Canadians prepared to go “cashless”

The idea of living in a cashless society is gaining considerable momentum in Canada suggests a newly released survey though it's hard to imagine it happening anytime soon.

The survey, conducted on behalf of PayPal Canada by Leger Marketing in Toronto, shows that 71 per cent of Canadians are comfortable with never having to handle cash to make a purchase, up 27 per cent from 2011. In fact, many Canadians are already embracing this shift as a full quarter (25 per cent) of survey respondents go more than a week without using cash.

"We've been seeing these trends for awhile. What's most interesting to us is how quickly the macro-trends are starting to happen," says Darrell MacMullin, managing director, PayPal Canada in Toronto. "Canadians want to go cashless. They see cash as less convenient and less secure in a lot of ways.

"People on average check their smartphones about 40 times a day. That's a lot more convenient for them than having to go to an ATM to pick up some cash."

Cashless transition will be a slow process

Every few months, a company with a vested interest in electronic payments puts out a report saying Canadians are ready to go cashless. Perhaps a fair percentage of the population is but at the end of the day, some will argue cash is still king. Those that do may be in the minority, suggests Warren Shiau, director of research, technology and consumer insight at Leger Marketing.

"For example, it makes no sense to walk around with $3,000 cash to buy furniture or to send cash to pay for something like an eBay transaction," he says. "All the market research data points to Canadians being ready to go cashless and I believe this is true.

"When we actually get there is another matter of course; the reality is there will probably always be some percentage of transactions that are cash, but it's shrinking all the time."

"For everyday purchases, I don't think you'll see 100 per cent adoption of any method overnight," MacMullin responds. "People are creatures of habit and they like convenience and security. They tend to gravitate to a particular form factor for the majority of their purchases. If it fits they're lifestyle, and more people are (digitally) connected on an ongoing basis, they'll want to transact anytime, anywhere, with whatever mechanism they want.

"If we can deliver an electronic experience that's a lot more convenient for people, they're going to gravitate to it."

Will cash ever expire?

Electronic payments in all forms have shown strong growth and are expected to continue show strong growth across the spectrum of all payment transactions that take place in Canada, remarks Steve Nogalo, vice-president, global payments, NCR Canada in Waterloo, Ont.

"That's everything from payroll deposits to debit transactions. That being said, cash remains extremely popular and the amount of cash in active circulation has actually grown across most economies," he tells Yahoo! Canada Finance. "There is still a very large percentage of the population that relies on cash. In Canada, this percentage is around 50 per cent (from a 2009 Bank of Canada study) which is lower than in other parts of the world where cash is still used in 70 per cent of all transactions."

Over time expect the trend away from cash to continue; however, NCR Canada doesn't expect it to go away completely.

"Cash is still a very efficient payment mechanism and until another payment provides the same ubiquitous acceptance as cash we will still see a percentage of the population using it," Nogalo adds.

NCR Canada recently released new software it calls Mobile Cash Withdrawal that allows consumers to initiate cash withdrawals from their bank accounts on an iOS or Android-based smartphone and then complete those transactions at an ATM by scanning a 2D barcode.

"This solution is targeted to consumers who are active smartphone users, and in particular, those great many consumers who are increasingly utilizing smartphones for more than talking and texting," he says.

"We have seen a tremendous amount of interest in this solution from banks around the world, including some in Canada. We expect Mobile Cash Withdrawal initially to be adopted by a younger, more technically savvy audience but expect that to level out across all demographics similar to how mobile banking adoption has evolved."

Meanwhile, previous polls and studies have suggested Canucks are ready to ditch cold hard cash for the electronic variety. For instance, an RBC/Shoppers Drug Mart poll published last March states Canadians tend to carry less physical cash on them nowadays and that that in-turn hints at a growing desire to rid ourselves of dollar bills and coins.

Similarly, the Consumers' Association of Canada believes with the demise of the Canadian penny that we're en route to cashless society.

"We're heading for an electronic, cashless society, there's not much doubt about that. This is one of the first steps related to achieving the goal related to that issue," says Bruce Cran, president of the CAC. "Cash is a very expensive thing to handle, it's the most expensive way of treating money. There's dangers attached to it that don't apply to the electronic structure."

Mobile vs. digital wallets

On the subject of mobile or digital wallets — and the differences between the two — NCR Canada's Nogalo says the terms are often used interchangeably but as smartphone adoption has exploded, the most common application of the concept is the mobile wallet.

"Since mobile wallets have assumed this position, the debate has shifted to what type of mobile wallet: cloud-based mobile wallets where the card/payment data is held in the cloud, or phone-based wallets, where the card data is stored within the secure element on the phone," he says. "Is one superior? No clear winner has emerged but there does appear to be growing momentum for cloud-based wallets."

Shiau says a mobile wallet is of necessity a digital wallet, but a digital wallet isn't always necessarily a mobile wallet (i.e. smartphone-enabled). Echoing Nogalo, he says there's a distinction between whether the wallet is client-based or server-based. This can be an important distinction security-wise, especially for smartphones.

"Think of it this way: what's the potential security risk of having your digital or mobile wallet and associated information on your smartphone versus having your it reside with your wallet provider?" he asks. "Yes, there are security risks associated with both, but accessing your digital/mobile wallet when you need to while it lives in a secure environment versus having it on your smartphone itself eliminates many potential security risks for sure."

PayPal Canada's MacMullin says a lot of consumers prefer the cloud- or server-based option.

"A lot of consumers don't want their credentials stored on a smartphone. The likelihood of people losing their phone is potentially high as is your phone credentials being jeopardized in someway," he says. "The advantage of having your financial information stored in the cloud is it's never shared with anyone you're doing business with nor is it transmitted across any cellular network and it's never stored on devices."