The number of consumer payment transactions in Canada is expected to be 1.7 billion transactions lower than in 2019, a decline of 8.1% over the year, according to the recently released Canadian Payments Forecast, 2020, published by Technology Strategies International Inc. The predicted decline in consumer payment transactions is a direct consequence of the decline in personal expenditure due to the impact of the COVID-19 pandemic.
“The measures taken to control the spread of the virus in Canada have altered the way Canadians conduct their day-to-day lives,” says Christie Christelis, President of Technology Strategies International. “The pandemic has changed consumer shopping behaviour and has curtailed expenditure at a time when income insecurity is at its peak.”
The total number of consumer payment transactions is only expected to recover to 2019 levels by the end of 2022, says the report. These developments are likely to have a major and lasting impact on the revenues and profits of key players in the payments industry in Canada.
“If we compare the scenario without the pandemic to the one that we are living through now, even though the total number of payment transactions will reach 2019 levels by the end of 2022 they will still be 2.6 billion transactions lower than they would have been without the pandemic,” says Christelis. “The impact is likely to be enduring.”
The report notes that different payment instruments will be impacted differently, with cash experiencing the most significant decline in 2020. Credit card payments are likely to suffer a more significant decline in the short terms than debit cards, but the impact is expected to be short-lived, with substantial growth returning from 2021 onwards.
“We predict that some of the shifts in consumer behaviour that we have noticed throughout the COVID-19 pandemic will be permanent and that a number of important opportunities will emerge in the digital payments space,” says Christelis. “Cash is unlikely to recover any ground in the coming years and will continue its decline, although at a slower pace than in 2020. Online shopping, which has surged throughout the pandemic, is likely to become even more important in the lives of Canadian consumers, and this also has an impact on the payment options available to consumers.”
The report goes on to say that contactless payments, which are experiencing a major boost relative to contact payments during the pandemic, will remain the mechanism of choice for credit card, debit card and mobile payments. There will be pressure on payments companies to make the temporary transaction limit increases instituted during the pandemic permanent. Payment networks and merchants that have not increased transaction limits could see consumers switching their preferred payment mechanism to those that allow higher limits.
Christelis says that mobile payments have gained a strong foothold in the Canadian market, with the number of people making mobile payments and the frequency of such payments both increasing. This sets the stage for ignition of the mobile payments market in Canada. He predicts that they are likely to become a far more prominent payment mechanism over the next few years, including both in-store and remote mobile payments.
Additional highlights from the study are:
- The value of international remittances is expected to increase significantly in 2020 as more support payments are sent to family members abroad due to the pandemic
- The increasing popularity of smart watches and fitness trackers is laying the foundation for the nascent wearables payment market, which is expected to develop rapidly over the next five years
- The use of virtual currencies is still low but increasingly steadily
The 140-page report provides a comprehensive review, analysis and forecast of consumer payments in Canada. It draws on established statistical sources as well the Canadian Consumer Payments Survey, 2020, conducted by TSI amongst more than 2,000 consumers. The report identifies high growth segments in the Canadian payments market in the context of important recent developments in the economy, technology and the industry. Detailed forecasts are presented for credit card payments, debit card payments, cash payments, cheque payments, contactless payments, prepaid cards, gift cards, P2P payments, remittances, online payments, mobile payments, bill payments and transfers, ABM installations and POS terminals.
