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Consumer Payment Preferences - Canada - November 2014

“Security and trust issues are the dominant factors in the minds of consumers at present and override the convenience benefits of contactless cards and mobile banking. This is likely to change in the near future as these concerns dissipate with the introduction of superior security features.”
– Sanjay Sharma, Senior Financial Services Analyst

This report discusses the following key topics:

  • Overcoming lack of trust is key to increasing mobile banking adoption
  • Highlighting the non-payment-related mobile banking functionalities will generate more consumer interest 
  • Monitoring non-traditional players such as PayPal, Apple Pay that pose a competitive threat to Canada’s banks
  • Calming the security concerns of Chinese Canadians

The world of payments continues to witness rapid innovations that are both a challenge and an opportunity for financial institutions. The adoption of mobile payments, provided by both financial and non-financial institutions, is the single biggest change in the payments world since the advent of online banking almost 20 years ago.
Canada is one of the world leaders in the adoption of cashless payments according to MasterCard’s 2013 Cashless study. Some traditional payment methods such as cheques are in decline whereas others such as credit cards remain popular and new card offerings continue to proliferate. The advent of non-traditional players and new payment methods such as Apple Pay makes it imperative for banks to stay on top of these advancements in order to retain their competitive edge.

This report covers various payment methods in Canada, payment actions, interest in mobile banking features and functionalities, fraud activity and attitudes towards payment processes.

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Table of contents

  1. Introduction

      • Definition
        • Excluded
          • Abbreviations
            • Glossary
              • Contactless cards (Tap and Go)
                • Mobile payments
                  • Mobile wallet
                    • Near Field Communications (NFC)
                      • Online payments via app
                        • Person-to-Person Payments (also known as e-transfer)
                          • Quick Response Code (QR Code)
                          • Executive Summary

                              • Market factors
                                • Canadian economy to pick up speed, but many risks remain
                                  • Outlook on the real estate and housing market
                                    • Wealth distribution in Canada
                                      • Household debt in Canada
                                        • Smartphone and tablet ownership
                                          • Products and innovations
                                            • Brand communication and promotion
                                              • The consumer
                                                • Canadians have used PayPal more than cheques in the past three months
                                                  • Figure 1: Payment methods used in the past three months, August 2014
                                                • Online bill payments and credit card purchases are the most common payment actions
                                                  • Figure 2: Payment-related actions performed in the past three months, August 2014
                                                • Non-payment mobile phone features dominate interest preferences
                                                  • Figure 3: Interest in mobile banking features (% who are interested – top two box), August 2014
                                                • Three quarters of Canadians prefer to pay off credit card balance monthly
                                                  • Figure 4: Attitudes towards payments, August 2014
                                                • What we think
                                                • Issues and Insights

                                                    • Overcoming lack of trust is key to increasing mobile banking adoption
                                                      • The facts
                                                        • The implications
                                                          • Highlighting the non-payment-related mobile banking functionalities will generate more consumer interest
                                                            • The facts
                                                              • The implications
                                                                • Monitoring non-traditional players such as PayPal, Apple Pay that pose a competitive threat to Canada’s banks
                                                                  • The facts
                                                                    • The implications
                                                                      • Calming the security concerns of Chinese Canadians
                                                                        • The facts
                                                                          • The implications
                                                                          • Trend Application

                                                                              • Trend: Guiding Choice
                                                                                • Trend: Life Hacking
                                                                                  • Trend: Make it Mine
                                                                                  • Market Drivers

                                                                                    • Key points
                                                                                      • Demographic overview
                                                                                        • Population count and growth in Canada
                                                                                          • Figure 5: Share of population of Canada, by territory/province, 2014
                                                                                          • Figure 6: Share of population in different age groups, by territory/province, 2013
                                                                                        • Canada’s population is expected to age in the coming years
                                                                                          • Figure 7: Population aged 65 years and over in Canada, historical and projected (% of total), 1971-2061
                                                                                        • Economic overview
                                                                                          • IMF says Canadian economy to pick up speed, but many risks remain
                                                                                            • Figure 8: Canada’s GDP, by quarter, 2008-14
                                                                                            • Figure 9: Household disposable incomes and savings in Canada, by quarter, 2008-14
                                                                                          • Unemployment rates remain steady
                                                                                            • Figure 10: Canada’s unemployment rate, by gender, 2008-14
                                                                                          • Consumer confidence
                                                                                            • Interest rates, inflation and market volatility
                                                                                              • Figure 11: Inflation rates in Canada, 2004-14
                                                                                            • Outlook on the real estate and housing market
                                                                                              • Wealth distribution in Canada
                                                                                                • Figure 12: Canada median net worth, by province, 2012
                                                                                              • Household debt in Canada
                                                                                                • Smartphone and tablet ownership
                                                                                                  • Figure 13: Tablet, smartphone and mobile ownership, by age, August 2014
                                                                                              • Products and Innovations

                                                                                                • Key points
                                                                                                  • Tangerine Bank’s biometric tools for mobile banking 
                                                                                                    • Barclays’ bPay contactless wristband
                                                                                                      • Venmo payments
                                                                                                        • Ribbon
                                                                                                          • MasterCard and One Inc.’s loyalty program solution
                                                                                                            • MasterCard’s credit card with an embedded fingerprint reader
                                                                                                              • Apple Pay
                                                                                                                • Intuit’s GoPayment
                                                                                                                  • Square Reader (Square Register App)
                                                                                                                    • PAYD Pro
                                                                                                                      • Flint Payment App
                                                                                                                        • Zoompass
                                                                                                                          • RBC and Nymi
                                                                                                                          • Brand Communication and Promotion

                                                                                                                            • Key points
                                                                                                                              • RBC’s Mobile Banking Campaign
                                                                                                                                • TD says thanks in a special way
                                                                                                                                  • Scotiabank’s mobile banking (Bank Anywhere) campaign
                                                                                                                                    • CIBC’s cheque deposit (remote deposit capture) feature advertisement
                                                                                                                                      • CIBC/Tim Hortons’ Timmy Card
                                                                                                                                      • The Consumer – Payment Methods Used

                                                                                                                                        • Key points
                                                                                                                                          • Canadians have used PayPal more than cheques in the past three months
                                                                                                                                            • Figure 14: Payment methods used in the past three months, August 2014
                                                                                                                                          • Over a quarter of Canadians have used six or more methods of payment
                                                                                                                                            • Figure 15: Repertoire analysis of payment methods, August 2014
                                                                                                                                        • The Consumer – Reasons for Not Using Contactless Cards

                                                                                                                                          • Key points
                                                                                                                                            • Inertia is the main reason for non-usage of contactless cards
                                                                                                                                              • Figure 16: Reasons for not using contactless cards, August 2014
                                                                                                                                            • CHAID analysis
                                                                                                                                              • Methodology
                                                                                                                                                • Males with household incomes above $75,000 over-index on contactless card usage by 10%
                                                                                                                                                    • Figure 17: Usage of contactless credit/debit cards – CHAID – tree output, August 2014
                                                                                                                                                • The Consumer – Payment Actions

                                                                                                                                                  • Key points
                                                                                                                                                    • Online bill payments and credit card purchases are the most common payment actions
                                                                                                                                                      • Figure 18: Payment-related actions performed in the past three months, August 2014
                                                                                                                                                    • About a fifth of Canadians have used deal site discounts and/or redeemed credit card reward points
                                                                                                                                                      • Figure 19: Payment actions related to rewards and offers, August 2014
                                                                                                                                                  • The Consumer – Interest in Mobile Payment Offerings

                                                                                                                                                    • Key points
                                                                                                                                                      • Non-payment mobile phone offerings dominate interest preferences
                                                                                                                                                        • Figure 20: Interest in mobile banking features (% who are interested – top two box), August 2014
                                                                                                                                                      • About half of smartphone owners are interested in features related to rewards and personalized offers
                                                                                                                                                        • Figure 21: Mobile banking features related to rewards and loyalty (% who are interested – top two box), August 2014
                                                                                                                                                    • The Consumer – Theft and Fraud Activity

                                                                                                                                                      • Key points
                                                                                                                                                        • One in 10 Canadians have been a victim of credit card fraud in the past two years
                                                                                                                                                          • Figure 22: Theft and fraud activity over the past two years, August 2014
                                                                                                                                                      • The Consumer – Price Display Preference

                                                                                                                                                        • Key points
                                                                                                                                                          • Most Canadians are in favour of tax-inclusive pricing
                                                                                                                                                            • Figure 23: Price display preference, August 2014
                                                                                                                                                        • The Consumer – Attitudes towards Payments

                                                                                                                                                          • Key points
                                                                                                                                                            • Summary of attitudes towards payment preferences
                                                                                                                                                              • Figure 24: Attitudes towards payments, August 2014
                                                                                                                                                            • Older Canadians more concerned about security
                                                                                                                                                              • Figure 25: Attitudes related to security and trust, August 2014
                                                                                                                                                            • Consumers not overly impressed by the convenience of mobile payments
                                                                                                                                                              • Figure 26: Attitudes related to convenience, August 2014
                                                                                                                                                            • Almost two thirds of Canadians prefer to pay by credit card for large-ticket items
                                                                                                                                                              • Figure 27: Attitudes related to credit card usage, August 2014
                                                                                                                                                          • The Consumer – Payment Preferences and Chinese Canadians

                                                                                                                                                            • Key points
                                                                                                                                                              • Chinese Canadians are more prolific users of the latest payment technologies
                                                                                                                                                                • Figure 28: Payment methods in the past three months: Chinese Canadians versus Whites/Caucasians, August 2014
                                                                                                                                                              • Deal site discounts and rewards resonate with Chinese Canadians
                                                                                                                                                                • Figure 29: Payment actions in the past three months: Chinese Canadians versus Whites/Caucasians, August 2014
                                                                                                                                                              • Chinese Canadians more likely to appreciate the convenience of mobile payments but are also more concerned about security
                                                                                                                                                                • Figure 30: Select attitudes towards payments: Chinese Canadians versus Whites/Caucasians, August 2014
                                                                                                                                                            • The Consumer – Target Groups

                                                                                                                                                              • Key points
                                                                                                                                                                • Four target groups
                                                                                                                                                                  • Figure 31: Target groups, August 2014
                                                                                                                                                                • Technophobes (23%)
                                                                                                                                                                  • Techno-enthusiasts (26%)
                                                                                                                                                                    • Credit Card Lovers (28%)
                                                                                                                                                                      • Savvy shoppers (23%)
                                                                                                                                                                      • Appendix – The Consumer – Payment Methods Used

                                                                                                                                                                          • Figure 32: Payment methods used within the past 3 months, August 2014
                                                                                                                                                                          • Figure 33: Most popular payment methods used within the past 3 months, by demographics, August 2014
                                                                                                                                                                          • Figure 34: Next most popular payment methods used within the past 3 months, by demographics, August 2014
                                                                                                                                                                          • Figure 35: Other payment methods used within the past 3 months, by demographics, August 2014
                                                                                                                                                                        • Repertoire analysis
                                                                                                                                                                          • Figure 36: Repertoire of payment methods used within the past 3 months, August 2014
                                                                                                                                                                          • Figure 37: Repertoire of payment methods used within the past 3 months, by demographics, August 2014
                                                                                                                                                                      • Appendix – The Consumer – Usage of Contactless Cards

                                                                                                                                                                          • Figure 38: Reasons for not using contactless cards, August 2014
                                                                                                                                                                          • Figure 39: Reasons for not using contactless cards, by demographics, August 2014
                                                                                                                                                                      • Appendix – The Consumer – Payment Actions

                                                                                                                                                                          • Figure 40: Payment actions performed in the past 3 months, August 2014
                                                                                                                                                                          • Figure 41: Most popular payment actions performed in the past 3 months, by demographics, August 2014
                                                                                                                                                                          • Figure 42: Next most popular payment actions performed in the past 3 months, by demographics, August 2014
                                                                                                                                                                      • Appendix – The Consumer – Interest in Mobile Phone Payment Offerings

                                                                                                                                                                          • Figure 43: Interest in mobile phone payment offerings, August 2014
                                                                                                                                                                          • Figure 44: Interest in mobile phone payment offerings – Ability to check your card/bank balance on your mobile phone before you buy something, by demographics, August 2014
                                                                                                                                                                          • Figure 45: Interest in mobile phone payment offerings – Instantly view debit/credit card transactions on your mobile phone, by demographics, August 2014
                                                                                                                                                                          • Figure 46: Interest in mobile phone payment offerings – The ability to pay for purchases using your reward/loyalty points accessed through your mobile phone, by demographics, August 2014
                                                                                                                                                                          • Figure 47: Interest in mobile phone payment offerings – The ability to hold all your store loyalty/rewards cards on your phone so you can present the right one at checkout, by demographics, August 2014
                                                                                                                                                                          • Figure 48: Interest in mobile phone payment offerings – The ability to instantly transfer money to another person using a mobile device, by demographics, August 2014
                                                                                                                                                                          • Figure 49: Interest in mobile phone payment offerings – Pay for purchases using your debit/credit card via mobile phone, by demographics, August 2014
                                                                                                                                                                          • Figure 50: Interest in mobile phone payment offerings – The ability to set up a prepaid account where the account reloads automatically from a debit/credit card when the balance gets low, by demographics, August 2014
                                                                                                                                                                          • Figure 51: Interest in mobile phone payment offerings – A function that lets me know if there is an offer that might interest me based on where I am located, by demographics, August 2014
                                                                                                                                                                          • Figure 52: Interest in mobile phone payment offerings – An instant notification if a purchase would take you over your overdraft limit, by demographics, August 2014
                                                                                                                                                                          • Figure 53: Interest in mobile phone payment offerings – Ability to store electronic receipts/warranty documents for purchases that you have made, by demographics, August 2014
                                                                                                                                                                          • Figure 54: Interest in mobile phone payment offerings – Personalised offers based on your shopping habits, by demographics, August 2014
                                                                                                                                                                          • Figure 55: Interest in mobile phone payment offerings – Use your mobile phone banking app to withdraw cash from an ATM, by demographics, August 2014
                                                                                                                                                                      • Appendix – The Consumer – Theft and Fraud Activity

                                                                                                                                                                          • Figure 56: Theft or fraud activity, August 2014
                                                                                                                                                                          • Figure 57: Most popular theft or fraud activity, by demographics, August 2014
                                                                                                                                                                          • Figure 58: Next most popular theft or fraud activity, by demographics, August 2014
                                                                                                                                                                      • Appendix – The Consumer – Price Display Preference

                                                                                                                                                                          • Figure 59: Price display preference, August 2014
                                                                                                                                                                          • Figure 60: Price display preference, by demographics, August 2014
                                                                                                                                                                      • Appendix – The Consumer – Attitudes towards Payments

                                                                                                                                                                          • Figure 61: Attitudes towards payments, August 2014
                                                                                                                                                                          • Figure 62: Agreement with the statements ‘I prefer to pay off the balance(s) on my credit card(s) every month’ and ‘I like to look for new offers and check that I am getting the best deal from my financial institution’, by demographics, August 2014
                                                                                                                                                                          • Figure 63: Agreement with the statements ‘I try to avoid using credit cards whenever possible’ and ‘I prefer to use multiple credit cards for my financial transactions’, by demographics, August 2014
                                                                                                                                                                          • Figure 64: Agreement with the statements ‘I am concerned about mobile payments (eg smartphone or tablet) not being as secure as other types of payments’ and ‘I am concerned that contactless credit cards are not as secure as other credit cards’, by demographics, August 2014
                                                                                                                                                                          • Figure 65: Agreement with the statements ‘The convenience of making payments with my mobile phone appeals to me’ and ‘I prefer to pay by credit card rather than cash or debit for large-ticket items (eg TV or furniture)’, by demographics, August 2014
                                                                                                                                                                          • Figure 66: Agreement with the statements ‘I am uncomfortable with the amount of data that is collected about my spending habits’ and ‘I prefer to shop at stores that display prices inclusive of tax’, by demographics, August 2014
                                                                                                                                                                          • Figure 67: Agreement with the statements ‘I wouldn't trust anyone other than established financial institutions when it comes to making card payments’ and ‘I spend less money shopping if I decide beforehand not to use my credit card’, by demographics, August 2014
                                                                                                                                                                      • Appendix – The Consumer – Payment Preferences and Chinese Canadians

                                                                                                                                                                          • Figure 68: Selected demographics, by total population against Chinese Canadians, September 2014
                                                                                                                                                                      • Appendix – The Consumer – Target Groups

                                                                                                                                                                          • Figure 69: Target groups, August 2014
                                                                                                                                                                          • Figure 70: Target groups, by demographics, August 2014
                                                                                                                                                                          • Figure 71: Payment methods used within the past 3 months, by target groups, August 2014
                                                                                                                                                                          • Figure 72: Reasons for not using contactless cards, by target groups, August 2014
                                                                                                                                                                          • Figure 73: Payment actions performed in the past 3 months, by target groups, August 2014
                                                                                                                                                                          • Figure 74: Attitudes towards payments, by target groups, August 2014
                                                                                                                                                                          • Figure 75: Price display preference, by target groups, August 2014

                                                                                                                                                                      Companies Covered

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                                                                                                                                                                      Consumer Payment Preferences - Canada - November 2014

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