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The US ahead of Canada in digital payments

March 31, 2021

Jonathan Bennett

Chief Commercial Officer

FIS Worldpay’s latest Generation Pay Report provides an in-depth look at how consumers in the US and Canada paid for their in-store and online shopping in 2020, with insights split into four age groups – Gen Z (18-23yr olds); millennials (24-39); Gen X (40-54); and baby boomers (55-73).

It found the use of mobile and digital wallets to fund purchases was high in both countries. But though equally as many Canadians as Americans in the Gen Z age group make payments this way (44-45%), the gap widens considerably when it comes to the older generations. Almost half of US Millennials (46%) and Gen Xers (44%) use mobile and digital wallets, for example, compared to just 35% and 29% respectively of Canadians in the same age groups. And roughly twice as many American Baby Boomers (22%) use mobile payments or digital wallets than those in Canada (11%).

Separate analysis from Juniper Research suggests that just over 50% of the US population used digital wallets in 2020, compared to just over 40% in Canada. In its latest Digital Wallets: Deep Dive Data & Forecasting 2021-2025 report, the company highlights how merchants have made concerted efforts to update their POS terminals to support contactless payment technologies, including eWallets stored on NFC-enabled smartphones. Juniper estimates that around 38% of mobile handsets used contactless wallets utilising NFC technology in 2020, compared to 28% in Canada.

GlobalWebIndex statistics compiled in the third quarter of 2020 provide further confirmation of the trend. Again, more Americans appear to favour solutions focussed on the point of sale (POS) payments made in physical stores, with 28% using electronic wallets (eWallets) such as Apple Pay, Google Pay and Samsung Pay compared to 22% in Canada.

High credit card use in Canada

Canadians are some of the world’s heaviest credit cards users, with even half (49%) of the youngest Gen Z age group using them to fund their online shopping purchases. Those figures expand to 63% for Millennials, 66% for Baby Boomers and 70% for the Gen X age group. It’s a similar story for in-store transactions, which an aggregate of 43% across all four categories fund with credit cards.

Those in the US are considerably less reliant on credit cards to do their shopping in both scenarios, particularly the younger demographics. Less than a third of American Gen Zers buy online using credit cards, for example, figures which rise to 39% for Gen Xers and 41% for Baby Boomers in the country. The figures dip further to 28% of Millennials, 34% of Gen Xers and 32% of Baby Boomers in in-store purchases.

According to World Bank global financial inclusion data, those findings have much to do with high levels of bank account ownership in North America, close to saturation point amongst adults aged over 15 years in both countries. However, significantly more Canadians own credit cards (83%) than their counterparts south of the border (66%).

App usage and eCommerce growth

Statista suggests that the use of mobile payment apps by retailers, restaurants and other physical outlets in North America increased from 16% to 21% between 2016 and 2020, with similar expansion in the prevalence of various mobile wallets over the same period.

That trend has run parallel with a decline in the use of cash payments across the continent, particularly in 2020, as physical stores shut their doors in response to COVID-19 pandemic restrictions or refused to accept banknotes and coins due to concerns over virus transmission. The exact impact saw a significant increase in eCommerce transactions’ volume and value as consumers switched their shopping habits online.

Around 256m Americans collectively spent a colossal $432bn online in 2020, a figure 20% higher than it was in 2019 according to Statista’s market outlook for e-commerce data obtained January 2021. Annual online consumer goods spend in the US is one of the highest in the world at almost US$1,700 per user.

Those figures dwarf the equivalent Canadian eCommerce total of US$29.9bn, though the growth rate between 2020 and 2019 was almost identical (18%). While the US population (331m) is nearly ten times larger than Canada’s (38m), roughly the same proportion of both country’s populations (77% of Americans and 78% of Canadians) made online purchases in 2020. Canada’s smaller economy limited its online spend per user to just US$1,150, however.

Evidence also suggests that an increasing percentage of that online spending is conducted on mobile devices. GlobalWebIndex statistics estimate that 66% of US citizens aged between 16 and 64 used shopping apps at least once a month compared to 60% of Canadians. Ranked by active users, Amazon was the third most popular app in the US (and fifth in Canada) according to App Annie data compiled in January 2021.

Such is the rise of mobile commerce (mCommerce) that Statista now estimates almost 54% of all retail eCommerce sales in the US will be transacted on a smartphone in 2021. That will leave merchants without a capable mobile payments platform at a distinct disadvantage.