The “Canadian Paradox” and how it’s changing in a post-COVID world

While Canadians have embraced new methods of digital interaction, use of branches and cash remains popular and even essential

Canada is one of the top two countries in the world for electronic payments (behind Sweden) while boasting the highest number of ATMs per capita, only Macau has more.

And the country is arguably the pioneer for peer-to-peer payments, yet checks are still used heavily. So, Canadians really make use of every payment option available to them—including cash.

Now the question is: “How has COVID-19 changed the way Canadians make payments?”

Like everywhere in the world, the pandemic accelerated the adoption of digital payments in Canada as well as reduced branches and a temporary reduction in cash use. KPMG summed up the digital rise around the world during the pandemic as “seeing three years of digital advancements in about three weeks.”

Prior to COVID, many Canadian banks were already on track for a digital offerings’ transformation, reducing cash and improving customer experiences—and the pandemic sped that up as FIs quickly adopted new ways of working, upgrading their system both back and front of house to be digitally enabled.

Digital banking penetration in Canada will increase from 69.7% in 2019 to between 74-77% by 2024

Source: Insider Intelligence

“Heading into COVID, more than 80% of our bank clients were already digitally active,” said Peter Tilton, Senior Vice President, Digital, Royal Bank of Canada. “Where we saw real change was with clients who either weren’t regular users of digital tools, or were heavy branch users like seniors. As social distancing and other public health measures took effect, digital engagement among these groups increased significantly as people sought to stay connected to their money and accounts.” 

Driving consumers to digital

When branches are less accessible and with more people opting to stay home rather than try to visit a branch, digital adoption has grown exponentially across the world, and Canada is no different.                

 “As clients became more comfortable banking digitally, we’ve seen increased usage in our digital platforms.”

Peter Tilton, Senior Vice President, Digital, Royal Bank of Canad

“The investments we made to keep clients connected to our advisors, especially when they were forced to work remotely due to the pandemic, were critical to us continuing to provide a banking experience that makes clients feel known and gives them a useful banking experience,” said Tilton. “As clients became more comfortable banking digitally, we’ve seen increased usage in our digital platforms like MyAdvisor and AI-based capabilities like NOMI.”

FIs are continually looking for ways they can improve the digital experience for their consumers. While the Canadian government considers rolling out open banking, FIs are exploring other technologies. One that’s growing in popularity is AI, which will allow deeper levels of engagement through personalization. For example, FIs can use real-time spending analysis to deliver insights to help consumers best manage certain financial situations—such as their cash flow or loans.

RBC is already on this journey and last year announced its new AI platform that would transform the customer banking experience. RBC’s AI private cloud can run through thousands of simulations and analyze millions of data points in a fraction of the time it previously took. This means RBC can conduct research at scale and has already improved trading execution and insights, helped reduce client calls and has resulted in faster delivery of new applications for RBC clients.                           

“Payments in Canada are being modernized at a rate not seen before. The introduction of new INTERAC e-Transfers® for Canadian businesses this summer will enable “the beginning of the end of cheques.” This new payment includes the data needed for businesses to make the leap to digital.”

Ramesh Siromani, SVP, Enterprise Payments, Royal Bank of Canada    

There remains an important role for branches and cash      

Not everyone wanted to make a complete move to digital. And that’s part of the reason the use of cash and visits to the branch are still important for consumers.

While the use of cards and mobile tap and pay are increasing—with 53 percent of Canadians reporting they used these payments more often than pre-COVID—cash use remains strong. RBR predicts Canada’s ATMs will see an estimated 640 million cash withdrawals this year and, what’s more, many Canadians have increased the amount of cash they have at home.

FIs are wise to continue giving their customers payment choices  

Like elsewhere in the world, payment evolution continues in Canada and both FIs and consumers are keen to embrace new forms and enjoy the convenience and personalization benefits that digital can bring—but not at the expense of traditional cash or card payments. The ability to use any form of payment they want, where and how they want to, will remain essential to consumers—and Canada is a clear example of that.