TORONTO — Sixty-three percent of consumers in Canada use cash at least weekly to make purchases at a merchant location, down five percentage points from 2015 – the most significant decline in use of traditional payment methods over the past year, according to a new report from Accenture.
Awareness of mobile phone payments increased nine percentage points from last year to 49 percent, slightly lower than the overall North American response of 56 percent, while the regular use of mobile payments in Canada remains flat at 11 percent, compared with 19 percent overall for North America.
The 2016 North America Consumer Digital Payments Survey is based on responses from more than 4,000 smartphone users in the United States and Canada, and is the most recent report in Accenture’s multi-year research on consumer attitudes about how they want to pay now and in the future. The survey found that even with the decline in cash use, cash and plastic continue to be the most commonly used payment methods. Canadian consumers’ use of debit and credit cards for payments in merchant locations dropped one percentage point each to 57 percent in 2016.
“We are seeing a gradual increase in consumer awareness of mobile phone payment options; however, adoption has remained flat over the past few years,” said Jonathan Magder, Canadian Payments Lead for Accenture. “Consumers are content to use cash and plastic for their everyday transactions, and while the use of cash is declining overall, it is the most commonly used form of payment. To shift consumers’ payment behaviors will take more than just providing another ‘me too’ mobile payments option; leading merchants will identify and provide next-generation, value-added services.”
While the use of mobile phone payments at merchant locations remains flat, according to the survey, other digital payments are on the rise – a trend that consumers expect to continue. Since 2015, Canadian consumers’ use of PayPal has increased eight percentage points to 18 percent in 2016. Consumers expressed optimism about mobile wallet adoption in the future, expecting a 67 percent increase in the use of mobile wallets by card networks (from 12 percent in 2016 to 20 percent in 2020) and tech giants (from seven percent to 15 percent in 2020).
“The existing payments system isn’t broken, which is why consumers are not making a mass-move to mobile phone payments adoption – the incentives are not there yet,” said Magder. “Canadian consumers expect more in today’s fast-paced digital environment; just the ability to tap-and-pay is not enough. Payments providers need to bring the traditional card to life and create a real-time interactive experience for consumers.”
The survey identified barriers to consumer adoption of mobile payments, which, if addressed, can provide first-movers with a significant advantage. Of the nearly two-thirds (64 percent) of North American consumers who have never used their mobile phone as a payment vehicle at a merchant location, more than one-third (37 percent) said they have not done so because they believe cash and plastic are fine for their payments needs, while nearly one-in-five prefer not to register payments credentials into their mobile phone (21 percent) or are concerned that unauthorized transactions may happen (19 percent).
Consumers trust traditional payments providers the most and are largely satisfied with digital payments transactions; however, there are no clear winners yet. Nearly three-quarters (71 percent) of Canadian consumers said they trust traditional card providers the most as their mobile payments provider, followed by alternative payments providers like PayPal (62 percent), established retail banks (58 percent) and large tech companies (54 percent).
Millennials and Mass Affluents: the Path to Adoption
Millennials, and mass affluent individuals who earn $100,000 annually after taxes, are natural segments for payments providers to target, as they lead adoption trends in digital and mobile payments and self-proclaimed early adopters for the next wave of payments technology. About half of both groups (47 percent for mass affluent and 48 percent of millennials) consider themselves to be among the first to try new technologies. About one-fifth of millennials (19 percent) and mass affluents (22 percent) are extremely interested in initiating payments transactions using wearables (e.g. watch, etc.) or smart devices, such as a refrigerator or car.
Magder concluded, “Millennials and higher income individuals may be low-hanging fruit for payments providers looking to increase adoption, but there is also a vast amount of untapped opportunity with consumers who are becoming more familiar with digital technologies and the rewards and convenience it affords. As open banking becomes more prevalent, driven by APIs, consolidated customer data will provide a full picture of the customer, providing payments providers with the information they need to create unique and differentiated offerings. Winning in mobile payments is anyone’s game at this point.”
While millennial and mass affluent consumers are leading the adoption charge, the survey found that consumers overall are becoming more open to considering digital payments options. One-fifth of North American consumers are interested in using wearables (21 percent) or smart devices (20 percent) to initiate payments, a two and three percentage point increase respectively from 2015. North American consumers expressed the most interest in the ability to park their car and have the car automatically pay for parking (30 percent).Today, nearly one-fifth of consumers (21 percent) are extremely comfortable linking personal data with different ways to pay for faster authentication and one-step checkout, and nearly two-fifths are comfortable providing online bank account credentials to third-parties