For those of you unfamiliar with Toronto, Canada, you may not be aware of ‘The Path’ network in the downtown area. In my years living here, this underground network has been a godsend; not only can one navigate around without needing to face the Canadian winter, but you can find virtually any type of shop you need. When I recently needed to find a jewelry store ahead of my partner’s birthday, The Path delivered. Not only did I find the perfect present, but the retailer was even having a sale!
As I pulled out my card to pay, the merchant informed me that the price didn’t include tax – unless I could pay cash, in which case tax was included. As a devout anti-cash convert, I was torn – in the end I paid cash, but with great reluctance. This brought to mind a question that I have been pondering ever since
Why, in 2019, are Canadians still using cash?
As in my earlier example, part of this continued use of cash is driven by merchants. This is not a uniquely Canadian phenomenon – in virtually every market that RFi Group conducts research, merchant preference is a key driver of cash usage. In our most recent Canada Merchant Acquiring Council study - a bi-annual survey of over 1,000 card-accepting merchants - we looked at how merchants prefer customers to pay; for those that prefer cash, the top reason behind this preference was the perception that cash was cheaper to accept than other forms of payment. This encapsulates one of the key challenges in moving away from cash usage; merchants generally do not understand the cost of accepting cash. When it comes to card payments, for example, the costs are clear – the merchant receives a bill from their acquirer each month that fully demonstrates the cost of card acceptance. When it comes to cash, the costs aren’t quite so easy to quantify – rather than one neat, easy-to-digest number, the merchant instead needs to consider things like time: the time taken to balance the register each day, the time taken to give out the right change, the time taken to deposit the cash at the local branch. Not only that, but the merchant needs to factor in the potential for mishandling, the added security risk of keeping cash on the premises, and good old-fashioned theft. Educating merchants regarding the true costs of cash will be an important step towards shift preferences towards more modern forms of payment.
Not all the blame can be laid at the feet of merchants, however; Canadians still want to use cash. Twice a year RFi Group runs the Canada Payments Council study, which looks at the attitudes and behaviour of 2,000 Canadians when it comes to payments. Part of this study looks at how customers prefer to pay in a range of different scenarios, and in several cases, cash is the most preferred – namely paying for taxis, paying for public transport, and most markedly in paying for low-value purchases like newspapers or coffee. Speaking from recent experience, my least favourite part of a taxi ride is sitting at your destination and waiting for the driver to fire up the payment terminal so you can pay by card, which again brings us back to the merchant; when there is friction, cash is easy, and the scenarios with the most friction are where cash is most prevalent. It may take us some time to shift customer preferences in this area, but the journey has begun; TransLink in BC has reached over 1 million contactless payments for public transport, showing that if we can eliminate the friction surrounding card payments even in those scenarios where cash is most prevalent, customers are willing to make the move with us.
So, how do we accelerate this move away from cash? The defining factor will be convenience. Eliminating friction at the point of purchase will be the single most important factor towards customers moving away from cash payments. Contactless has seen widespread adoption in Canada to date by providing a more convenient experience for customers at the point of sale. The adoption of mobile payments, while rising slowly but surely, has been relatively slow in markets like Canada where contactless usage is widespread – specifically because tapping your phone isn’t that much more convenient than tapping your card. In markets like China and India, where mobile payments were being compared to Dip & Pin card payments or even cash payments, the convenience factor was enough to drive adoption – and with great success! One potential way we can help improve the convenience at the point sale is through wearable devices; these devices are inherently convenient just by nature of the device itself; why bother pulling out your wallet, for instance, when your smartwatch is already on your wrist! That being said, to date no one has really provided that great, convenient wearables payment experience; but we have been moving closer in that direction. From RBC supporting Fitbit Pay in Canada, to Bankwest launching a contactless payment ring in Australia, banks globally are working towards finding that great wearables payment experience – and when we do, cash’s days may just be numbered.
Assuming that you have all of the following payment options available to you, please select the method you would most prefer for each scenario.
All this and more will be discussed in detail at RFi Group’s upcoming Global Business Banking Summit - Canada Edition, taking place in Toronto on March 20th.