Canadian Payments Market Transition: A Study by the Canadian Payments Association

The Canadian Payments Association (CPA) gathered 2014’s retail payments data from payment service providers, consultants and researchers from the Bank of Canada to provide an overview of the most common consumer and business payments in 2014 and gain insights on emerging payments.

The year 2014’s data and analysis demonstrate that the payments market has continued its steady transition to electronic payments with incumbent payment providers and bank-led networks leading the space. However, the data also shows a payment system in transition. While traditional forms of payments still form the majority of Canadian payments, there is fast growth in the number of transactions using newer channels to access funds from deposit and credit card accounts, including e-wallets, contactless technology and e-commerce platforms.

Transaction channels

The study demonstrated that the most common consumer and businesses transactions totaled 20.7 billion transactions, worth $8.6 trillion.

Source: CPA

Cash accounted for nearly a third of all payments volume. However, prepaid, debit and credit cards combined surpass cash transactions by accounting for around 45% of the transactions volume. The traditionally dominating checks are being challenged by ETFs in the total value of transactions with 43% against 45%.

Two new payment channels emerged in 2014:

1) Contactless payments accounted for over half a billion transactions at the POS

2) Online transfers grew to account for over 80 million payments

Channels transition

In order to understand how the Canadian payments market evolved in a given time frame, the CPA revealed a historic data demonstrating the overall growth both in annual total transaction average value (5%) and volume (2%).

Overall growth was distributed differently across channels with some of them seeing a decline.

Source: CPA

Even though paper-based transactions are the ones used most often, these methods saw a decline of 5-6% in volume in comparison to the strong growth of card transactions—5-8% in volume—and a growth of 5% in volume of ETF transactions.

Among cards, credit and prepaid demonstrated a strong growth, particularly at POS. The CPA attributes it to credit card rewards and a head start in the contactless channel. Online transfers involving online e-wallets and electronic P2P transactions were the fastest growing payment type.

Credit cards are the fastest-growing traditional form of payment, growing by a total of about 60% volume and 49% in value since 2008.

Rewards and incentive programs have helped to grow the use of credit cards in all types of traditional card transactions, from bill payments to small transactions at the POS. About 73% of Canadians have a reward program associated with the credit card they use most. In addition, credit cards have become the dominant payment method in newer payment channels of contactless and e-commerce, where credit cards are accounted for the vast majority of transactions in Canada.

The EFT segment has grown by a total of 67% in value since 2008 and constituted the second largest payment segment in 2014 with 44% of all transaction value.

While online transfers are only a small segment of payments, they have grown at the fastest rates—by a total of 184% in volume and 228% in value since 2011.

Both e-wallet and e-P2P payments are benefitting as Canadians become more inclined towards electronic payments, and more comfortable with online and mobile device banking & commerce. In total, this segment has accounted for nearly 82 million transactions valued at $32 billion in 2014, as stated by the CPA. While these payments are still in the early stages of growth, they have the potential to impact nearly every other payment segment.

Evolving POS

The CPA paid particular attention to the transitions made at POS. Different payment methods used at POS have seen certain changes in usage. In total, over 15 billion payments worth about $822 billion were made at POS in 2014.

Source: CPA

The most drastic decline happened on both the volume and value of cash transactions at POS. In 2014, cash was used for around 25% fewer POS transactions (in both value and volume) than in 2008.

Debit and credit card transactions are happening at a gigantic volume with a significant growth over the years. Credit cards are accountable for most of the growth as they gained over 900 million transactions since 2011 and expanded to 57% of the total value of POS transactions. Credit card growth has mostly been successful in the lower-value transactions segment.

Two main reasons are suggested by the CPA to explain the credit card growth at the POS:

- Credit cards provide an effective enticement for use, with about 75% of cardholders’ primary credit cards having some form of reward-incentive

- Credit cards have a sizeable head start in the expanding payment channels of contactless and e-commerce, and appear to be successfully leveraging this position.

It is worth mentioning that contactless payments account for a relatively large segment of the total POS transactions—7% of all consumer debit and credit card transactions were performed using the contactless channel, equating to over 650 million total transactions.

In 2014, credit cards dominated the contactless channel, being used in about 7 out of 10 contactless transactions and accounting for over 90% of the value of contactless transactions.

However, the CPA suggests that debit cards have a great potential to become a larger source of contactless transactions moving forward as they demonstrated a quick progress given that credit cards had a multi-year head start.

E-commerce only accounted for about 3% of all of the POS payment value in 2014, or about $26 billion. Even though it represents a very small portion of POS value, e-commerce is considered an important part of Canadian commerce with many expecting it to become a significant part of the shopping and payments experience in the coming years. Again, credit card transactions dominated the e-commerce channel and are accountable for about 90% of the volume and 85% of the value of e-commerce in Canada.

Government and businesses

Commercial payments accounting for about 2.4 billion transactions are valued at $7.3 trillion. EFT payments have become the most common form of commercial payment, growing to account for more transaction volume than checks and credit cards combined. EFT and checks dominate the total commercial transaction value—47% and 52% of total value respectively.

Overall, commercial use of checks is declining—volumes decreased by about 100 million items or about 13% in total since 2008.

Checks remain an important payment instrument for certain commercial transactions, including B2B and real estate transactions. Commercial use of credit cards grew by about 30% to just under 400 million transactions. While credit cards account for a low proportion of total commercial payments, their value has nearly doubled in six years, demonstrating the potential for longer term growth.


The Canadian payments industry is dominated by traditional forms of payments. Instruments such as cash and checks are still prominent, and established electronic items including EFT, credit and debit card network payments have become hallmarks of the Canadian payments market.

However, while traditional forms of payments maintain the largest segments of Canadian payments, there has been a rapid growth in transaction volumes using newer channels. The existing networks are providing different avenues to the use of deposit and credit card account funds, through the use of e-wallets, contactless technology, and e-commerce portals and applications.

Additionally, EFT growth shows that businesses and governments are reducing their use of checks, and are beginning to better leverage online banking, invoice and treasury management tools to send/receive funds.

Credit card payments are becoming dominant in the new payment channels and are continuing to take a greater share of the payments made to merchants. New players and payment niches might take hold quickly and the trends observed in 2014 might take off in new directions, impacting existing payment instruments and the payment environment.