Payment Cards in Canada

Introduction

Payment Cards in Canada is an invaluable guide to one of world's largest payment card markets. The report provides statistics on market size, competitor market shares and forecasts. It also provides an overview of regulations, competitor activities, issuer strategy and product innovation including developments in contactless, mobile, and online payments as well as prepaid cards.

Features and benefits

* Detailed market sizing, competitor shares and forecasts are an invaluable guide for any cards player building a business case for activity in Canada.
* In-depth insight into contactless, mobile, prepaid and online payments highlights future opportunities for all industry stakeholders.
* Detailed analysis of Canada's regulatory framework assists potential market entrants in understanding current and possible future legislation.

Highlights

Canada has a well developed payment cards market with the highest card penetration in the Americas at 3.7 cards per person. The payment cards sector in Canada remains heavily influenced by regulations which dictate to what extent a bank can operate in the market.
The "big five" Canadian banks account for 61% of the credit cards market. However, Bank of America and Capital One have grown to become major players with 15% of the market. Retailers such as Canadian Tire and Walmart are increasing in importance with over 9% of the market while Credit Unions remain very popular in some regions such as Quebec.
The greatest contactless opportunities lie in the petrol station market although coffee shops and fast food restaurants have led the way so far. Prepaid cards are becoming more popular and issuers are marketing the cards to specific consumer segments. Zoompass is Canada's sole mobile payments operator well developed in mobile money transfer.

Your key questions answered

* Which card segments are showing the fastest growth in the Canadian payments market and why?
* Who are the key players in Canada and what is their market share?
* How do Canadian regulatory authorities impact the payment cards sector?
* How extensive are mobile and contactless payments and where does future growth lie?
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TABLE OF CONTENTS
Catalyst 1
Summary 1
Executive Summary 2
Sizing and forecasting the payment card market in Canada 2
Competitor and product developments in Canada 3
Online, contactless, prepaid, and mobile payments 4
Sizing and Forecasting the Payment Card Market in Canada 13
Overview 13
Key macroeconomic and consumer data 14
Macroeconomic trends and performance 14
Demographic and consumer trends 19
Regulation of the Canadian payment cards sector 20
Key institutions and players 20
Banks operating in Canada fall into three categories, known as schedules 22
Recent and future legislation aims to increase both transparency and competition, while also decreasing fees 22
Acquiring and processing landscape 26
The Interac network monopoly has made the Canadian debit card market unique 26
Moneris Solutions is the largest acquirer in Canada, although other players are developing similar capabilities 28
Sizing the payment card market in Canada 29
Size and performance of the payment card market 29
Forecasting the payment card market in Canada 55
Forecasting the pay now card market 55
Forecasting the revolving credit card market 56
Forecasting the charge card market 58
Competitor and Product developments in Canada 59
Overview 59
The competitive landscape 60
Categorization of players in the Canadian payment cards market 60
Competition levels vary between products, with Schedule III banks unable to issue debit cards 61
Credit Unions are major competitors in Quebec, Saskatchewan and the greater Vancouver area 62
Retailer cards are seeing a surge in popularity and are increasing competition with traditional issuers 62
The Big Five Canadian banks dominate the payment cards landscape 63
The "Big Five" banks 63
Other significant Canadian players 65
International banks with a significant presence in Canada 66
Card issuer market shares and performance 67
Credit card market shares 67
Pay now card market shares 68
Charge card market shares 69
Leading loyalty programmes 69
Credit card product strategy 71
Frequency of use by brand 74
BMO is the only Big Five issuer not offering a low interest card 75
Card scheme market shares and developments 77
Pay now card scheme shares 77
Charge card scheme shares 81
Online, Contactless, Prepaid, and Mobile Payments 83
Overview 83
Online payments in Canada 84
E-payment methods 85
Interac e-Transfer transfers money securely but is limited to participating financial institutions 86
The introduction of Interac Online allows online payments by debit card but only 7.4% choose this method 87
Comfort and security drive consumer payment tool use 88
Contactless 89
Canada is the second largest market in terms of potential opportunity in the Americas, worth $22.7bn 89
The petrol market offers the biggest opportunity for contactless payment methods, but has witnessed few developments 90
Convenience stores also offer numerous opportunities, but no large retailers have yet embraced contactless 90
Coffee shops and fast food chains have lead the way in contactless payments in Canada 91
Prepaid 93
Monoline issuers such as MYPLASH are investing heavily in the youth and travel markets 94
Only two of the "Big Five" Canadian banks offer prepaid cards and both target different consumers 95
SelectCore launched Canada's first reloadable prepaid card sold at retail 95
RBC and Consorteum Holdings Inc have both launched prepaid card schemes aimed at different segments of those on benefits 96
Developments in mobile payments 97
Zoompass has developed rapidly, with domestic and international P2P mobile money transfers 97
Zoompass Tag has undergone trials with the aim of introducing it to mobile devices in 2011 97
Appendix 99
Definitions 99
Methodology 100
Cards and payments database 100
Financial Services Consumer Insight is new to our offering, providing new and valuable insight 101
Forecasting methodology 101
Further reading 102
Ask the analyst 103
Datamonitor consulting 103
Disclaimer 103


TABLE OF FIGURES
Figure 1: Canada is the second largest economy in the Americas 15
Figure 2: Recessionary forces led to a contraction of real GDP 16
Figure 3: Inflation, as measured by consumer price index, plummeted to 0.3% in 2009 17
Figure 4: Canadian unemployment stood at over 8% in 2009 18
Figure 5: CIBC Visa Advantage card is the first debit card which does not only use the Interac network 25
Figure 6: The Interac Association provides a network for debit card payments 27
Figure 7: Canada has the highest card penetration rate in the Americas 29
Figure 8: Canada has a higher penetration of pay later cards than pay now cards, 2009 30
Figure 9: Canada is second only to the US in terms of pay now card penetration, 2009 31
Figure 10: Canada leads in terms of pay later card penetration 32
Figure 11: The number of pay later cards in issue is higher than pay now cards, and is growing fast 33
Figure 12: Pay now cards accounted for the majority of transactions in Canada 34
Figure 13: Canadians prefer transacting at POS to ATM withdrawals 35
Figure 14: Food and drink accounts for the largest share of the pay later card market in Canada 36
Figure 15: Pay now cards are the most frequently used card payment option in Canada 37
Figure 16: Frequency of use is higher at POS than at ATMs across all card types 38
Figure 17: Pay now and credit cards are almost equal in terms of total transaction values 39
Figure 18: Value of transaction at POS was over four times that at ATM 40
Figure 19: Food and drink accounted for the highest payment transaction value in Canada 41
Figure 20: Charge cards recorded the highest average transaction value in Canada 42
Figure 21: Average transaction values are higher at ATMs than at POS in Canada 43
Figure 22: Canada has the highest average pay now POS transaction value in the Americas 44
Figure 23: Canada has the highest turnover per pay now card in America 45
Figure 24: Average transaction value and frequency of use for pay later cards at POS is highly dispersed 46
Figure 25: Canada has the highest average POS turnover for pay later cards 47
Figure 26: Food and drinks account for the highest average pay later transaction value in Canada 48
Figure 27: 49% of all credit cards in Canada are used as primary cards by consumers 49
Figure 28: More than one-third of credit cards in Canada are used all the time 50
Figure 29: Canada has lower revolve rates and balances outstanding than the US 51
Figure 30: 58% of consumers in Canada pay off their balance in full each month 52
Figure 31: The number of ATM terminals in Canada grew at a CAGR of 4.8% over 2005–09 53
Figure 32: The number of POS terminals grew at a CAGR of 3.5% in Canada over 2005–09 54
Figure 33: The number of pay now cards in issue is expected to increase by 7.5% over 2010–14 55
Figure 34: The credit card market in Canada is expected to grow at a CAGR of 7.2% over 2010–14 56
Figure 35: The charge card market is expected to grow the fastest over 2010–14f 58
Figure 36: Bank of Montreal has the largest number of credit cards in issue in Canada, 2009 67
Figure 37: Bank of Montreal is the largest player in terms of the number of cards issued 68
Figure 38: TDS Canada occupies 16.1% of the charge cards market in Canada 69
Figure 39: 80% of National Bank cards were reported to be of standard branding 72
Figure 40: 67% of Scotiabank cards were used as primary cards 73
Figure 41: Scotiabank had the most used credit cards with 60% of consumers using them all the time 74
Figure 42: Interac has a monopoly in the pay now cards market in Canada 77
Figure 43: The total value of transactions through Interac grew by a CAGR of 5% over 2005–09 78
Figure 44: MasterCard branded cards dominate the credit card market in Canada 79
Figure 45: Visa accounts for more than half of the total credit card transaction values in Canada 80
Figure 46: American Express has the most charge cards in circulation in Canada 81
Figure 47: The total value of charge and deferred debit card transactions was highest for American Express 82
Figure 48: Over 80% of Canadians are Internet users 85
Figure 49: Only 9.2% of Canadian cardholders use e-payment methods 86
Figure 50: Only 7.4% of online shoppers use their debit cards for at least one type of purchase 88
Figure 51: 55.5% of PayPal users stated security as a reason for using the payment method 89
Figure 52: Contactless payments present a $22.7bn opportunity in Canada 90
Figure 53: Petrol stations offer the greatest potential in the contactless market at $7.7bn 91
Figure 54: MYPLASH uses popular culture to target the youth prepaid card market 94


TABLE OF TABLES
Table 1: Canada – macroeconomic indicators 14
Table 2: Canada – demographics and consumer trends 19
Table 3: Datamonitor’s forecast for the pay now card market, 2010–14f 56
Table 4: Datamonitor’s forecast for the credit card market, 2010–14f 57
Table 5: Datamonitor’s forecast for the charge card market, 2010–14f 58
Table 6: Credit card benefits by bank 70
Table 7: Credit card benefits by bank continued 71
Table 8: Information on popular credit cards 76
Table 9: Current relevant publications 102



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