For five years running, TSYS has tracked Canadian consumers, and found a continuing embrace of credit as the preferred means of payment.
The 2018 Canadian Consumer Payment Study asked more than 1,000 adult individuals (over the age of 18) about their use of credit cards, their enthusiasm about rewards points and programs, and how they feel about new technologies and payment methodologies, such as person-to-person (P2P) transactions. Overall, payment cards were top of mind and top of wallet.
“According to The Nilson Report, total general-purpose cards (debit and credit) transaction volumes were up 8.7 percent between 2016 and 2017,” TSYS said, noting that “the number of actual cards grew by 4.1 percent during the same period.” It’s important to note, too, that “purchase volume also increased, and was up 9.5 percent in that” period of measurement.
John Dale Hester, senior vice president of relationship management at TSYS, said in an interview with PYMNTS that the 2018 study marked, at least in part, “a continuation of trends that we have been seeing in years past.”
Credit Cards Come First
Among those trends, and within the Nilson payment card stats listed above, for the fourth year in a row, credit cards were the payment method preferred across all manner of shopping in Canada, with the exception of coffee shops (where cash was the favorite) and payments sent to individuals (more on this later).
The use of credit is pervasive, as the study showed that consumers of all age groups and across all income levels said they preferred wielding cards to pay. Consider the fact that 67 percent of respondents said they have two or more cards, up from 63 percent in 2017 and 61 percent in 2016. Conversely, the percentage of those with only one debit card remained the same at 69 percent.
Drilling down a bit, credit was the preferred payment type for 60 percent of the 1,000-plus individuals asked, followed by debit at 28 percent, with cash trailing at 8 percent. Credit cards were the most preferred payment choice across all age groups, breaching 60 percent levels for 25- to 34-year-olds and 45- to 54-year-olds, and more than 65 percent for those above the age of 65.
All this begs the question as to why consumers have increasingly clamored to use credit. TSYS posited that it’s partly due to wide acceptance at merchants. Hester noted that spending on credit cards prevailed at 57 percent for supermarkets and grocery stores, and more than 60 percent for gas stations, department stores and dine-in restaurants.
Hester said the fact that so many individuals hold at least two cards — and use those cards for everyday spending — speaks to what he termed “a comfort level” with credit, and that “loyalty has been among the top reasons they pick those cards.” For the fifth year in a row, loyalty and rewards programs came in as the top influencer for when consumers choose between multiple credit cards.
Furthermore, 90 percent of respondents, TSYS found, selected rewards as a feature that causes them to use one credit card over another — no matter the age group, with redemptions for merchandise and cash back as the top-two favorites.
Discounts also lure consumers, and Hester noted that new account openings may be spurred upon the purchase of large-ticket items, where offers at the point of sale may (for new cards) shave 10 percent to 20 percent off that item. Therein lies a boon for companies that offer multiple cards, as TSYS found that 43 percent of individuals want to have multiple relationships with a single financial institutions (FIs), and not necessarily banks alone.
“If I know that I'm going to get 1 percent, 2 percent, 3 percent — whatever they're offering — off of the purchase that I made” with a card, explained Hester, “I feel like I'm getting more from my issuer when I use a credit card versus a debit card. This is an expectation now.”
There may be another spur toward holding several cards in an age where data breaches hold sway. “People want two or more cards,” he said, “because if something happens to one, they have a backup, and they are not completely ‘out of the water’ for whatever period of time must pass until they get their new plastic card or new account number.”
This is not to say, of course, that the tangible plastic card must be dominant in every use case. Hester noted that Canadian consumers are showing interest in, and familiarity with, new tech-driven payment methods. TSYS found that although cash continues to be the preferred way to pay individuals, P2P services have gained traction, with 55 percent of respondents indicating they have used a P2P service.
That comes, he said, as Canadian consumers are also familiar with contactless payments — in concept and, increasingly, in everyday use. More than 95 percent of respondents were aware of the capability, with 86 percent having used it, as contactless has made its way into mass transportation and other settings.
Secure In Security?
When it comes to security, 70 percent of those surveyed said they were “not very” or only “somewhat” concerned by the possibility of their data being stolen. TSYS suggested that this is because a majority of respondents believe the bank is responsible if their account or personal information is stolen, then used to make fraudulent purchases.
Of course, Hester said, “the more spend that occurs on card products, the more fraud that can potentially occur.” One of the pain points with issuers comes around declining legitimate transactions. As card not present (CNP) transactions increase, he noted that issuers and FIs could turn to products that use machine learning, paired with their traditional risk models, to reduce false-positives.
Though mobile services are increasingly important in conducting daily activities, there is room for consumer uptake when it comes to using a merchant’s mobile app to make a purchase. TSYS found that while consumers are growing increasingly comfortable with getting a variety of communications on their phones from financial services providers, only 33 percent of respondents made an online purchase using a merchant's mobile app in 2018.
“What you will see, and continue to see, is a growing momentum for in-app purchases, both in a physical and virtual environment,” Hester told PYMNTS.