
- When it comes to credit cards, consumers in Canada have tremendous choice with hundreds of institutions – including banks, credit unions, and retailers – offering credit cards, with a wide range of features
- Cash is often assumed to be a “free” form of payment for merchants – it’s not. In fact, it can be very expensive if you include effort spent on cash handling
Canada benefits from a secure, efficient and innovative payments system built on the foundation of strong financial institutions. Canadians value and trust the payments system which enables them to make the transactions that are part of their daily life. And those transactions are driving the country’s economy.
When making a purchase or paying someone money that you owe, consumers can choose to use cash, cheques, debit and credit cards, as well as other electronic payments services like PayPal, e-mail money transfers, bank transfers and mobile payments. Many of these options are available for both in-store or online purchases.
Canadians have come to rely on the choice and the overall reliability of their payments system. They assume, with good reason, that the payments they initiate will be processed efficiently, accurately and securely. That confidence is a key part of a healthy and productive Canadian economy.
Innovation in payments technology has increased the country’s productivity and expanded the size of the Canadian economy. A study by IHS Global Insight1 found that electronic payments have contributed $196 billion to the Canadian economic growth in the last 25 years.
The expanded range of payment options offers consumers a great deal of choice in how they pay:
- 99% of adult Canadians have an account with a financial institution,2 including 98% of adults in low income households,3 so the accessibility of banking services in Canada is incredibly high.
- 94% of Canadians have a debit card to use at retailers or at ABMs to make transactions.4
- 89% of Canadians have at least one major credit card.5
- 48% of Canadians use online bill payment as their primary tool for paying bills.6
- 30% of Canadians think it is likely they will be paying for more purchases with a mobile wallet in the next two to three years.7
- The use of new payment methods is growing substantially. Online payment provider PayPal indicates that it now has more than four million users in Canada.8 And in a recent study, 75 per cent of Canadians have said that they were unable to pay for something because they didn’t have cash with them (as cash was the only payment method accepted ), an indication that Canadian consumers are more than keen to move to a digital payment environment.9
With a variety of payment methods to choose from, many Canadians use their debit card because it allows them to quickly and conveniently make payments from their bank account, without the need to carry large amounts of cash. In fact in 2000, Interac Direct Payment surpassed cash as Canadians' preferred method of payment,10 and debit card payments have continued to grow.
Canadians are among the biggest users of debit cards in the world, with only residents of Sweden, the Netherlands, Australia, and the United Kingdom doing more transactions per person. Debit cards are accepted by 504,000 retailers in Canada, and 4.9 billion transactions were done using the Interac® network in 2014.11
Electronic debit payments are becoming more widespread as Canadians can use their debit card to make purchases at online retailers and pay money owed to friends and family through e-mail money transfers. And debit card users can now wave their card in front of a reader to make small value transactions. Regardless of the type of transaction, debit card users are always protected so, if they become the victim of fraud, they will be reimbursed by their financial institution.
Credit cards are an essential part of our payments system. Every day, Canadians rely on their credit cards to buy household supplies, sign up their kids for swimming and soccer, make a hotel reservation and pay for parking. From gifts to necessities to travel, Canadians use their cards and derive a great deal of benefit from the system.
Canada benefits from a well-functioning credit card system that offers many benefits to both consumers and retailers who accept credit cards as payment.
Benefits to consumers
When it comes to credit cards, consumers in Canada have tremendous choice with hundreds of institutions – including banks, credit unions, and retailers – offering credit cards, with a wide range of features that can fit every profile and pocketbook.
Benefits of credit cards for consumers:
- Access to unsecured credit (no collateral required against amounts charged).
- Interest-free credit from time of purchase to the end of the billing period.
- Instant certainty of payment for merchants means instant receipt of goods and services for consumers.
- Other rewards and benefits, such as air travel points, car insurance, damage and loss insurance, extended warranty programs and affinity programs.
- Ability to make purchases over the Internet.
- Fraud protection with zero liability to the consumer in cases of fraud.
- Convenience and safety associated with not having to carry large amounts of cash.
- Protection from losses for consumers when they pay for something in advance, like travel packages, concert tickets or goods on order that do not arrive.
- Detailed expenditure tracking.
- 24/7 access
Benefits to merchants
While some Canadians understand that merchants pay a fee to accept credit cards, they may not understand all of the benefits that retailers derive from accepting payment cards. For merchants, payment cards speed up the checkout line, reduce cash handling time and costs, increase sales and more.
Merchants are not required to accept credit cards but do so in increasing numbers to attract customers by making this convenient payment method available to them. Merchants that do accept credit cards receive many benefits, including:
- Fast, guaranteed payment, which can reduce line-ups at checkout. If every credit card transaction took an extra 30 seconds, it would use up an additional 27 million hours of staff time each year.
- The ability of accepting credit without worrying about the creditworthiness of customers, insufficient funds or outstanding receivables.
- Increased sales by offering customers a variety of payment options.
- Expanded markets; ability to sell to customers throughout Canada and around the world in the currency used by the retailer.
- The ability to enter into co-branding relationships: merchants can have their own branded credit card to build their brand recognition and encourage cardholders to shop at their establishment.
- Card payments mean less cash on hand. Cash is often assumed to be a “free” form of payment for merchants – it’s not. In fact, it can be very expensive if you include effort spent on cash count and handling, armoured transport, a higher likelihood of theft and potential mistakes by cashiers. A 2014 study by the University of Toronto found that reliance on cash places a significant constraint on growth and innovation for small businesses and results in inefficiencies and lost profit opportunities.12
Canada has a very sophisticated credit card market with a lot of choice and competition for consumers. The system works well for both individuals and retailers, and is a critical element in Canada's efficient payments system.
- Credit Cards: Statistics and Facts
- Understanding the Credit Card Transaction Process (PDF)
- American Express Canada Website
- Interac Website
- MasterCard Canada Website
- Visa Canada Website
In May 2012, the banking industry and credit union system announced a set of voluntary, secure, open guidelines for the development of mobile payments at the point-of-sale in Canada. And in July 2015, the industry published a Payments Security White Paper highlighting the need to maintain the highest level of payment security, promote competition and support innovation for the benefit of Canadian consumers and retailers. Both documents can be found on the www.cba.ca website at Developing Mobile Payments Capability in Canada.