Thursday, September 2, 2010

Canadian payments industry experiences a year of unprecedented change

(Oakville, Ontario – August 12, 2010) — Contactless debit and credit card payments are rolling out rapidly in Canada and are likely to account for significant transaction volumes and values by 2014, a new study published by Technology Strategies International predicts.  According to the recently released market research report titled "Canadian Payments Forecast - 2010", there is also strong interest in mobile payments, although in the short term this is likely to ride on the back of contactless rollout. 

The study found that consumer payments were remarkably resilient during the recession, with the largest impacts being felt in the value and volume of credit card transactions.  The resilience was a result of growth in personal expenditures, even in the face of declining GDP.

"The industry has been through some very significant changes over the past two years," says Christie Christelis, President of Technology Strategies International.  "The increased regulatory oversight, and in particular, the Code of Conduct, has had, and will continue to have, far-reaching effects on how the key players position themselves in this market, and how they move forward with their growth strategies."

"Interac is particularly vulnerable to competition in the debit space at the moment," he notes, "and the Code has provided breathing space for the organization to ready itself for the onslaught from scheme debit."

Key findings of the study include:

  • The impact of the recession was felt in the payments space with cash withdrawal from ABMs, cash purchases, credit card purchases and credit card cash advance volumes declining.
  • Online payments, cross-border payments and contactless payments grew rapidly in 2009.  The use of cheques for personal payments continued to decline.
  • The intensity of competition is increasing in the Canadian debit payments space. MasterCard and Visa have managed to secure the support of leading issuers to launch alternative debit payment products in Canada – a market currently dominated by Interac.
  • The merchant lobby has been highly effective in delaying the launch of scheme debit in Canada. The Credit and Debit Card Industry Code of Conduct has forced would-be issuers of alternative debit products to rethink their launch strategies.
  • MasterCard has encroached on Visa's turf as Visa issuers experiment with issuing the more lucrative MasterCard credit cards.
  • Contactless payments have extended their reach remarkably quickly over the past year, and issuers and acquirers are undertaking major thrusts to make contactless payments ubiquitous in appropriate payment settings.
  • Cross-border payments are expected to grow rapidly, with the entry of scheme debit stimulating growth in both the outbound and inbound cross-border payments segments.
  • Mobile payments continue to attract strong interest from payment companies, banks and acquirers, especially in the face of increased smartphone usage in Canada. Over the next five years. growth in mobile payments will occur primarily on the back of developments in the contactless payments space.
  • Alternative payment mechanisms for online payments (i.e. non-credit card payments) will account for one third of all online payments made by Canadians by 2014
  • Cash will remain the most frequently used form of payment in Canada over the next five years, but will suffer some erosion from contactless debit and credit payments

The 138 page report provides a comprehensive review, analysis and forecast of consumer payments in Canada.  It identifies high growth segments in the Canadian payments market in the context of some important recent developments in the economy and the industry.  Detailed forecasts are presented for credit card payments, debit card payments, cash payments, cheque payments, contactless payments, cross-border payments, online payments, ABM installations and POS terminals.

About Technology Strategies International 
Technology Strategies International is a leading Canadian technology market research firm based in Oakville, Ontario.  Established in 1995, the company has been tracking developments in Canadian payment industry for the past fifteen years.  For more information please