‘Dramatic change’ in payments arrives as Canadians leave cash behind

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The pandemic accelerated a transition away from cash, and the rapid adoption of digital alternatives is paving the way for more innovation.

Mastercard’s latest New Payments Index found that in the past year 52 per cent of Canadians used at least one digital payment method, such as contactless credit or debit cards, tap-able smartphone mobile wallets, buy now pay later (BNPL), and cryptocurrencies. An overwhelming 88 per cent plan to use at least one of these solutions in the year ahead.

Darrell MacMullin, senior vice-president of product, digital and new payments for Mastercard Canada, says the accelerated transition from cash represented a dramatic change in the relationship Canadians have with their money. It also provides an opportunity for the digital payments industry to introduce expanded options.

“As the world went into pandemic lockdown in 2020, consumers shifted their payment habits to embrace solutions like contactless tap-and-go payments and online shopping,” Mr. MacMullin says. “Now, more than two years later, research from Mastercard shows that the adoption of new payment technologies is rising, and consumer appetite for new, fast and flexible digital experiences continue to grow at an aggressive rate.”

If not for the pandemic, it might have taken several more years for businesses and consumers to embrace new and emerging digital payment solutions. Once Canadians started utilizing such tools out of necessity as a pandemic response, many discovered the added benefits, conveniences and security features that are only available with digital payment solutions.

“Not only are consumers aware of solutions like cryptocurrency, digital cards, biometric payments, and BNPL, but they are increasingly and actively using these solutions for various financial transactions throughout their everyday lives,” Mr. MacMullin says.

He adds the transition has further simplified, secured and expedited transactions between Canadians and merchants – particularly those that have kept up with changing consumer preferences.

“As the demand for emerging payments and choice continues, it requires a wider range of solutions, insights, and products to meet the accelerating enthusiasm for the future state of pay,” Mr. MacMullin says. “The businesses that can provide multiple ways to shop and pay are best positioned to meet these expectations, lower abandonment rates and increase sales.”

Some of the most popular digital payment tools, according to Mastercard’s study, include direct transfer between accounts, digital credit cards, and digital wallets, with nearly three quarters of Canadians utilizing each of them in the past year. Online bill payments also increased in popularity: initially out of necessity during lockdowns, and later due to the added conveniences they provide.

Canadians value security, transparency and control when making payments and managing their finances, the study found. Digital solutions such as biometrics – like the fingerprint scanners that are now standard on most smartphones – can provide an added layer of security.

“Cash, inserting debit or credit cards and tap are still among the highest trusted traditional payments methods,” Mr. MacMullin says. “While consumers still tend to view those traditional payment methods as more secure, almost half of Canadians view the emerging payment methods – such as digital wallet, digital credit card and digital transfer – as secure as well.”

Mr. MacMullin says increased adoption of digital payment solutions hinges on continued education around the safety and security of new technologies.

“Canadians can have peace of mind knowing that payment security is in the DNA of our brand, so all our products are designed with security top of mind. We’re always looking at the most advanced technology to enhance the security of our products and services.”

For example, Mastercard transactions are protected by the company’s tokenization technology that replaces account numbers and other sensitive data. This results in a payment method that is hard to breach or replicate, ultimately helping fight fraud.

Looking into the future, Mr. MacMullin says Mastercard is preparing for a world where BNPL solutions account for more than a quarter of all transactions, which is on pace to become a reality by 2026. The company is also using emerging blockchain-based technologies – such as cryptocurrencies and NFTs – to further enhance convenience, privacy and security for everyday Canadians, and improve access to NFT and cryptocurrency markets.

“We’ve been innovating over the past year to make these improvements happen,” Mr. MacMullin says. “Overall, these integrations are designed to make crypto more accessible and help the NFT ecosystem keep growing, innovating and bringing in more fans.”

More broadly, the company is playing a critical role in the transformation of Canadian payments as part of the Canadian Real-Time Payments ecosystem – providing technology solutions to help build Canada’s Real-Time Clearing and Settlement System. Once in place, it will accelerate the development of digital payment applications and experiences for consumers and businesses even faster.

Digital payment solutions are not entirely new, but it could have taken years for cash to become secondary to virtual alternatives. Now that Canadians have discovered the added convenience, security and control of these solutions, there is even greater appetite.

“The future of payments is already here,” Mr. MacMullin says. “Consumers are now actively using cryptocurrencies, contactless payments, digital cards, and biometrics, and we expect to see further adoption of emerging solutions in the years ahead – both for domestic and cross-border payments that are secure and real-time.”

Advertising feature produced by Globe Content Studio with Mastercard. The Globe’s editorial department was not involved.