Digital Payment Trends in Canada: Challenges and Solutions

The shift toward online shopping in recent years has accelerated the adoption of digital payments. In Canada, credit and debit cards are the top payment methods for online purchases, with credit cards holding the lion's share at 64%. As a whole, the transaction value for digital payments is expected to exceed $174 billion this year and reach $249.80 billion by 2028.

Still, the most widely accepted payment for Canadian businesses is the good old-fashioned check, with electronic funds transfer (EFT) a close second. Only 52% currently accept credit cards; 40.9% debit cards. However, most businesses say they plan to add more electronic options in 2024.

The digital wallet

The willingness of Canadian companies to adopt more virtual payment methods likely stems from the convenience and popularity of card payments and the rise of digital wallets.

According to insights from RFI Global, the use of digital wallets saw a massive spike in the last six months of 2023, going from 38% to 51%, as well as a 33% increase in frequency.

Interac® Debit, Interac e-Transfer®, and EFT

Other popular payment methods in Canada are Interac Debit, Interac e-Transfer, and electronic funds transfers (EFT). Interac Debit is Canada’s only debit network for in-person payments. EFT, also called pre-authorized debit, supports sending money between bank accounts, similar to ACH in the U.S. Interac e-Transfer is also an electronic transfer of funds between bank accounts.

Contactless payments are becoming the norm in Canada

Another rising payment star is contactless payments. Since the COVID-19 pandemic, an overwhelming majority (84%) of Canadians prefer contactless or tap-and-pay options and plan to continue using them post-pandemic.

Canadian retail and e-commerce are alive and well

Considering the popularity of cards and digital wallets, it’s no surprise that revenue from e-commerce retail in Canada has also increased. Revenue went from $25.98 million in 2017 to $52.1 million in 2023. In fact, Canada has the 11th largest e-commerce market in the world.

With trends continuing to move toward more digital experiences, payment processing has never been more important for Canadian businesses. Let’s take a look at the top challenges.

1. Integration woes

Integrating payments into your current software or business can be challenging for companies everywhere, especially when multiple integrations are required. In Canada, there are also special regulatory requirements (more on this below) that can add to the complexity of a payments integration.

Choosing a provider that has one integration for online and in-person payments, streamlined and easy-to-use API documentation, and dedicated customer support can make integration much smoother and faster.

2. Speed, reliability, and connectivity

Businesses that serve Canada need to support in-demand payment methods and ensure payments are processed fast without interruption. The overall speed and reliability of payment processing greatly affect the buying experience.

Even brief outages can result in substantial revenue losses and reputational damage. Finix has an industry-leading uptime of 99.999%, along with robust contingencies in place to ensure uninterrupted payment processing.

3. Regulatory compliance and data privacy

Keeping up with compliance and regulations can be a huge challenge for companies, particularly small to mid-sized businesses. Canada has strict laws governing the collection, use, and disclosure of personal information.

Businesses must adhere to these laws to avoid significant penalties. Along with Canada-specific regulations, providers and businesses must comply with the global Payment Card Industry Data Security Standard (PCI-DSS).

Governing compliance and regulatory bodies in Canada:

• Personal Information Protection and Electronic Documents Act (PIEDA): Governs the collection, use, and disclosure of personal information by private organizations.

• Financial Transactions and Reports Analysis Centre of Canada (FINTRAC): Oversees anti-money laundering regulations and requires businesses and payment providers to detect and report suspicious transactions.

• Code of practice for consumer debit card services: Outlines the responsibilities financial institutions and payment providers have when offering debit card services to consumers.

• Compliance with PCI-DSS: A global requirement for handling cardholder data and protecting consumers from fraud.

• Electronic Funds Transfer Act (EFTA): A framework for disclosing liabilities and consumer rights regarding electronic money transfers and preauthorized debits.

4. Payment processing costs

Businesses processing cross-border payments are often faced with profitability issues when it comes to costs. Factors vary depending on volume, industry, and the number of vendors in your payment stack.

When evaluating payment solutions, be on the lookout for providers that offer competitive and flexible pricing models, support discounted business card transactions through Level 2 and Level 3 processing, and include feature-rich capabilities that let you reduce vendors.

Other considerations include:

• Card-present and card-not-present interchange rates

• Added fees

• Configurable fee profiles

See Finix pricing for Canada: platforms and individual business

5. Currency exchange rates

The biggest factor that affects costs and profitability is currency exchange rates. The unpredictable fluctuation in currency values can affect revenue and the price of goods and services. Cross-border transactions also often have additional fees, such as currency conversion fees.

A provider with a flexible pricing model can help you maximize revenue on Canadian transactions so that you’re not eating the costs.

6. Payment methods

As mentioned earlier, Canadians prefer card payments for online purchases and show a strong preference for other digital payment methods. This means businesses must be able to support a variety of payment methods to meet customer demand and stay competitive.

7. Payment fraud

The rise of e-commerce and online transactions in Canada comes with an unfortunate side effect: payment fraud. E-commerce and online businesses are particularly vulnerable to fraud attempts as it’s easier for cyber criminals to use stolen credit card numbers and fake identities to make fraudulent purchases at scale.

A payment provider with a strong fraud detection and prevention solution can help protect your business with real-time transaction monitoring.

For example, Finix offers an advanced fraud solution that uses sophisticated rulesets and machine learning to analyze transactions. The algorithms adapt based on ever-evolving trends to keep your business protected from current and future threats. For a tailored approach, creating custom fraud rules on top of Finix’s rulesets is also available.

Other ways providers help prevent payment fraud:

• Address verification

• CVV code requirements

• Monitoring suspicious domains

• Monitoring suspicious activities tied to IP address

8. Customer support

Most businesses that accept cards and other digital payments aren’t payment experts, nor do they have a dedicated payment operations team to handle issues as they arise. This makes support for payments a crucial component for companies in our digital age—especially those processing cross-border payments.

A provider with a team that’s knowledgeable about the intricacies of payment processing in each country is a must to help with compliance, regulations, disputes, and troubleshooting.

You may be wondering who the big payment processor players are in Canada. Which one is right for you boils down to your business needs.

• Chase

• Elavon

• Finix

• First Data

• Global Payments

• Helcim

• Moneris

• PayPal

• Stripe

• TD Merchant Solutions

• Worldpay

With Finix, businesses have access to unified payment technology and a true end-to-end solution for online and in-person payments.

Here are some of our top features and offerings:

• One payment integration: Accept online and in-person payments with the same API integration in Canada and the U.S.

• Unified, user-friendly dashboard: Access all of your transaction data for the U.S. and Canada in one, easy-to-use dashboard.

• White label options: Create a seamless customer experience using your logo and brand colors, while Finix powers everything behind the scenes.

• EFT/Pre-authorized debit (PAD) support: Send bank-to-bank transfers (like ACH in the U.S.).

• Credit and debit support: Meet customer demand for online and in-person payments.

• Pre-built payment tools: Access a full suite of plug-and-play tools including virtual terminals, payment links, and prebuilt, Finix-hosted checkout pages with little to no need for a developer.

• Contactless point of sale (POS): Let customers tap to pay for a touchless payment experience.

• Fraud monitoring: Utilize real-time transaction monitoring for advanced fraud detection and prevention.

• Embedded compliance: Make managing and staying in compliance easy.

• Unified reporting and analytics: Get deep insights into your business with transaction-level details including interchange and additional fees, payment trends, profitability, chargeback ratios, and more.

• Dispute management: Manage disputes with ease, including evidence uploads and decisioning, all in one place.

• Exceptional customer support: Get fast, expert service from a team of payment professionals who are here to help you succeed. Know that you’re covered 24/7/365 in the event of an emergency.

Payment experiences stickier than maple syrup

It’s nearly impossible to function in modern society without at least some form of technology in this digital age—and that’s especially true with payments. With the right payments partner, you can create payment experiences that foster customer trust and loyalty while maximizing efficiency and revenue.