2018 Canadian Consumer Payment Study

Transcription

1 2018 Canadian Consumer Payment Study

2 Table of Contents Introduction Key Insights Findings & Insights Payment Types Payment Preferences Prepaid Cards and P2P Payments Contactless Actions Taken in the Last Year Most Attractive Card Features and Details on Rewards Mobile Phone Usage and Preferences Smart Speakers and Connected Payments Marketing, Communications, Offers and Banking Activity Security Conclusion Appendix Respondent Demographics CANADIAN CONSUMER PAYMENT STUDY 2

3 INTRODUCTION Improving customer experience starts with monitoring the fast-changing technology landscape and its impact on consumer behavior. As such, tracking key attitudes and activities regarding technology is the focus of this year s Canadian Consumer Payment Study CANADIAN CONSUMER PAYMENT STUDY 3

4 INTRODUCTION For the fifth year in a row, we ve surveyed Canadian consumers to track important trends in how they re thinking, feeling and going about making payments. We asked a variety of questions about how customers pay for different types of purchases, why they use one credit card over another, how they redeem their rewards points and how comfortable they are with mobile offerings. We also asked what features they would be most interested in using, how open they are to emerging technologies such as person-toperson (P2P) payments and smart speakers like Amazon s Echo, and how concerned they are with the security of their personal and financial information. The responses provide valuable insights into consumers perspectives that can help financial institutions make more informed decisions about new product offerings, channels for customer communication and marketing programs. This year, we found that Canadian consumers continue to love their payment cards. According to The Nilson Report, total general purpose cards (debit and credit) transaction volumes were up 8.7 percent between 2016 and 2017, and the number of actual cards grew by 4.1 percent during the same period. Purchase volume also increased and was up 9.5 percent in that time frame. Interest in new payment options is also rising; however, consumers still trust their own financial institution more than any other organizations in the payment ecosystem. To remain competitive with these new players, financial institutions will need to pay attention to customer communication and relationship-building strategies. Those that invest in creating increasingly positive experiences for their customers across all phases of the cardholder life cycle will be rewarded with increased engagement. Our survey included 1,020 Canadian consumers. Participants were required to be more than 18 years of age, to have at least one credit card and one debit card and not work for a financial institution. We also took steps to ensure that the survey sample reflected the age and gender distributions of the Canadian population. We hope you will find the results useful as you work on existing strategies or projects and develop new ones. Consumer interest in mobile and emerging technologies is also on the rise. While traditional payment and purchase channels remain strong, there is a growing interest in mobile, which means it will be critical to any new service or offering. Emerging technologies are also gaining ground, and the use of and text continues to grow. Consumer willingness to embrace new technologies depends on whether they see it as providing value, being easy to use and secure. Our participants were definitely aware of security issues many have made changes to their and online merchant accounts over the past year as a result but they don t seem to be overly concerned CANADIAN CONSUMER PAYMENT STUDY 4

5 Key Insights 2018 CANADIAN CONSUMER PAYMENT STUDY 5

6 KEY INSIGHTS Six insights from our study: Every payments player wants to maintain a competitive edge. And they can accomplish this goal by understanding what consumers want, integrating useful new technologies, maintaining a degree of personalized relationships and creating an exceptional customer experience throughout the purchase process. 1 Canadians continue to love their credit cards. For the fourth year in a row, consumers ranked credit cards as their No. 1 favorite payment method. In fact, this year, credit led in every category except for coffee shop purchases and payments to individuals. For the first time since our study began, consumers from all age groups and income levels said they prefer paying for purchases with credit cards. Sixty-seven percent of our respondents stated they have two or more credit cards, which makes it more important than ever to understand what motivates consumers to use one credit card over another. According to Payments Canada ( Canadians are using credit for increasingly larger percentages of their monthly spending ( Canadian Payment Methods and Trends 2017 ). With the rising popularity of credit, the percentage of consumers using debit cards and cash has decreased. 2 Consumers are ready for mobile. Although the use of mobile for payments is still relatively low, consumers expect to rely more on mobile payment options within the next couple of years. More than 50 percent of those surveyed said they are familiar with merchant apps, and 33 percent of those who are familiar with the merchant apps indicated they have already made a purchase in this manner. Currently, consumers top two uses for mobile are storing loyalty/rewards cards on their phones and viewing transactions instantly. Considering the number of consumers with smartphones and wireless services, it s no surprise that all industries and companies are continuing to focus heavily on the digital landscape CANADIAN CONSUMER PAYMENT STUDY 6

7 KEY INSIGHTS 3 The top reason for using one card over another? Rewards. For the fifth year in a row, loyalty or rewards programs came in as the top influencer when consumers choose between multiple credit cards. Ninety percent of our respondents selected rewards as a feature that causes them to use one credit card over another. This sentiment was consistent across all age groups. Rewards are most often redeemed for merchandise, with cash-back coming in at a close second. Real-time rewards are gaining traction, with an increasing number of card issuers beginning to offer this option. Consumers said they would like to be able to use their loyalty and rewards points for immediate discounts when making a purchase. 4 As technology evolves, consumer interest in new payment methods is growing. Over the last couple of years, person-to-person (P2P) services, which enable consumers to easily pay other individuals, have become easier to use and more widespread. Although cash continues be the preferred way to pay individuals, 55 percent of respondents indicated they have used a P2P service. Canadian consumers are also very familiar with contactless payments. More than 95 percent of respondents were aware of the capability, and 85 percent have used it. We also believe payment usage will increase for connected devices like smart speakers (such as Amazon s Echo, Apple Home Pod, etc.) as a larger percentage of them gain payment capabilities CANADIAN CONSUMER PAYMENT STUDY 7

8 KEY INSIGHTS 5 Consumers want to talk, especially if there s a problem or an opportunity. Some 43 percent of our respondents felt it was important to have all of their accounts with the same financial institution. Most use the internet or mobile banking apps for regular interactions with their financial institution. However, a large percentage, 69 percent, still want to call customer service and talk to a representative if they have an issue with their card. When it comes to learning about new products and services, 83 percent of respondents were open to receiving marketing communications, although preferences around the frequency varied. New products and services that address identity theft and credit scores/ ratings were what potentially interested consumers most. 6 Security matters, but consumers are not overly worried. The almost daily proliferation of news reports on security failures and data breaches prompted us to add questions this year to track consumer attitudes about the safety of their personal and financial information. While many respondents said they d changed their passwords for , online banking and retail websites (in addition to checking their credit reports for irregularities), 70 percent said they re not very or only somewhat concerned about their data being stolen. This could be because the majority also believes the bank is responsible if their account or personal information is stolen and then used to make fraudulent purchases. They also seem to understand and are comfortable being asked for more information to verify their identities and to obtain new credit cards or loans CANADIAN CONSUMER PAYMENT STUDY 8

9 Findings & Insights 2018 CANADIAN CONSUMER PAYMENT STUDY 9

10 Payment Types More consumers today are choosing to use credit cards for purchases and payments, but debit cards, cash and alternative electronic methods are also popular options. THE NUMBER OF CONSUMERS WITH MULTIPLE CREDIT CARDS IS GROWING. Exhibit 1: Number of Credit and Debit Cards One 33% 69% This year, 67 percent of respondents said they have two or more credit cards, compared to 63 percent in 2017 and 61 percent in (The percentage of consumers with only one debit card remained the same.) Given this steadily growing trend, it s important to understand what motivates consumers to use one card over another. Two Three 4% 18% 25% 33% 16% Four or more 0% 20% 40% 60% 80% Credit Debit 2018 CANADIAN CONSUMER PAYMENT STUDY 10

11 PayPal was once again the top alternative electronic payment type following credit and debit cards. This year, 49 percent of our respondents indicated they have a PayPal account, with other payment types (listed in Exhibit 2), trailing significantly behind. PayPal was once again the top alternative electronic payment type. Exhibit 2: Other Payment Cards/Accounts Owned PayPal account 49% Store credit card 2 Prepaid card 9% Other 7% Store debit card 4% Digital or virtual currency account 0% 10% 20% 30% 40% 50% 60% 2018 CANADIAN CONSUMER PAYMENT STUDY 11

12 Payment Preferences CREDIT USE IS GROWING AMONG ALL AGE AND INCOME GROUPS AND IN ALMOST EVERY CATEGORY. Exhibit 3: Most Preferred Payment Type Credit was the overwhelming favorite again this year and the preferred top method of payment for consumers choosing from a list that included credit cards, debit cards, cash and a number of other options. Although the preference for cash decreased from last year, we believe some consumers continue to use it because it s both anonymous and widely accepted. Exhibit 3 shows preferences over the past four years % 28% 38% 44% 60% 13% 47% % 15% 46% % 14% 0% 20% 40% 60% 80% Credit card Debit card Cash 2018 CANADIAN CONSUMER PAYMENT STUDY 12

13 Noting the significant increase in the use of credit, we wanted to examine variations in preference across different age and income segments. Exhibits 4 and 5 reflect the breakdown of this information. In previous surveys, debit cards were the preferred payment method for consumers in the year-old group. This year, however, credit was the preferred payment type for all age groups. See Exhibit 4. For the first time in five years, credit was the most preferred payment type across all income groups. In the past, only those with household incomes greater than $50,000 preferred credit. Given the significant increase in the use of credit, however, it s not surprising that consumers who had previously preferred debit have now shifted to credit. See Exhibit 5. Exhibit 4: Preferred Payment Type by Age Most Preferred Payment Type Age range or older Credit card 56% 63% 55% 60% 58% 65% Debit card 29% 27% 35% 28% 28% 2 Cash 1 7% 8% 7% 10% 9% Exhibit 5: Preferred Payment Type by Household Income Total household income Most Preferred Payment Type Less than $24,999 $25,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 - $149,999 $150,000 or more Prefer not to answer Credit card 49% 5 59% 64% 67% 70% 59% Debit card 30% 35% 27% 28% 2 25% 25% Cash 15% 10% 9% 7% 6% 3% 10% 2018 CANADIAN CONSUMER PAYMENT STUDY 13

14 CREDIT RULES FOR MOST STORE AND RESTAURANT PURCHASES, EXCEPT IN COFFEE SHOPS. Credit continued to be the top payment option over debit and cash for buying groceries, gasoline and department store purchases. There was also a shift from debit to credit in the top spot for discount stores. Exhibit 6 shows how the top three preferred payment types compare for each of the store categories. Exhibit 6: Preference by Store Type 57% Supermarket/ grocery store 3 8% 6 Gas station/pump 23% 6% 63% Department store 25% 5% 37% Discount store 25% 29% 0% 10% 20% 30% 40% 50% 60% 70% Credit Debit Cash 2018 CANADIAN CONSUMER PAYMENT STUDY 14

15 This year, credit also took the lead as the favored method of payment at fast-food restaurants. Last year, debit was preferred in this category, and cash led the year before. For coffee shops, however, cash is still the top method of payment but credit is gaining. Exhibit 7 includes details for preferred payment options at restaurants. Exhibit 7: Preference by Restaurant Type 4 Fast-food restaurant 28% 27% 6 Dine-in restaurant 25% 10% 30% Coffee shop 20% 38% 0% 10% 20% 30% 40% 50% 60% 70% Credit Debit Cash 2018 CANADIAN CONSUMER PAYMENT STUDY 15

16 THE PREFERENCE FOR CREDIT EXTENDS TO PAYING ONE-TIME AND RECURRING BILLS AS WELL AS TO IN-STORE AND ONLINE SHOPPING. Credit remained the top payment option for both one-time and recurring bills. Exhibit 8 shows how the gap between credit and debit has widened this year, mirroring the overall trend toward credit. We believe the Other category represents the use of online bill payment services available at the consumers financial institutions. Exhibit 8 breaks down bill payment preferences between credit, debit and other methods. Credit continues to dominate the online shopping and travel categories, as it has since this study began. PayPal significantly trailed credit for the second spot. In the online travel purchase area, a large number of respondents (24 percent) selected N/A likely due to the fact that they don t use online travel sites (or even travel at all). See Exhibit 9. In previous years, we reported that the choice of using credit for online purchases reflected consumers security concerns and their preference for using someone else s money at locations where they feel there could be a problem. However, this year, credit is strong across all types of purchase scenarios. Credit continues to dominate the online shopping and travel categories, as it has since this study began. Exhibit 8: Preference by Bill Payment Exhibit 9: Preference by Online Categories 45% 7 Pay bills - one time 23% Online shopping 1 17% 8% 4 69% Pay bills - recurring 2 Online travel 23% 24% 0% 10% 20% 30% 40% 50% 60% 0% 20% 40% 60% 80% Credit Debit Other Credit PayPal N/A 2018 CANADIAN CONSUMER PAYMENT STUDY 16

17 Once again, we asked our survey respondents to tell us which payment form they believe is safest for both in-store and online purchases. Exhibits 10 and 11 show how the results compare over the past three years. For in-store purchases, Exhibit 10 shows that credit cards remained in the number one position, followed by cash and then debit cards. In keeping with the overwhelming preference for credit we ve observed in this year s study, the percentage of respondents who selected credit cards as safest for in-store use was higher this year. second place, was significantly down this year due to the strong preferences shown for credit cards. Prepaid cards had a fairly good showing, which makes sense given the top-stated reason consumers use these reloadable prepaid cards is for online purchases. Exhibit 11: Safest Payment Type for Online Purchases In Exhibit 11, you ll see that credit cards were also selected as safest for online purchases, by a higher-than-normal percentage. PayPal, in Credit card 44% 58% 47% Exhibit 10: Safest Payment Type for In-Store Purchases PayPal 23% 36% 46% 33% Credit card 35% 40% No preference 9% 8% 23% 9% Cash 30% 29% Prepaid 8% 8% 2 6% Debit card 28% 25% Debit card 4% 0% 10% 20% 30% 40% 50% 60% 5% % 20% 40% 60% 80% CANADIAN CONSUMER PAYMENT STUDY 17

18 Prepaid Cards & P2P Payments/ Payments to Individuals RELOADABLE PREPAID CARDS Although the number of respondents who had reloadable prepaid cards continued to be low at only 2 percent, this payment method is still a hot topic of interest and discussion in the Canadian market. Payments Canada Canadian Payment Methods and Trends: 2017 noted that prepaid transactions are the fastest-growing point of sale (POS) transaction type, with a 7 percent yearover-year growth in value. Exhibit 12 measures consumer interest, and Exhibit 13 details the top reasons consumers either have or want to have a reloadable prepaid card. Exhibit 12: Interest in Obtaining a Reloadable Prepaid Card No Yes 35% 27% 3 37% About a third of our respondents indicated they would be interested in obtaining a reloadable prepaid card. As in other areas, the high usage of credit appears to have impacted several of this year s trends. Exhibit 12 shows how respondents interest in obtaining a reloadable prepaid card has shifted since last year. Unsure Already have 30% 35% 0% 10% 20% 30% 40% 50% CANADIAN CONSUMER PAYMENT STUDY 18

19 The reasons consumers use a reloadable prepaid card have remained relatively unchanged since last year. A large number of respondents (79 percent) who already had a card or who were open to getting one in the future said they were primarily interested in this option to protect their debit and credit cards from fraud when making online purchases and to better manage their spending. The second most-popular use for a prepaid card was travel spending, with other purposes trailing significantly behind. Exhibit 13 shows how respondents rated a variety of potential purposes over the past two years. Exhibit 13: Purpose to Use Reloadable Prepaid Card Online purchases 79% 8 Travel 5 6 Instead of a banking account 2 19% To provide funds for my child 17% 2 For my small business 6% 7% Other 3% 0% 20% 40% 60% 80% 100% CANADIAN CONSUMER PAYMENT STUDY 19

20 CASH AND CHEQUES ARE STILL IN PLAY AS PREFERRED METHODS OF PAYMENT TO INDIVIDUALS. P2P payment options have exploded over the last several years. So this year, we expanded our questions to explore our participants awareness and adoption in this realm. Cash remained the overwhelming favorite for making payments to individuals, coming in at 44 percent. However, that s slightly down from last year s 48 percent. Cheques, which haven t been mentioned previously in this report, held steady at 12 percent for both 2017 and Exhibit 14 shows that despite consumers multi-year migration to electronic payments in most other areas, when it comes to making payments to individuals, cheques and cash remain strong contenders. We wanted to learn more about consumers awareness of and experiences with P2P services. Exhibit 15 shows that a significant number of respondents (55 percent) indicated they had used a P2P service, which is up from 48 percent last year. Only 17 percent had never heard of P2P, and 28 percent were aware but had never used it. Only 16 percent of respondents who had never heard of or never used a P2P service said they would be likely or very likely to use one in the next year. However, the growth trajectory for P2P services continues to look very strong. The growth trajectory for P2P services continues to look very strong. Recently, even social media channels like Facebook Messenger, Siri and others have begun to enter the P2P arena. Even though news articles and press releases continue to highlight the convenience, our survey didn t reflect this. Of our respondents who either currently use a P2P service or are likely to do so, only 13 percent indicated they d be likely or very likely to use one of these social media channels to send a P2P payment. Exhibit 14: Three Top Preferred Payment Methods to Individuals Exhibit 15: Usage/Awareness of P2P Services 1 Cheque 17% I have never heard of P2P payments 1 Other 44% Cash 28% No, but I was aware of this method 55% Yes, I have used P2P payments Note: Four other payment options make up the other CANADIAN CONSUMER PAYMENT STUDY 20

21 Contactless AWARENESS AND USE OF CONTACTLESS PAYMENTS IS CONTINUING TO GROW. In March of 2018, Visa Canada released the results of its survey on contactless and other new payment forms. In that survey, 52 percent of respondents identified themselves as regular users of contactless cards. Furthermore, Visa Canada says 48 percent of Canadian POS transactions (as of December 2017) were contactless ( canadians-embrace-contactless-paymentsbutare-cautious-about-other-new-payment-forms). This is the second year we ve included questions in our survey about contactless payments. We wanted to know more about our participants awareness and behavior regarding the contactless feature on their cards. Exhibit 16 shows 95 percent of respondents said they were aware of the feature in 2018, an increase from 89 percent in Of those respondents who were aware of the contactless feature, 86 percent indicated they had made a purchase using the tap option (compared with 79 percent last year). When we asked the remaining participants why they hadn t used the tap option, 55 percent chose the reply, I am not comfortable tapping. This number is very consistent with last year s results. Exhibit 16: Awareness of Contactless Feature Yes 95% 89% 95 percent of respondents are aware of the contactless feature on their card. No 5% 1 0% 20% 40% 60% 80% 100% CANADIAN CONSUMER PAYMENT STUDY 21

22 Actions Taken by Consumers in the Last Year We wanted to know what kinds of actions consumers took over the past year related to making purchases, sending money, using mobile services and overall money management. The two most significant changes in behavior were in mobile categories and are highlighted in Exhibit 17. MORE PEOPLE ARE USING APPS THAT STORE THEIR CARD INFORMATION. We also noticed a fairly significant decline in PayPal accounts being opened. This could be due to the fact that so many people are already using PayPal. Exhibit 17 compares this year s responses to last year s. Exhibit 17: Actions Taken in the Last Year I made a purchase using a credit card I have on file with the online retailer I shop with most often. I paid down debt % 59% % 59% I began saving more. 59% 57% I sent money to another person utilizing a P2P service separate from my bank s online bill pay (e.g., Interac e-transfer). 46% 48% I registered my credit card with an online retailer (e.g., Amazon, Google Play, itunes, etc.). A merchant or individual used a mobile phone or tablet as a terminal to accept my payment (e.g., debit, credit, prepaid, etc.). I opened a new credit card to take advantage of the rewards being offered for travel, merchandise, etc % 44% 2 24% I opened an account with PayPal to make online or in-store purchases. I paid using a mobile phone app that stores my card information % 13% 2018 CANADIAN CONSUMER PAYMENT STUDY 22

23 Most Attractive Card Features and Details on Rewards THE IMPORTANCE OF LOYALTY/REWARDS PROGRAMS AND LESSENING INFLUENCE OF FINANCE CHARGES. The growing trend of having multiple credit cards makes it especially important to keep track of what drives consumers decisions to use one card over another. For the fifth year in a row, rewards led the category as a top influencer for 90 percent of respondents. What surprised us this year was a shift in the importance of finance charges. Last year, this category was the second-highest feature, selected by 57 percent of respondents. This year, it was tied for third place with only 44 percent of the respondents listing finance charges/interest rates as an influencing factor. Exhibit 18 shows the breakdown for 2017 and Digging deeper, we wanted to see how these responses varied by age and income. All age groups and income levels consistently chose rewards as the most attractive feature. However, we did start seeing some differences in how respondents felt about the second-ranked categories. With every income level, card brand was the second most important influencer. But for people under the age of 44, that second-place influencer was finance charge/interest rate and payment flexibility. It s possible that younger consumers are more concerned about finance charges and payment options because they re more likely to carry balances than those in the older age groups, who are more likely to pay off their cards in full. Exhibit 18: Features That Cause Consumers to Use One Card Over Another Payment options/ flexibility Finance charge/ interest rate Customer service provided by the issuer of my card Card brand (e.g., American Express, Mastercard, Visa) Type of rewards 39% 46% 44% 44% 57% % 90% 87% 0% 20% 40% 60% 80% 100% CANADIAN CONSUMER PAYMENT STUDY 23

24 CARDHOLDERS PREFER MERCHANDISE AND CASH-BACK WHEN REDEEMING LOYALTY POINTS. Last year, 65 percent of respondents reported having a loyalty/rewards program attached to their most preferred credit card. This year, that number grew to 78 percent reflecting the overall growth in the preference for using credit cards. Given the overwhelming strength of rewards as an influencer, we asked questions to explore how people use their loyalty/rewards points. Last year, cash-back was number one. This year, we found that the majority of consumers most frequently redeem their rewards points for merchandise (59 percent), followed by cash-back (56 percent), gift cards (54 percent) and travel (53 percent). Less frequently, a smaller number 27 percent of respondents redeem their points for experiences, which is consistent with the results from previous years. Exhibit 19 shows the breakdown of categories by frequency. Exhibit 19: How Frequently and for What Rewards Are Redeemed More than once a month 3% 6% 6% About once a month 3% 4% 7% 6% A few times a year 7% 20% 20% 15% 16% Once a year or less 15% 25% 27% 28% 34% Never 46% 4 47% 44% 73% 0% 10% 20% 30% 40% 50% 60% 70% 80% Experiences Gift cards Merchandise Travel Cash-back 2018 CANADIAN CONSUMER PAYMENT STUDY 24

25 Mobile Phone Usage and Preferences According to Newzoo s 2018 Global Market Report, 72.1 percent of Canadians own a smartphone ( countries-by-smartphone-penetration-andusers/). And 90 percent subscribe to wireless services ( Across the board, Canadian industries and companies are heavily focusing on the digital landscape. Many have appointed chief digital officers to spearhead organizational efforts in this area, as mobile services have become key strategic components in both attracting and retaining business. It seems like we see almost daily news reports about companies that are closing or entering bankruptcy, at least in part, because they failed to adapt quickly enough to changing consumer preferences for online and mobile services. This is true for financial institutions and payment companies as well. Mobile services are increasingly important in conducting daily activities, particularly with how consumers manage their accounts CANADIAN CONSUMER PAYMENT STUDY 25

26 SMARTPHONE USERS LIKE ACCOUNT SECURITY FEATURES AND INSTANT REWARDS. We asked our survey participants which features they would be most interested in using on their mobile phones. The top three were: being able to immediately stop a transaction not made by them (61 percent), being able to use loyalty/rewards points for discounts at the time of a purchase (53 percent), and being able to turn off a payment card to prevent unauthorized use (51 percent). These responses reflect what we ve seen already in regard to consumers growing desire to better manage their cards and use rewards points in real time. This year s responses also reflect that consumers are more open to receiving instant offers and promotions. Exhibit 20 shows how this year s responses compared to last year s. Exhibit 20: Mobile Features: Moderate or Higher Interest Alerts sent to your mobile phone each time a purchase is made with a card 36% 40% Use a wearable device, such as a smart watch, to make a payment 18% 18% Store your government-issued identification, such as a driver's license, on your phone Use a mobile app to change the PIN on your debit or credit card Keep all your loyalty/rewards cards on your phone so you can present the right one when checking out 28% 28% 29% % Use your phone to immediately stop a transaction that was not made by you 6 60% Instantly view transactions made with your debit or credit cards Ability to use your phone to turn your payment card on or off to prevent unauthorized use based on various criteria Ability to use your card's loyalty/rewards points for immediate discounts when making a purchase Receive instant offers and promotions for the store you are visiting 36% 4 47% 49% 5 53% 56% 47% 0% 10% 20% 30% 40% 50% 60% 70% CANADIAN CONSUMER PAYMENT STUDY 26

27 EARLY MOBILE ADOPTORS ARE VIEWING TRANSACTIONS INSTANTLY AND STORING LOYALTY/REWARDS CARDS. We also asked our survey participants which mobile features they were already using. Given the relatively early stages of many of these features, the percentage of those who already use the features currently lags behind consumer interest. The most-used feature was instantly viewing transactions made by debit or credit cards (9 percent). Following that was keeping loyalty/rewards cards on the phone to use when making a purchase (7 percent). Mobile features present strong opportunities for issuers, who can provide these types of mobile services to their cardholders. Exhibit 21 compares responses for 2017 and 2018 (where the data was available). Exhibit 21: Mobile Features Consumers Already Use Alerts sent to your mobile phone each time a purchase is made with a card Use a wearable device, such as a smart watch, to make a payment % 2017 N/A Store your government-issued identification, such as a driver s license, on your phone Use a mobile app to change the PIN on your debit or credit card Keep all your loyalty/rewards cards on your phone so you can present the right one when checking out Use your phone to immediately stop a transaction that was not made by you Instantly view transactions made with your debit or credit cards 7% 9% 4% 5% Ability to use your phone to turn your payment card on or off to prevent unauthorized use based on various criteria Ability to use your card s loyalty/rewards points for immediate discounts when making a purchase Receive instant offers and promotions for the store you are visiting 5% N/A 2018 CANADIAN CONSUMER PAYMENT STUDY 27

28 USE OF MERCHANT APPS AND MOBILE WALLETS ARE ON THE RISE PARTICULARLY WITH YOUNGER CONSUMERS. Consumer familiarity with using merchant apps to pay for goods and services rose 9 percentage points this year. When we examined how the responses varied by age, we discovered significant differences. For those in the year-old group, 80 percent of respondents said they were familiar with the process, compared to just 36 percent of those 65 or older. Exhibit 22 shows responses from the last two years. We also wanted to know if our survey participants who were familiar with merchant apps had actually used the app to make a purchase. In Exhibit 23, you ll see that between 2017 and 2018, the number of participants using a merchant app to make an online purchase grew from 27 percent to 33 percent. However, there was no significant change in the percentages for in-store merchant app purchases. Based on earlier responses, offering consumers the ability to redeem rewards within the merchant app would likely create more interest for both in-store and online purchases. Exhibit 22: Familiarity With Using Merchant Apps to Pay for Goods and Services Yes % % No 44% 53% Exhibit 23: In-App Purchases Made (Answered by Those Who Had Familiarity With the Process) I have made an online purchase using a merchant s mobile app % % I have made an in-store purchase using a merchant s mobile app. 19% 18% 2018 CANADIAN CONSUMER PAYMENT STUDY 28

29 For the past three years, we ve included a section on mobile wallets to discover how willing our participants are to load debit and/or credit cards onto their phone for use in making payments. According to the responses, consumer reluctance is declining dramatically. This more open interest in mobile wallets is supported by the fact that the number of participants who said they would never load a debit card into a mobile wallet decreased from 42 percent in 2016 to 27 percent in Not surprisingly, respondents in the year-old age group were more likely to load a card than those in older groups. Exhibit 24 and Exhibit 25 track the changes over the past three years in participants likelihood to load debit and credit cards. Exhibit 24: Likelihood of Loading a Debit Card Into Mobile Phone or Wallet Exhibit 25: Likelihood of Loading a Credit Card Into Mobile Phone or Wallet 27% 26% Never 34% 4 Never 33% 4 Not likely 29% 28% 2 Not likely 27% 26% 2 Neutral 20% 18% 16% Neutral 20% 18% 15% 15% 17% Likely 13% Likely 14% 1 14% Definitely 5% 4% 6% Definitely 5% 5% 6% Already loaded 5% 4% Already loaded 6% 5% 3% 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50% CANADIAN CONSUMER PAYMENT STUDY 29

30 CONSUMERS BELIEVE MOBILE WILL TAKE ON A LARGER ROLE IN THEIR FUTURE PURCHASING BEHAVIOR. It s always interesting to understand what consumers believe about their future payment habits. For the past two years, we asked our respondents to predict what percentage of their in-store purchases would be made using their phone instead of physical cards over the next two years. This year, we only asked this question of respondents who said they were likely to, definitely would or already have loaded a debit or credit card into a mobile phone or wallet. Exhibit 26 shows that 91 percent of these respondents believe that over the next two years, 25 percent or more of their purchases will be made using a mobile phone versus a physical card. Although many of these individuals may not have loaded their debit and/or credit card into a mobile wallet yet, clearly they believe they will be doing so in the near future. CONSUMERS PREFER TO MAKE THEIR OWN PAYMENT CHOICES OVER AUTOMATION. Consumers have already established that they frequently use different payment forms depending upon where they are shopping and dining and what they are purchasing. We asked the same subset of likely mobile wallet users from the previous question how likely they are to use an application that automatically decides which card to use (based upon preset preferences). In Exhibit 27, you can see that 38 percent of respondents said they would likely or definitely use this feature; 30 percent said they were not likely or would never use it; and 31 percent remained neutral. While there may be opportunities for this kind of application in the future, for now, it seems that consumers prefer to remain in control of their payment choices. Exhibit 26: Percentage of In-Store Purchases That Will Be Replaced by the Use of Your Phone vs. a Card Exhibit 27: Likelihood of Using an Application That Automatically Decides Which Card Is Used 9% 0% of purchases Never Not Likely 1 18% 13% 100% of purchases Neutral 3 23% 25% of purchases 20% 75% of purchases Likely 29% Definitely 9% 35% 50% of purchases 0% 10% 20% 30% 40% 50% Note: Answered by likely mobile wallet users CANADIAN CONSUMER PAYMENT STUDY 30

31 CONSUMERS TRUST THEIR OWN BANKS THE MOST FOR MOBILE PAYMENT APPS. We asked which mobile payment providers our survey participants would most trust to safeguard their personal and financial information. Overwhelmingly, across all age groups, respondents chose their own financial institution. Exhibit 28 shows the range of options and responses from the past two years. Exhibit 28: Most Trusted Source for Mobile Payment Apps CONSUMERS INCREASINGLY TRUST FACIAL RECOGNITION FOR MOBILE AUTHENTICATION. Our final mobile-specific question explored consumer comfort levels with various mobile authentication methods, including passcodes, fingerprints, voice recognition and camera/facial recognition. The traditional passcode method continues to rank first at 64 percent, followed closely by fingerprints at 52 percent. Comfort levels increased across all of the categories from last year, reflecting growing familiarity with all types of authentication methods. Facial recognition showed the most significant increase, which we attribute to the introduction of mobile devices incorporating this feature. Exhibit 29 shows how participants responded over the past two years. My own primary financial institution/bank 48% 48% I am not interested in a mobile app Payment network/ brand card (e.g., Visa, Mastercard, American Express) Mobile device manufacturer (e.g., Apple, Samsung, etc.) Mobile device operating system provider (e.g., Apple/ IOS, Android, etc.) Mobile network operator (e.g., Rogers, Telus, Bell, etc.) 7% 7% 5% 3% 0% 35% 36% Exhibit 29: Comfort Level With Various Forms of Mobile Authentication Passcode Fingerprint Facial recognition 28% 36% 5 50% 64% 60% Online retailer (e.g., Walmart, Costco, Amazon, ebay, etc.) Voice recognition 24% 2 Department store/ warehouse club (e.g., Walmart, Canadian Tire, Costco, etc.) 0% 0% 20% 40% 60% 80% % 20% 40% 60% CANADIAN CONSUMER PAYMENT STUDY 31

32 Smart Speakers and Connected Payment Devices Last year, we began asking participants about their ownership and use of smart speakers, such as Amazon s Echo, Apple Home Pod, etc. The results were understandably low, as these products were not yet widely available in Canada. This year, we continued to explore the category and added a few questions about connected payment devices. Similar to last year, ownership and use of smart speakers and other connected devices is still quite low at 14 percent. Among owners, the top reported usage is for music and entertainment (91 percent), overtaking last year s preference for questions and answers, which took the second spot this year (80 percent). See Exhibits 30 and 31. Exhibit 30: Own a Smart Speaker Yes 14% 16% No 86% 84% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% CANADIAN CONSUMER PAYMENT STUDY 32

33 We wanted to understand how people who have adopted smart speakers or connected devices are using these technologies. Across all categories, while ownership has not grown, usage increased from last year across the different applications. Exhibit 31 shows the overall breakdown. Exhibit 31: Smart Speaker Uses To shop/ purchase items (e.g., Amazon) 26% 28% To make lists 3 47% Fun and games (e.g., jokes, jeopardy, etc.) 34% 46% Smart home (e.g., thermostat, lights, TV, etc.) 2 47% Help around the house (e.g., timers and alarms, etc.) 2 70% Questions and answers 60% 80% News and information 46% 76% Music and entertainment 43% 9 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% CANADIAN CONSUMER PAYMENT STUDY 33

34 CONSUMERS ARE HESITANT TO CONSIDER USING SMART SPEAKERS FOR PAYMENTS, CITING SECURITY CONCERNS AND SATISFACTION WITH THEIR CURRENT PAYMENT METHODS. We were also interested in understanding what consumers thought about using smart speakers in the future for making purchases or payments. Out of the entire survey pool (not just those who already have a device), 11 percent said they would consider using a smart speaker to make payments in the future however, less than 1 percent indicated they have already done so. Then, we explored the reasons why our respondents were reluctant to use a smart speaker for purchases or payments. The top reason, shown in Exhibit 32, was security concerns (60 percent), followed by 35 percent who believe the way they currently pay is easier. Other was listed by 5 percent of respondents. In their explanatory comments, they included a variety of reasons for not wanting to use smart speakers for payments, including: Too easy to spend money; I prefer to make purchases when I want them and not a device purchasing for me; In case it misunderstood me and made a wrong payment; and The idea of paying to put a device that can eavesdrop in my home is insane. There s been a lot of talk in the news lately about how consumers will use cars and other internetconnected objects to complete a variety of tasks, including making payments. Gartner Research estimates that by 2020, more than 250 million vehicles worldwide will include some form of embedded connectivity. And a recent Visa and pymnts.com study predicts that more than $210 billion in annual commuter commerce is at stake. You can read more about this in our ngenuity article, Driving Commerce Inside the Connected Car Yes, You Can Pay From the Dashboard. We asked our survey pool how likely they would be to use these types of connected payment devices. As you can see in Exhibit 33, interest is currently quite low, but this is an area we will continue to monitor as this technology becomes more widespread. Exhibit 32: Reasons for Not Using a Smart Speaker to Make Purchases/Payments 5% Other Exhibit 33: Likelihood of Using a Connected Payment Device Very unlikely 3 Unlikely 2 35% Easier to pay the way I currently pay 60% Security concerns Neutral Likely 10% 33% Very likely 4% 0% 10% 20% 30% 40% 50% 2018 CANADIAN CONSUMER PAYMENT STUDY 34

35 Marketing, Communications, Offers and Banking Activity It s no secret that consumers entrust their Financial Institutions (FIs) with a great amount of their personal data much of which they don t share with other brands, or even their closest friends. The amount of customer data that card issuers have makes them uniquely positioned to provide an extraordinary level of personalized communication. In this section of our survey, we wanted to monitor how comfortable consumers are around communications and marketing, as well as how they prefer to interact with their FIs. Exhibit 34: Importance of Having Accounts With Same FI Not at all important Not important 8% 7% 9% 19% 18% 19% 30% EXISTING CUSTOMERS ARE STRONG PROSPECTS FOR NEW PRODUCTS AND SERVICES. Neutral 28% 30% For the third year in a row, more than 40 percent of survey participants said it was important or very important to have all of their financial products at the same banking institution/provider. This is good news for FIs wanting to increase the number of products and services their existing customers have. See Exhibit 34. Important Very important 13% 14% 13% 30% 3 3 0% 10% 20% 30% 40% CANADIAN CONSUMER PAYMENT STUDY 35

36 THE INTERNET AND ATMS ARE THE MOST COMMON CHANNELS FOR INTERACTION. Exhibit 36: Banking Activities Conducted: Mobile App Exhibit 35 breaks down the various channels consumers prefer to use to interact with their banks. View balance View recent transactions (payments, deposits) 8 9 CUSTOMERS PREFER ELECTRONIC METHODS FOR COMMON BANKING ACTIVITIES. Make bill payments 70% When we explored how consumers conduct their banking activities electronically, we separated our audiences into two groups: those who use mobile banking apps and those who bank via the internet (using a smartphone, tablet or personal computer). The questions were tailored for each group, but the top results came out the same. Exhibits 36 and 37 demonstrate that whether consumers use mobile banking apps or the internet, their top four activities are: viewing balances, viewing recent transactions, making bill payments and transferring funds. Make mobile cheque deposit Transfer funds Contact customer service 9% 37% 67% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Exhibit 35: How Interacting with Bank if Once a Month or More Frequently Exhibit 37: Banking Activities Conducted: Website Calling customer support 10% View balance 9 ATM (automated teller machine) 58% View recent transactions (payments, deposits) 8 Walking into a branch 40% Make bill payments 79% Banking via the internet on your personal computer Banking via the internet on your smartphone or tablet A banking app from your financial institution on your mobile device 46% 45% 75% Open a new account/apply for credit Transfer funds Contact customer service Reorder cheques 18% 16% 19% 68% 0% 20% 40% 60% 80% 0% 20% 40% 60% 80% 100% 2018 CANADIAN CONSUMER PAYMENT STUDY 36

37 IS THE TOP CHOICE FOR MOST COMMUNICATIONS. We asked our survey participants how they would like to be contacted by their FIs regarding various types of information. The overall preferred channel was , which reflects the results from the past three years. The one exception was in how respondents wanted to be alerted about the potential unauthorized use of an account. In that case, a combination of both phone calls and text messages outpaced . Exhibit 38 shows the overall preferences by type of communication and the preferred channel. Exhibit 38: Preferred Channel for Receiving Communications From Your Financial Institution Do not send Mail Phone / text Phone call Social media Mobile alert Marketing/special offers 27% 13% 54% Availability of new products 26% 1 56% Change in terms of your account (e.g., interest rate, fees, etc.) 9% 27% 55% 3% Potential unauthorized use of your account 8% 6% 37% 2 20% 6% Significant change to your account (e.g., address change, new card request, etc.) 8% 15% 5 10% 1 3% Purchase transactions 18% 13% 53% 6% 4% 5% 2018 CANADIAN CONSUMER PAYMENT STUDY 37

38 IF THERE S A PROBLEM, CONSUMERS WANT TO SPEAK WITH A PERSON RIGHT AWAY. While we ve noted that customers prefer using the internet and ATMs for normal, everyday transactions, if there s an issue with a payment card they overwhelmingly prefer to call customer service. Visiting a branch was a distant second, followed by ing customer service. Interestingly, there was a decrease this year in people who would visit the branch and an increase in those who would contact the bank via online chat (on the website). Exhibit 39 shows how this year s responses compared to those in When we looked at the breakdown by age groups, we found that year olds were more likely to walk into the branch than any other age group. We believe this is due to their lower comfort level and experience with financial services. Exhibit 39: Preferred Method of Communication of an Issue CONSUMERS PREFER TO RECEIVE MARKETING MESSAGES ABOUT ONCE A MONTH. Chat with customer service via their mobile app Chat with customer service via their website 3% 5% Social media (e.g., Facebook, Twitter) Walk into a branch 15% 2 customer service 9% 8% Call customer service to talk to a representative 66% 69% 0% 10% 20% 30% 40% 50% 60% 70% 80% CANADIAN CONSUMER PAYMENT STUDY 38

39 When we asked respondents who were willing to receive marketing and special offers from their bank how often these messages should be sent, 48 percent said once a month (which is similar to results from previous years). In the No. 2 spot, 27 percent said they d like to be able to decide how often to receive materials. See Exhibit 40. CONSUMERS ARE INTERESTED IN PERSONALIZED MARKETING AND SPECIAL OFFERS. Exhibit 41 shows that 83 percent of the same subset of respondents said they would be somewhat or very interested in receiving coupons and special offers based on information their financial institution collects about their purchase history. Only 17 percent of respondents were not interested. That s great news for those planning or already executing on campaigns geared toward specific payment behavior. CONSUMERS ARE INTERESTED IN IDENTITY THEFT PROTECTION AND CREDIT SCORE RATING. Exhibit 40: Preferred Frequency of Receiving Special Offers Exhibit 41: Willingness to Receive Coupons/Special Offers 5% Never 27% I want the ability to decide how often 1 Once a week 2 Very interested 17% Not at all interested 9% Once a year 48% Once a month 6 Somewhat interested 2018 CANADIAN CONSUMER PAYMENT STUDY 39

40 We wanted to learn more about what other types of products and services consumers would like their financial institutions to offer. This year, we added two items to the list: discounted tax software and financial planning. Both of these new options performed fairly well. However, similar to the results from last year, our respondents top choices were identity theft protection and credit score/rating. The raw percentages for these were lower this year because, while respondents were able to choose multiple products and services, many only chose one and there were two additional options. The responses can be found in Exhibit 42. Security: Exhibit 42: Other Products and Services Something else Discounted tax software 16% Financial planning 25% Credit score/rating 4 Identity theft protection 5 Nothing 34% 0% 10% 20% 30% 40% 50% 2018 CANADIAN CONSUMER PAYMENT STUDY 40

41 Consumers Are Aware, but Not Overly Concerned PEOPLE ARE CHANGING THEIR PASSWORDS TO SECURE THEIR PERSONAL DATA AND ACCOUNTS. Exhibit 43: Actions Taken in the Last Year to Secure Data/Accounts New to the survey this year is a section aimed at understanding consumer sensitivity and behavior around security. In light of numerous reports in the news of security failures and breaches, we wanted to know what actions, if any, our respondents had taken over the past year to ensure the security of their personal data and accounts. We also wanted to know how they felt about being asked for additional information geared at preventing fraudulent behavior. Exhibit 43 shows that the most common action was changing , online banking and retail account passwords, followed by requesting and reviewing credit reports to check for abnormalities. As part of our inquiry into consumer attitudes on security, Shop at fewer online sites Shop online less frequently Signed up for credit monitoring or identification protection services Changed passwords on the websites where I shop frequently Changed my online banking passwords 18% 36% 3 47% 53% Changed passwords for my 53% Obtained and reviewed my credit report to look for any irregularities 4 0% 20% 40% 60% 2018 CANADIAN CONSUMER PAYMENT STUDY 41

42 we asked participants who they thought was responsible if their personal information was stolen and used to make fraudulent purchases or withdraw funds from their account. In Exhibit 44, you can see that 40 percent of respondents believe their bank is responsible, followed by 35 percent who think the store or merchant where the information was stolen should be responsible, followed by 25 percent who listed the card network as responsible if a credit card was used fraudulently. SYSTEM REMAINS FAIRLY HIGH. We asked our participants how concerned they are that their account or personal information could be stolen. Their responses, displayed in Exhibit 45, indicated that the majority is only somewhat or not very concerned while only 30 percent indicated extreme concern. CONSUMERS CONFIDENCE IN THE PAYMENT Exhibit 44: Who Is Responsible If Account or Personal Information Is Stolen/Fraudulent Activity Occurs? Exhibit 45: Concern About Information Being Stolen My bank The store or merchant where my information was stolen The card networks if it is card related (e.g., Visa, Mastercard, American Express) 30% 25% 40% 1 Not very concerned 30% Extremely concerned The credit bureaus The government 0% 58% Somewhat concerned Other 4% 0% 20% 40% 60% 2018 CANADIAN CONSUMER PAYMENT STUDY 42

43 Over the past few years, financial institutions have been combatting fraud by increasing the amount of information consumers are required to provide in order to confirm their identity and apply for new loans and credit cards. As a result, these processes take longer and require more effort on the part of the customer, which isn t always in alignment with the goal of providing the best possible customer experience. We wanted to know whether or not consumers understand why they re being asked for this additional information and measure their level of comfort with the situation. In Exhibit 46, survey respondents were asked to rate the degree to which they agreed or disagreed with four statements. Most of the responses were neutral or better, which seems to indicate that our respondents generally understand the security issues behind why they are being asked for more information and are willing to provide it. Exhibit 46: Agreement Level Regarding Data/Verification Requested I understand they are asking for more information due to increases in fraud and identity theft 19% 3 46% I don't mind when I am asked a variety of questions to confirm my identity when I call to inquire about the status of my new card/loan 3% 4% 23% 26% 45% 5% The time involved to complete an application for a new loan/credit card takes too long 20% 2 45% 7% I am comfortable providing the information requested when I am asked for detailed personal information when applying for a new loan or card 5% 10% 13% 3 4 0% 10% 20% 30% 40% 50% 60% Stongly agree Agree Neutral Disagree Stongly disagree 2018 CANADIAN CONSUMER PAYMENT STUDY 43

44 Conclusion 2018 CANADIAN CONSUMER PAYMENT STUDY 44