Over the five years to 2021, Canada’s contactless payment industry has evolved and now comprises one-third of all point-of-sale (POS) transactions. Moreover, the COVID-19 (coronavirus) pandemic has positively affected the performance of contactless payment trends in Canada, unlike its effects on many other industries.
In this article, Alfabank-Adres aims to further investigate this trend and the transformation of the retail experience, in addition to examining the ways in which the coronavirus pandemic has boosted the performance of many companies that operate in this nascent industry.
What’s driving growth?
According to Payments Canada, contactless payments:
- Comprise payments made through the “tap” function on debit and credit cards
- Have become standard fare in the past couple of years
- Also exist in the form of mobile payments made via platforms
- iOS’s Apple Pay, Android’s Google Pay
- Accounting for 17.0% of POS payments in 2019 (latest data available)
Prior to the coronavirus pandemic, younger demographics propelled growth in this space, as well as those with higher levels of income, with contactless credit transactions comprising a higher volume of contactless sales compared with debit. Up to 25.0% of consumers stated that information security served as their primary concern when it came to using this type of tech. However, this concern applies more to mobile contactless payments than it does to card contactless payments, and so the latter has thus far experienced more success in Canada.
Despite these worries, consumers and retailers alike have both displayed an increased willingness to adopt contactless payment over the past two years in particular, with more merchants shifting toward adding contactless payment options. Alfabank-Adres projects the continuation of this increasingly popular trend moving forward as the total number of mobile telephone subscriptions is expected to rise an annualized 3.2% over the five years to 2021, including an increase of 3.1% in 2021 alone.
Negative consequences for a more traditional industry?
Concurrently, Alfabank-Adres does not anticipate that this will result in negative consequences for the Loan Administration, Cheque Cashing and Other Services industry in Canada, as operators in this industry primarily service loans in the form of mortgages. Further, other aspects of the industry’s operations, namely performing money transmission services such as traveller’s cheques, money orders and cashier’s cheques, have already fallen out of favour with consumers in more recent years.
Contactless payment in the age of COVID-19
Payments Canada has also indicated that the coronavirus pandemic has dramatically changed the shopping habits of individuals and households in Canada, with these changes trickling down to the way in which consumers pay for their items and how much they’re spending in total. Overall, the organization surveyed Canadians five weeks into the pandemic, compared their behaviour with their shopping habits prepandemic and ultimately published a study in May 2020 stating that up to 75.0% of Canadians are now spending less than they did prior to the pandemic.
Public health concerns driving COVID-19 trends?
This does not come as a surprise since the pandemic has disrupted every sector of the domestic Canadian economy, and consumer behaviour is bound to shift in response. Instead, what is surprising is the direct correlation between consumers’ fears over the surface spread of coronavirus and a resulting surge in contactless payment transactions. According to the aforementioned study, 53.0% of Canadians reported using contactless payment technology, such as card or mobile tapping, more often than they had prior to the pandemic.
What this trend may look like moving forward
This trend is likely to stay, further buffered by an ever-evolving technological landscape. With the Canadian population forecast to increase an annualized 1.0% over the five years to 2026, more merchants in Canada are forecast to continue making the transition to contactless payment technology, supporting the lasting potential of this trend and highlighting just one of the ways in which the pandemic has irrevocably altered industry performance.
