Stay-at-home orders shaped payments trends in Canada – what’s next?
The events of the past year have transformed the world, including the way people spend their money. Many businesses had no choice but to embrace ecommerce, those who had already done so reaped the benefits, and new and innovative ways to pay have emerged. Add to that the increasing popularity of crypto and digital currencies and high demand for installment options and real-time payments, and it’s safe to say that the payments industry is embracing digital transformation.
In Canada, our sophisticated digital payments ecosystem has allowed consumers to adapt to stay-at-home restrictions with relative ease, and the resulting behavioural shift towards digital payments is likely to stay as we move towards a "new normal” that is a hybrid of both old and new consumer habits.
As economies everywhere begin to recover, it’s a good time to reflect on the impact of the pandemic on payment trends, and what the future looks like.
Five notable impacts
- The massive shift to ecommerce has perhaps been the most obvious change, with several years’ growth achieved in just one year. During the pandemic, we saw the purchase volume share of card-not-present (CNP) transactions increase by 900 basis points1. We can expect this trend to continue, even as people head back to work and brick-and-mortar locations reopen.
- This led to wider adoption of digital payment options, like click-and-collect grocery shopping, increased usage of pay buttons like Click to Pay (based on EMV® standards), and a shift to using our phones to buy not just our morning coffee and lunch, but other everyday purchases like gas, retail goods and restaurant food delivery.
- The pandemic has also accelerated the digitization of cash as demonstrated by the growth in debit. When we look at cash usage on the Visa brand, such as with ATM withdrawls, over the past year, global debit cash volumes have decreased by seven percent while debit payments volume has grown by 16 percent2. This represents more than double the historic gap in growth rates and is relatively consistent globally. In Canada, Visa Debit and prepaid card spending has grown nearly nine times more than credit, while credit spend decreased. This isn’t too surprising considering that people tend to become very pragmatic in times of financial uncertainty.
- We saw a decline in affluent spend. Given this segment’s higher portion of spend on discretionary purchases, like travel, dining out and out-of-home entertainment, spending plummeted in some cases to single-digit percentages of 2019 levels3. However, what we’re already seeing in the U.S. is these discretionary budgets begin to exceed previous levels as vaccination rates rise and travel restrictions lift.
- Digital transformation exploded. Early on in the pandemic, mega merchants enjoyed success because of their established digital infrastructure, access to inventory and fast delivery. Small businesses that typically sell through brick-and-mortar shops had a tougher go, and many were forced to bring their businesses online or risk going under. While their share of purchase volume remains below 2019 levels, we’re glad to see that accelerated digital transformation of small businesses has opened up new channels to reach consumers that may have been unreachable before the pandemic4.
What can we look forward to as things go back to normal? Here are some of the long-term trends we’re paying attention to at Visa:
- Online marketplaces are becoming the new “main street,” where small businesses and merchants buy and sell. Transactions in this segment have been trending upward for the past five years, with a significant spike over the past couple of years.
- Acceleration in new ways to pay, like cryptocurrency, which will require us to work with wallets and exchanges to ensure people can use their Visa cards to buy and cash out while enabling financial institutions and fintech partners to offer crypto options.
- More people paying in installments (also known as “buy now, pay later”), which represented a massive $1.7 trillion of global payments volume in 20195. According to Shopify’s Future of Commerce Report, the number of Shopify merchants offering BNPL has increased 60 percent since the start of the pandemic, and here at Visa we’re working to provide new opportunities for our partners to add more payment options with our installments solutions.
- Nearly all of the world’s economies are upgrading or building new capabilities to meet consumer and business demand for real-time payments. According to our research, 44 percent of Canadian small business owners say real-time access to cash flow would help their businesses recover in the wake of COVID-196, which is why we’re working to enable instant payouts for small businesses through Visa Direct.
In the past year, it has become easier to move money around the world faster, more reliably, and more securely, than ever before. Looking ahead, we will no doubt continue to see a significant evolution in how businesses in this country address consumer demand for more flexible payment options, as well as new ways Canadians can pay and be paid.
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1 VisaNet, Canadian issued volume. Pre-COVID period is from Mar’19 – Feb’20, and COVID period is from Mar’20 – Feb’21
2 VisaNet, Canadian issued volume. Growth gap compares pre-COVID to COVID period (Mar’19 – Feb’20 vs. Mar’20 – Feb’21)
3 VisaNet, Canadian issued volume. Growth gap compares pre-COVID to COVID period (Mar’19 – Feb’20 vs. Mar’20 – Feb’21)
4 Visa Business and Economic Insights analysis of VisaNet data
5 Euromonitor International 2020 Installment Sizing Report Commission by Visa January 2020. Global Total Installments payment volume estimated for 2019 is $2.9 Trillion, $1.2 Trillion of the global estimated payment volume
6 Visa Back to Business Study 2020
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