President & CEO, Payments Canada
The COVID-19 pandemic has driven changes in how we work, play, and pay. We were abruptly required to do almost everything differently. Our lives instantly became much more digital — video meetings, online education, on-demand entertainment.
Payments have also become much more digital. P2P (peer-to-peer) payment options have replaced cash and cheque payments; we’ve seen remote payment coupled with curb-side pickup; and where face-to-face payment is required, we prefer to pay contactless by tapping a payment card.
A survey by Payments Canada demonstrated that 62% of Canadians reported using less cash than pre-COVID-19, and 42% said they avoided shopping at places that didn’t accept contactless payments. Canadians are also embracing Direct Deposit as a faster, safer and more convenient way to receive government payments, with 98% of EI and OAS recipients opting for electronic payment rather than cheque.
We’ve seen a pervasive shift towards digital payments in Canada, but there is no doubt that the pandemic has accelerated this shift and acted as a catalyst to transform the Canadian payment landscape forever.
Digital’s effect on small businesses
What might this shift to digital mean for businesses in Canada?
Many small retailers are likely already questioning the future of cash as a payment method, and there are some that have opted to accept only electronic payments. Cash continues to be a preferred payment option for some Canadians (and the only payment option in some cases), and until there’s a digital alternative to cash that possesses similar attributes and meets the needs of all Canadians, cash (although declining) is likely here to stay.
While there has been a small but steady annual reduction (~5%) in cheque usage by small- and medium-sized enterprises (SMEs), many Canadian businesses continue to rely on cheques to receive and send payments. This may be because there aren’t digital payment alternatives that meet their needs. Cheques provide information that’s helpful in tracking payments, but manual reconciliation processes take time and introduce the potential for errors. Cheque payments can also have a negative impact on cash flow due to the delayed availability of funds.
The future of payments
As Canada continues to recover from the impacts of the pandemic, it’s expected that Canadians’ preference for digital experiences will endure. Existing electronic payment options provide an alternative to cheques for many payment types (e.g. payroll), and Canadian businesses are encouraged to explore opportunities to convert cheque payments to faster, secure, and more convenient digital payment experiences. In 2022, Payments Canada will introduce a real time payments system (the RTR) that will further support the shift to digital.
The pandemic has created both digital need and opportunity: the time is right for Canadian businesses to shift to a “digital-first” focus.
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Tracey Black is President and CEO of Payments Canada. Building on the organization’s past success, Tracey provides the leadership to define the next stage of Payments Canada’s evolution, supporting the payment needs of Canadian consumers and businesses, and empowering a new era of modern payments. Tracey has more than 20 years of professional experience with extensive industry knowledge and deep expertise in payments strategy and innovation.