TSYS’ consumer payment study shows that old habits die hard. Although mobile payments are on the rise, Canadians still prefer credit and debit cards, with cash transactions a third choice as most preferred payment preference. Sarah Hartman, Senior Director of Consumer Issuing, talked to Karen Webster and offered her take on the most recent findings of the likes and dislikes of the Canadian consumer.
Old payments and banking habits die hard, which (depending on the habit) may not be all that bad. A recent study by TSYS shows a continued strong preference for credit, debit and cash among Canadians, even though there are starting to be glimmers of mobile payments adoption. Still, it’s early days for interest to be enough to draw the hockey stick of growth on the whiteboard.
What is, however, is the degree to which Canadians love what they have in the form of banks and payments systems. Many of the 1,200 Canadian consumers that TSYS surveyed during March 2016 said it was important to use one financial institution for all of their banking needs. TSYS’ Sarah Hartman indicated that this was consistent with a recent Canadian Bankers Association study.
Here are a few of the highlights:
• Canadian consumers are increasingly adopting mobile payment technology, albeit slowly, and are comfortable with alternative mobile authentication methods, such as fingerprinting, voice recognition and camera technology.
• Cash is still the preferred payment mode for small transactions, and credit cards dominate online and larger transactions.
• Consumer appreciation for instant in-store offers declined slightly from previous years, which was somewhat surprising, particularly because credit card rewards are the number one factor in consumer credit card choices.
TSYS’ Sarah Hartman delivers insight around those findings in a recent interview with Karen Webster.
Consumers Are Adopting Mobile Wallets
No strict differentiation was made in the survey between mobile wallets, such as Apple Pay, for in-store use and a PayPal mobile wallet for online shopping. However, Hartman told Webster that consumers were also asked about storing credit and debit card information on retailers’ websites versus their phone. The survey found that 23 percent, almost a quarter, of respondents were likely to load or had already loaded their credit card information to a mobile wallet.
Although almost a quarter may sound unimpressive, Hartman found the statistic encouraging for the mobile industry, particularly because the number of open wallets in Canada was low prior to some of the recent launches. “Overall comfort levels with mobile wallets might be a little higher in Canada than in the U.S., and there has been a positive response to the recent mobile wallet launches,” Hartman explained.
Other statistics with respect to mobile transactions show that consumers’ habits change slowly over time. So, although consumers might upload their credit and debit card information to their phones, it may take some time for payment by mobile phone to become habitual. Fifteen percent of those surveyed in 2016 stated they would be interested in making an in-store purchase using a mobile device, but when asked about the actions taken in the last year, only 7 percent said they had actually done so.
That number has remained consistent the last three years, with 6 percent stating they had made an in-store purchase for the first time using their mobile device each of the prior two years. The slow change in behaviors is also reflected in the 62 percent of consumers who said they had not changed the way they pay during the last year, compared to 60 percent in 2015 and 52 percent two years ago. That number was expected to go down, not up, but habits might change soon.
Many Consumers Prefer To Use Just One Banking Institution
Many Canadian consumers express considerable confidence in their banking system. Hartman cited a study by the Canadian Bankers Association that found that 87 percent of those surveyed considered their banks stable and secure. Hartman then was not surprised to learn that 44 percent of consumers would be interested to have all of their financial products with the same financial institution. She also agreed that this might play out differently in the U.S., where there are 14,000 banks competing for business.
Consumers Are Open To Alternative Methods Of Authentication
The survey found that more than 60 percent of consumers were comfortable with alternative methods of authentication other than passwords, such as fingerprints, voice biometrics and camera-based systems, a result Hartman believes will encourage the use of mobile payments. Winning over the Canadian consumer to mobile payments might come down to convincing them that it is safer than current options, and authentication technology that the consumer warms to might be the key to changing payment behavior.
Payment By Credit Card Dominates, But Cash Is Preferred For Small Transactions
Despite some interest in mobile payments, credit card payments continue to dominate for online and larger purchases (53 percent of consumers preferred to pay by credit in department stores and only 8 percent preferred cash), but cash transactions are still popular for small transactions, such as quick-service restaurants and coffee shops (52 percent preferred to pay by cash in a coffee shop and only 21 percent preferred to use a credit card). This trend is a consistent one, perhaps because payment preferences are sticky, but Hartman finds the strong cash preference surprising considering the availability of contactless and mobile in Canada.
The main driver of credit card choice for consumers continues to be rewards, with over 60 percent citing that rewards influence their credit card preference. Interest rates and fees are secondary influencing factors. Whether a consumer chooses to pay with a credit or debit card depends on the type of purchase; credit is preferred for online and larger purchases, while debit is used more for daily spending.
For Future Study
TSYS plans to continue modifying the survey each year to incorporate new questions, along with tracking responses to questions asked in prior years. The expansion of mobile-specific behaviors and preferences will be at the top of the list. But Hartman also wants to look beyond payments, at communication and other preferences as well. One emerging trend, and one that reflected a somewhat surprising result, was the slight decline noted in consumers’ interest in instant in-store offers, despite their penchant for rewards programs. Hartman plans to gain more insight into this finding, particularly as the contactless and mobile payment movement accelerates, which it surely has to, doesn’t it?
The full study can be accessed here.
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