Market Trends of Canada Payments Industry
This section covers the major market trends shaping the Canada Payments Market according to our research experts:
High Proliferation of E-commerce, Including the Rise of M-commerce, is expected to drive the Payments Market
- Canada is a lucrative and high-spending e-commerce market. As per the IMF, Canada's economy is forecast to grow by 3.9% in 2022 and 2.85 in 2023. Furthermore, as per World Bank data, the average Canadian earns USD 43,450 a year, 27% more than the average EU citizen.
- The COVID-19 pandemic helped fuel sharp growth in e-commerce payments in 2020. Due to lockdown and emergency stay-at-home orders, consumers replaced in-store with online shopping. It is likely that Canadians will continue to leverage online platforms for everyday needs, even after the COVID-19 pandemic. Many businesses transformed by moving to e-commerce sales platforms for the first time. This contributed to the rise in online purchases, as Canadians had more choices for online shopping.
- A PayPal Canada survey revealed that Canadians, in general, are spending USD 178 each month online, an increase of USD 69 from pre-pandemic, even as Canadians emerge from lockdown. Overall, this increase represents more than USD 2 billion in monthly online spending.
- Furthermore, the innovative payment solutions offered by leading E-commerce companies further paved the way for the growth of the E-commerce market. Lucrative cashback and loyalty programs on the credit card used for online shopping heavily influence the shift. As per Payments Canada, 78% of Canadians have a reward linked to their cards. Most of these reward programs issue points in various ways, including travel, general, and cashback rewards.
- Moreover, in Canada, the evolution of M-commerce is further proliferating online shopping, supported by a high internet penetration rate and mobile penetration rate. Furthermore, innovative payment solutions offered by E-commerce companies make payments checkout easy, with many of them offering digital wallets for online purchases. Furthermore, many E-commerce companies offer real-time payments like BNPL, attracting consumers to move toward E-commerce.
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Real-time Payments are expected to gain significant traction in the country
- Buy Now Pay Later services are rapidly evolving in the Canadian payments market. BNPL allows consumers to divvy up an online purchase into multiple payments, often at 0% interest and without fees. Various leading payments providers such as Klarna, Affirm, PayBright, and Afterpay is providing Real-time payments such as Buy Now Pay Later services to consumers in the region.
- Furthermore, many modern BNPL services can be accessed almost instantly online at the point of sale and can be used to pay for a much broader (and less expensive) range of products and services than before, including clothing, household essentials, groceries, entertainment, travel, and so on. This factor is further proliferating the growth of Real-time payments in the region.
- Payments Canada is a public purpose organization that owns and operates Canada's payments systems. Payments Canada is working closely with the Real-time payments ecosystem to modernize Canada's payments and to launch Canada's Real-time payment system, Real-Time Rail. Operated by Payments Canada and regulated by the Bank of Canada, the RTR will allow Canadians to initiate payments and receive irrevocable funds in seconds, 24/7/365. Leveraging the ISO 20022 data standard, the system will support payment information traveling with every payment. The RTR is expected to launch in 2022.
- Payments Canada is partnering with the leading payments solutions provider companies in the region for the Real-Time Rail Payments system. For instance, in March 2021, Payments Canada announced the selection of Interac Corp. as the exchange solution provider for Canada's real-time payments system, the Real-Time Rail (RTR). The announcement follows a selection process that includes participation from the Bank of Canada.
- Furthermore, the exchange solution provided by Interac will allow Payments Canada members participating in the RTR to send and receive RTR payment messages. The partnership will leverage Interac's existing infrastructure in Canada's payment ecosystem and its existing connectivity to nearly 300 financial institutions. To enable the settlement of RTR payments in real-time, the exchange solution will interface with the clearing and settlement solution being provided by Mastercard's Vocalink. This will further enhance the capabilities of the Canada payments market in real-time payments.
