Over the past few weeks, I have had the pleasure of speaking about global payments trends across both Canada and the US, sharing insights from RFi
At a global level, while cash remains king, credit and debit card usage has overtaken traditional payments across most markets. In the US and Canada, paper (mainly cheques) are still widely used; However, RFi Group data shows that North American consumers expect to rely less on cash going forward and increase their usage of cards. This is especially true among millennials, where we see lower number in terms of cash usage: they are the least likely to use cash in a typical month and the most likely to be able to envisage a cashless society.
"The usage of online banking and third-party apps is growing and matching cash usage"
We are also seeing a shift in the way consumers send money between each other. At the global level, many still rely on cash, but the usage of online banking and third-party apps is growing and matching cash usage – when we ask how customers usually send money to friends and family, cash, online banking and third-party apps are each being used by roughly a third of customers. While this is also true for Canada and the US, the two countries show different behaviours. In Canada, the use of online banking for peer-to-peer payments (P2P) is high and has grown significantly in the last 12 months – this is directly correlated with send money to each other, particularly among millennials.
This is usually the point where people ask me about the use of FinTech and digitalonly providers - what are consumers doing and what are they thinking?
The usage of these providers is on the rise, but we see clear differences across all the countries we are surveying. Asian countries are really leading the pack, and we also see a lot of activity in the US, while Canada sees a little bit less activity. The use of FinTech and digitalonly providers is more prevalent in the payments space than in any other aspect of banking – at a global level we are talking about 64% of consumers being comfortable (6+/10) using one of these providers for their payments needs. As expected, it is higher among millennials, but it is still quite high across all other age groups. Returning to Canada and the low use of FinTech, it is not that Canadians are not interested in these players; rather, it is that at least at this stage, our data shows they are quite satisfied with the way Interac and Banks have been addressing their payments needs.
Of course, I can’t write about payments trends and not mention the use of mobile payments. At a global level, the proportion of consumers who have made an in-person payments via mobile (contactless mobile payment) has grown from last year, rising from 20% to 27% between 17H1 and 18H1. Our data shows that in countries where contactless cards usage is already well established, the use of mobile wallet is usually lower. However, we see a clear appetite for new payments methods (especially among Millennials), so there is a real opportunity for mobile wallets or other types of payments apps.
So, what are the main barriers to mobile wallets?
Regardless of whether we are surveying consumers or merchants, the story is the same. Our studies find that security, reliability and prevalence are the key barriers to both usage and acceptance. Education and reassurance are key to overcoming negative perceptions around security and reliability, but as an industry we need to educate the market about prevalence. When we speak to consumers about the different barriers of usage, a key theme that emerges is the perception that their merchants don’t accept mobile wallets in general, or their particular wallet. Even Millennials, who you would assume to be more knowledgeable about these new payments methods, think third-party wallets like ApplePay or GooglePay are more widely accepted than bank wallets (41% for third-party wallets vs 28% for bank wallets). Perception of low merchant acceptance is also one of they main barriers to frequent usage.
On the other hand, when we ask merchants about the key reasons why they don’t accept mobile payments, we see a clear lack of understanding – both in terms of mobile wallets in general, as well as the features offered through their POS terminals. Most believe they must update their terminals and/ or pay extra fees to accept these transactions. In Canada, many are not aware that their current terminals, which already accept contactless cards, can also accept mobile payments. Making sure the communication goes from the account manager to the frontline staff is crucial to accelerating the acceptance of mobile wallets.
However, perhaps more important than improving the understanding of these wallets is demonstrating their prevalence to merchants – showing them that this is how consumers want to be paying, and that they risk losing customers if they don’t. One of the most common reasons that merchants don’t accept mobile payments is a perceived lack of demand from their customers; however, 1 in 5 Canadians have indicated they have either abandoned a purchase or avoided a merchant altogether because they weren’t able to pay the way they wanted to pay! There is a huge missing opportunity to promote acceptance of mobile payments among Canadian merchants, for the benefit of both businesses and consumers.