A new era in payments – Canada's digital transformation during the COVID-19 pandemic

Crisis situations are known to compress innovation timelines, and COVID-19 hit at a pivotal moment in Canada’s digital transformation. With foundational elements like digital access, merchant adoption, and issuer interoperability firmly in place, the physical distancing restrictions and non-essential business closures that accompanied COVID-19 accelerated a new era in payments, driven by the changing needs of Canadians and Canadian businesses.

Crisis drives innovation, consumer expectation accelerates it 

Interac data shows that since COVID-19 was declared a pandemic by the World Health Organization on 11 March 2020, Canadians have increasingly opted for secure digital solutions over cash and cheques – and many for the first time. First-time Interac e-Transfer users grew 43% more when compared to user growth during the same time in 2019, and the average number of transactions per user in April 2020 grew by 9% over the year prior.

This increased usage contributed to a historical monthly high in April with over 61.3 million transactions, cementing the Interac e-Transfer platform as an essential means to move funds in near-real-time for Canadians moving forward. As some emergency orders remain in place, traditional use-cases like splitting dinner tabs or trip reimbursement have been replaced with splitting grocery shopping responsibilities with friends and neighbours, sending financial support to loved ones, or everyday small business payments. The growth in usage has been coming not only from the younger demographics but also from seniors aged 65+ as they adapt to a new normal, with 40% more Canadians 65+ using the platform between 17 March and 6 May 2020, compared to the same period in 2019.

The shift away from cash and cheques is also reflected in the double-digit growth of Interac Debit for In-App and In-Browser Payments since mid-March 2020 and the 5% increase in contactless Interac Flash transactions since the initial spending dip for the same period. Interac Debit for In-App and In-Browser continues to surpass forecast growth, largely driven by food delivery services and restaurant take-out options as Canadians shift their behaviour in an effort to physically distance themselves.

Businesses recognised the need to adapt to customer expectations before the intense physical distancing recommendations came into effect during COVID-19. Once non-essential businesses were forced to temporarily shutter their doors, that adaptability became critical to survival. Those able to pivot and embrace customer needs remained in business. Suddenly, offering a frictionless experience took on a whole new meaning.

Now, customers are looking for more than just convenience. When making an online grocery order it must be fast. When paying for it, it must be secure, contactless, and seamless. Retailers need to embrace the disruption of this global pandemic and innovate quickly to address Canada’s changing transaction habits. Even as economies begin to open, Canadians are adjusting how they shop and discovering new payment channels such as mobile.

A retailer offering a safe, quick, and omnichannel shopping experience is likely to gain market share, while those retailers stuck in pre-COVID-19 in-store experiences may be left behind. A swift shift from retailers is in the interest of our overall economic recovery.

The changing role of good-fund transactions

With more than six billion transactions annually, Interac Debit is a key part of the way Canadians transact, and we know that the consumer experience bleeds from one channel to the next. If a consumer likes to pay a certain way in-store, they are more likely to choose that method of payment when shopping online or through mobile, where available. Compound this with the current crisis and overall economic uncertainty, good-funds transactions like Interac Debit and Interac e-Transfer become increasingly important to both consumers and merchants as a means to manage cashflow.

Our analysis shows that small businesses have been receiving 35% more Interac e-Transfer transactions than expected, suggesting that the platform offers a convenient solution that allows them to adapt to the digital economy. For a business owner, the ease of requesting, sending, and receiving money from anyone in Canada in near real-time, as the Interac e-Transfer platform makes possible, is an important component of maintaining a strong cash flow. It allows payments to go straight to the account in near real-time, offering immediate access to funds. This allows business owners to put their money back to work for the business right away.

Digital shift key to economic recovery

There’s no doubt that COVID-19 is accelerating a digital-first payment ecosystem in Canada and beyond. We are in a leading position to transform based on our secure interoperable banking infrastructure, digital penetration, and market readiness. We have a chance to exemplify how a digital economic framework based on real-time, good funds can strengthen our economic recovery efforts: businesses can operate faster and more efficiently, consumers have seamless experiences when transacting with businesses large and small, and micro businesses can grow because of easy access to ecommerce.

All of this adds up to an economy that is creating more value per capita. This is not an unexpected shift, and Interac has been building the foundation for it. Our roadmaps have prioritised foundational good-funds digital payment solutions like ecommerce and money-movement solutions alongside contactless payment methods like Interac Flash and Interac Debit on mobile. Digital payments are an integral means to economic recovery in Canada and we will continue to support Canadians and Canadian businesses on this journey through the digital use of their own money.

This article was published in our Payment Methods Report 2020, an extensive overview of what’s new in how people pay in the most relevant ecommerce markets.

About William Keliehor

William Keliehor leads the commercial strategy at Interac. This includes product management and strategy, payments solutions P&L, domestic and international client and business development, fraud mitigation and strategy, product and brand marketing, communications and government relations, and policy strategies.

About Interac Corp.

Interac Corp. operates an economical, world-class debit payments system with broad-based acceptance, reliability, security, and efficiency. Today, Interac solutions are chosen an average of 18 million times daily to pay and exchange money. Interac has a diverse group of shareholders and nearly 300 financial institutions are connected to our network.