The pandemic’s effect on payments in Canada Part 4: The anniversary edition

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In May of 2020, we published a two-part series discussing how the COVID-19 pandemic affected the retail payments industry, and the federal regulatory responses that followed to mitigate those effects. In December of 2020, we published an update, noting that Canadian spending and purchase habits had not returned to pre-pandemic levels.

A year into the pandemic, the Toronto and Peel regions have remained largely under lockdown; as of April 3, the rest of the province also entered a four-week lockdown, which was shortly followed by a province wide stay-at-home order, which took effect as of April 8, as the Ontario government attempts to mitigate the impacts of a third wave of infection. In this article, we review the latest data from Payments Canada to determine how the trends in the retail payments industry have developed since our last update.

Canadian spending and purchasing habits

The latest statistics indicate that many of the trends noted in our December 2020 update, including spending remaining at below pre-pandemic levels and an ongoing reluctance to use physical methods of payment, continue.

A notable development is that 53% of Canadians report using less cash than they used pre-COVID-19, down from the 57% reporting in our last update. Further, 38% report being uncomfortable handling cash compared to 42% in our last update. While this data indicates consumers are trending towards using cash again, it is too early to conclude whether cash usage will reach pre-pandemic levels. In fact, 37% of Canadians report that they do not expect to return to using cash payments to the same extent that they did pre-COVID-19, and 42% reported that the pandemic has changed their payment preferences to digital and contactless payments for the long-term. Thus, although cash use may have increased incrementally since our last update, preferences for digital and contactless payments appear to be here to stay. This durability suggests that it remains important for businesses to prioritize e-commerce platforms.

Another notable development is that 58% of Canadians report spending less overall, compared to 61% in our last update. This indicates that while there has been a slight increase in consumer spending, the majority of Canadians remain conservative in their spending habits amidst the continued economic uncertainty of the pandemic.

Other key findings from Payments Canada

Decline in handling of cash, payment terminals and ATMs 

  • 67% are using ATMs less (compared to 64% in September 2020)
  • 37% report being uncomfortable when they have to touch debit or credit card payment machines  (compared to 40% in September 2020)

Preference for contactless payments 

  • 47% of Canadians report tapping their credit cards more versus 42% who report tapping their debit cards more (compared to 47% and 46% respectively in September 2020)
  • 54% try not to exceed the contactless limit when buying something in-store (compared to 50% in September 2020) 
  • 37% try to avoid shopping at places that do not accept contactless payments (compared to 36% in September 2020)   

While overall spending is down, Canadians continue to favour credit/debit cards and e-Transfer 

  • 33% of Canadians report using credit cards more often than pre-pandemic (compared to 32% in September 2020)
  • 20% report using debit cards more (compared to 21% in September 2020) 
  • 25% say they use e-Transfer more (no change since September 2020)

Increased use of e-commerce platforms

  • 49% of Canadians report using e-commerce platforms more often than pre-pandemic (compared to 48% in September 2020)

Dramatic increase in spend on food and food delivery services; Canadians tipping more 

  • 58% of Canadians report spending more on food overall (compared to 54% in September 2020)  
  • 28% of Canadians report using food delivery services such as Uber Eats and Instacart more often than pre-COVID-19 (compared to 29 % in September 2020) 
  • 40% report tipping more than pre-COVID-19 (compared to 41% in September 2020)

Overall, the data indicate that while there has been a slight uptick in paper-based payment methods, contactless and digital payment methods continue to be preferred by Canadian consumers. Canadians continue to indulge in takeout using food delivery services but remain conservative in their overall spending habits compared to pre-pandemic levels.

According to a separate report recently issued by the Bank of Canada, the pandemic has resulted in an unprecedented increase in savings in 2020, totaling approximately CA$180 billion or roughly CA$5,800 per Canadian. Most of these extra savings have been sitting in bank accounts, as the Bank of Canada reports that the value of personal bank deposits increased by CA$150 billion between February and December 2020. This represents an increase of CA$100 billion as compared to the average in the last decade. With no visible end to the pandemic in sight, and no concrete way of determining when life will return to “normal”, Canadians seem keen to grow their nest egg and ensure that they have excess funds available to weather the remainder of the pandemic.

Although we saw substantial shifts in consumer spending habits at the onset of the pandemic, they remain largely unchanged since our last update. While the roll out of vaccines in older and other high-risk segments of the population provides some optimism, the pandemic remains a highly influential and sustained factor in our daily lives. As such, the lasting impacts of the pandemic remain uncertain. It will be interesting to see whether there will be a revival of paper-based payment methods and what other shifts in consumer spending habits may arise once the majority of the population has been vaccinated. For now, the data indicate that digital payments continue to be a driving force behind economic recovery as we wait to see when (or if) consumer spending will return to pre-pandemic levels.

 

A special thank you to Natalie Tomaszczyk (articling student) for her assistance with this article.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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