Some Canadians are still reluctant to give their banking information to the taxman – even if it means waiting longer for financial relief during a pandemic.
Sixteen per cent of Canadians who received federal emergency benefits, such as the Canada Emergency Response Benefit (CERB), in recent months opted to do so by cheque rather than direct deposit, according to Public Services and Procurement Canada (PSPC). It’s a curiously high proportion considering how badly people need the money, and because COVID-19 has otherwise accelerated the use of digital payments as people make more purchases online.
A big part of the problem is a lack of trust in government, including the Canada Revenue Agency, which administers the recently extended CERB program. It’s unfortunate because not only is direct deposit a faster payment method than paper cheques, it’s also more efficient.
Producing and mailing government cheques costs money, so Ottawa is working with financial institutions to increase enrolment in the direct deposit system. But it’s apparent the only way to persuade more Canadians to sign up is by offering alternative payment methods that don’t require them to divulge their personal banking details.
“For COVID-19 benefit payments, direct deposit means access to the first payment in about three days, rather than up to 10 days,” Tracey Black, president and chief executive of Payments Canada, wrote in a recent article. The Ottawa-based non-profit organization, which is funded by financial institutions, is responsible for Canada’s payments clearing and settlement infrastructure.
Avoiding unnecessary trips to the ATM or teller wicket might seem like a no-brainer during a pandemic, but persuading people to enroll in direct deposit for their emergency benefits is just part of Ottawa’s broader challenge. Some Canadians also opt to receive cheques for their income tax refunds and for government benefits, including payments for the Canada Pension Plan, Canada Child Benefit and Old Age Security.
During the 2019-20 fiscal year, the Receiver-General issued about 327 million payments on behalf of federal government departments and agencies, according to PSPC. Roughly 30 million of those payments were made by cheque.
“While direct deposit is a more rapid method of payment, there are no plans at this time to make direct deposit mandatory for Canadians,” PSPC spokesman Jeremy Link wrote in an e-mail. “Our intention is to ensure that we deliver benefit payments in an accessible way to Canadians, whether that be by direct deposit or by cheque.”
That’s the right call because forcing the issue is a bad idea. Still, it’s concerning that despite years of effort by Ottawa, people remain wary. As Ms. Black points out, direct deposit has been around for 25 years. So why are a chunk of emergency and other federal payments still being made by cheque?
In a 2017 report – public opinion research by EKOS Research Associates Inc. that was prepared for PSPC – some older adults expressed a preference for cheques, while others don’t think it’s worth switching to direct deposit for one or two payments a year. But there were other concerns cited by direct-deposit holdouts.
Four in 10, for example, were unwilling to consent to their banking information being shared with other federal government departments, and less than half were comfortable with their details being distributed to provincial governments. Concerns included “mishandling of information, leaks and cyber attacks.”
At the same time, one in four had concerns about the federal government’s ability to protect their personal information.
“Some participants, notably in Toronto, cited problems with the government’s Phoenix [pay] system as an example of their distrust of government competence with their payments,” the report said.
Ottawa must close the enrolment gap because not all government cheques are being cashed. As of May, 2019, there were roughly 7.6 million uncashed cheques worth an estimated $1-billion, according to the CRA. Some date back to 1998.
Digital payments should be part of the Trudeau government’s economic recovery plan. A good place to start is by offering Canadians alternative payment methods for their government benefits that respects their need for privacy.
One obvious option is Interac e-Transfer, an account-to-account money-movement service that’s already popular with consumers. The service also allows organizations to send secure payments to multiple recipients without requiring their banking information. It’s already being used by the Alberta government and the Canadian Hospitality Worker Relief Fund to facilitate emergency payments during the pandemic. The Canadian Red Cross used Interac e-Transfer to distribute $50-million during the 2016 Fort McMurray wildfires.
Fintechs can also play a role in modernizing the payment system. Mobile phone numbers and e-mail addresses offer the benefit of being more portable than bank accounts, and can facilitate secure payment transactions.
Canadians rightly want to protect their privacy. They want the freedom to deposit payments in the account of their choosing without divulging their financial details. Persuading Canadians to sign up for direct deposit would be an easier sell if Ottawa gave them more choice.
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