Canada Cards And Payments Market

Canada Cards And Payments Market Overview (2024 to 2032)

CURRENT SCENARIO

The Canada cards and payments market continues to grow steadily. Overall, there was no significant shift in payment trends in 2023 compared to the previous five-year span. Moreover, credit and debit cards remain prominent in all other payment forms in transaction volume and applications, driving the market forward. In addition, EFT volume secured the 3^rd position in total and witnessed comparable progress during the last 5 years in association with credit and debit cards. Further, cash payments surged, however, continued to be positioned at the 4^th spot generally regarding payment transaction volume. Additionally, cheques represented a small percentage of overall payment activity and maintained a consistent decline. Besides these, the market experienced a significant rise due to online transfers also held for a limited portion of total payment volume but, in contrast to cheques, it has displayed strong progress, achieving a 136 per cent increase in the past 5 years.

On the other hand, the dynamics of the Canadian payments market have seen extraordinary volatility in the past four years. This is because of COVID-19, the ongoing war in the Middle East and in Europe, supply chain distributions, escalating inflation, increasing interest rates, and worries regarding the economic downturn. These advancements have already had a substantial impact on customer expenditures, which is one of the major factors propelling the Canada cards and payments market. These developments have already had a significant impact on consumer spending, which is one of the key factors driving the payments industry in Canada.

Leading banks and payment solution providers in Canada are introducing various services to capitalize on the growing preference for alternative payments. For instance, Samsung introduced Samsun Pay in November 2016 with the support of the Canadian Imperial Bank of Commerce (CIBC). This service, which initially supported only CIBC cards is now extended to support payment cards of different banks, effective from November 2017. In May 2018, Google introduced Android Pay, with the collaboration of the country's leading banks like CIBC, Scotiabank, and Bank of Montreal (BOM).

MARKET DRIVERS

The widespread popularity of e-commerce drives the growth of the Canada cards and payments market.

The country progressively adopted electronic commerce during a big disruption in retail and distribution channels.

• According to the International Trade Administration, e-commerce customers in Canada in 2022 were more than 27 million, which is about 75 per cent of the country’s population. This figure is projected to rise to 77.6 per cent in 2025.

The higher number of online shoppers means that retail sales in e-commerce continue to follow an upward trajectory, ultimately fuelling the growth of this market. Retail eCommerce sales are anticipated to touch 40.3 billion dollars by 2025. Traders and dealers are actively infusing money in digital payments to reach customers spread all over a large land area and, at the same time, preparing to deal with growing competition from websites and platforms like Amazon Canada. Its progress can be understood from the fact that digital payments as of 2024 account for an astonishing 86 per cent of the overall transaction volume, with the contactless category holding 53 per cent of payments in 2023.

The rise of fintech startups also accelerates the market growth.

The country has been establishing itself as a powerful force in the fintech sector. Financing trends present a major indicator of the potential of this sector, particularly when looked at from the investor's point of view.

• According to a 2024 study by the Ivey Business School, in the last 10 years, Canadian FinTech companies have secured funding of more than 18 billion dollars through approximately 1100 deals comprising angel investors, proceeds from public offerings (first and subsequent), private equity rounds, initial stage and late stage VC funding.

Companies included in ‘Payments and Money Transfers’ operations dominated in both the overall funding secured and the number of firms, which is one of the major propellants of the fintech sector as well as this market.

The convenience of payments and the rapid installation for respective POS terminals are supporting the growth of contactless payments in Canada. Several banking firms like Royal Bank of Canada (RBC), BMO, CIBC, Scotiabank, and TD Canada Trust are offering contactless cards. The value and volume of the contactless payments have increased by 78% and 81% in 2016, as per the report of Canadian Payment Methods and Trends. The report also mentions that the number of transactions through these cards has crossed 2.1 billion, of which 1.1 billion are through credit cards and 1 billion through debit cards.

Mobile banking has been gaining prominence in the country with the increasing penetration of smartphones. In 2015, according to the Canadian Bankers Association, around 200 million banking transactions happened through mobile devices in 2015. Equitable Bank, based in Toronto has introduced EQ Bank, a digital-only bank in January 2016, and BMO launched an account opening service on the smartphone to witness the profits in the growing demand for mobile banking. BMO service, starting from October 2016 is allowing small business owners to open saving accounts instantly.

MARKET RESTRAINTS

High Transaction fees limit the expansion of the Canada cards and payments market.

Several small companies and businesses in the country are worried about the exorbitant charges related to payment processing, particularly for credit card transactions.

• As per a recent survey data shared by Payments Canada in October 2023, over 3 quarters of small business owners i.e. 79 per cent constantly mentioned the cost of accepting credit cards as untenable

Today, Canadian customers are enthusiastic about or hooked on reward points and gradually more transactions are heading to consumer credit cards, especially with the pressure of inflation on household budgets. However, on the positive side, the Federal government has come to terms with Mastercard and Visa regarding a new deal to decrease interchange rates for small market players, still, there is a need for a huge amount of work to ensure that savings are fruitfully moved on to entrepreneurs.

MARKET OPPORTUNITIES

Regulatory changes present potential prospects for the growth of the Canada cards and payments market.

With ongoing advancements in technology and services reshaping the payment methods and processes, revising and expanding access to the Canadian Payments Act (CP Act) can facilitate the modernization of Canada’s payment ecosystem. The 2023 Fall Economic Statement by the Department of Finance of Canada comprises proposed amendments to the CP Act aimed at broadening the eligibility criteria for the membership of Payments Canada. The suggested CP Act revisions were part of the 2023 Fall Economic Statement Implementation Act, better called Bill C-59, which was enacted by the Government of Canada. These important legal amendments will encourage greater innovation and choice, establishing the base for essential advantages and opportunities for consumers across the country. There are various benefits of broadening membership in addition to traditional banks to involve a wide variety of financial service providers, like payment service facilitators, fintech companies, and other non-conventional financial institutions.

MARKET CHALLENGES

Some of the grave problems in payment processing for small companies and business owners are associated with payment fraud and information security, which derails the growth trajectory of the Canada cards and payments market.

From the small business standpoint, maintaining the same level of security for payment transactions and protecting consumer information can be a daunting job. And, at the same time, several companies must adhere to the standards of data security, like payment card industry compliance (PCI), the application or execution can be quite expensive and complicated, which affects the uniformity in the market. Moreover, progressively these businesses have emerged as targets for payment fraud (for instance, online payment fraud, counterfeit currency, and chargebacks) and have to deploy effective measures for their prevention can also be expensive and resource-intensive.

Canada Cards and Payments Market - Highlights of the report

Information about various application areas of Pay later cards and pay now cards, along with the focus on the total number of cards operational in the market, their average transactional volumes and other functionalities involving the use of those cards.

The trends in the e-commerce industry, card penetration in the market, merchant acquisitions, and the advent of mobile and electronic wallets. The transition towards EMVs and contactless card payments at POS terminals.

The growing alternative payments and encouragement from local banks like Samsung Pay by Samsung Electronics in partnership with Canadian Imperial Bank of Commerce (CIBC) is accepted by several banks in the nation. Similarly, Google's Android Pay is supported by major banks like Bank of Montreal (BMO), CIBC, and Scotia Bank.

The augmenting contactless cards payments at the retailer POS terminals and interest of consumers to use these cards, along with the push from major banks of the country like Royal Bank of Canada (RBC), BMO, CIBC, Scotiabank, and TD Canada Trust. According to Payments Canada's report, the contactless payment volumes and values were increased by around 81% and 78% in 2016 with close to 2.1 billion transactions.

Increasing the use of smartphones for payments and banking transactions offering new innovations like digital-only banks. For instance, EQ bank, launched by Toronto-based Equitable Bank operates on mobile providing all services. Similarly, BMO introduced new service on smartphones to open an account in minutes, which was extended to small business owners to open savings accounts.

SEGMENTAL ANALYSIS

Canada Cards and Payments market – By Cards

• Debit Cards
• Credit Cards
• Prepaid Cards

The credit card segment continues to be the most popular method in terms of payment volume in the Canada cards and payments market. It remained the most commonly utilised payment method by the Canadian people based on the number of transactions and they also constitute the majority of total card value. The dominance of this segment can be attributed to one of the major reasons users prefer their application over another is the potential to earn rewards.

• According to Payments Canada, credit cards held 33 per cent of payment volume in 2023, succeeded by debit cards with 30 per cent, electronic funds transfer with 15 per cent, cash with 11 per cent, online transfer with 6 per cent, and prepaid cards, automated banking machines (ABM), and cheque all at 2 per cent.

Whereas, the prepaid cards segment witnessed the largest growth in transaction value at 10 per cent compared to others. Canadian customers report the application of prepaid cards to make quick payments, get loyalty rewards/discounts and to utilise their own money. The average amount of prepaid transactions was 69 dollars.

Canada Cards and Payments market – By Payment Terminal

• POS
• ATMs

The POS segment is the biggest category of the Canada cards and payments market and is projected to drive further during the forecast period. This growth of the segment’s market size can be credited to the extensive use of credit card machines in the country. Some of the widely popular CC machines are Clover Flex, Ingenico Move/5000, Square Terminal, and Poynt Smart Terminal. Apart from these, the segment’s market share also expanded due to the swift rise of contactless payments, which make about 53 per cent of payments

Canada Cards and Payments market – By Payment Instruments

• Credit Transfers
• Direct Debit
• Cheques
• Payment Cards

The payment cards segment is the leading category of the Canada cards and payments market. In 2023, both debit and credit cards continue to rule the segment with a combined proportion of 63 per cent of overall payment volume. Besides this, another trend in the country’s market displays a considerable shift to digital payments, with the use of cards at the top. Consumers use these cards for paying off big or medium amounts transactions.

Country Analysis

Canada cards and payments market witnessed a positive growth rate despite tax hikes, inflation and worsening housing crises in recent years.

The payment ecosystem of Canada remains influenced by international and domestic innovation. On one hand, the market saw a tremendous rise in digital payments. The country’s payment market expanded by 1 per cent in Value and 6 per cent in volume between 2022 and 2023. In addition, the region’s market size is believed to expand due to the application of Generative AI for fraud detection and prevention throughout banking and other financial services. Also, new use cases respond to emerging problems like authorized push payment (APP) fraud, where manipulative strategies to coerce individuals into transferring funds to fraudulent accounts.

Recent Market Developments

• In October 2024, the government of Canada announced the reduction of fees charged for credit cards to 27 per cent for small business owners and companies.