Canadian Credit Card Market Outlook

Description

The characteristics of the Canadian payments industry are determined by more than the competition among credit card and debit card issuers, the financial institutions and retailers, and consumer demographics. Payment trends also reflect consumer demands for transformative digital purchasing experiences and real-time payments, as well as the shifting pressures on card reward programs as consumers dialed down their in-store shopping and travel behaviors because of COVID-19.

Two years after the onset of the pandemic, total Canadian consumer spending has recovered to 2019 levels and the overall economy is on the road to full recovery, but the payments landscape remains altered with regard to where consumers spend their money, the channels used for spending money, and how consumers choose and interact with their payment products.

Canadian payment product and their rewards/loyalty program trends also track the Federal government's efforts to both push down interchange fees to benefit merchants and retain current levels of rewards to appease consumers. The government's push to move industry income in only one direction contravenes the historical pattern of card issuers collecting less in interchange and thereby lowering the value of rewards programs commensurately.

This all-new Packaged Facts report reviews and analyzes the Canadian credit card market within the context of the $9 trillion Canadian payments market, covering transaction volumes and transaction values across product types and usage channels. It also examines emerging credit products, payment strategies, and buy-now, pay-later (BNPL) offerings of the Big Five banks, as well as those from financial technology companies (fintechs) and the card networks. The report also provides analysis of the partnerships between the big Canadian banks and their credit card co-branding partners, including retailers and airlines.

Report Methodology

The information in “Canadian Credit Card Market Outlook” was obtained from primary and secondary research. Primary research included an extensive English/French proprietary Packaged Facts online consumer survey - fielded in February 2022 - that assessed Canadian consumers use of payment products by type, frequency of use, demographics as well as the psychographics drivers of consumer choices. The survey is census representative of the primary demographic measures of age, gender, geographic region, race/ethnicity, and household income. Within the report, additional consumer surveys from other market research firms and payment providers are referenced and cited.

Secondary research also includes general business and trade publications, management consulting reports, investment analyst reports, company financial filings, and vendor-generated survey findings. Research also relied on Canadian and international governmental, non-profit, and not-for-profit trade reports; country profiles; and payment system analysis.

Please note:Unless otherwise specified, all dollar figures are in Canadian dollars.

Product Code: LA17132578

Executive Summary

Scope & Methodology
- Scope of Report
- Report Methodology
Executive Summary
- Retail Category Patterns
- Canadian Banking is Highly Concentrated
- Pandemic Devastated Industries Central to Credit Cards: Airlines and Hotels
- Paydown in Credit Card Debt a Sharp Reversal Over Historic Trends
- Payment Transactions
- Debit Cards and Interac e-Transfers
- Digital Payments
- Contactless Payments
- Canadian Consumers Use of Credit Cards

Overview of Canadian Payments

Introduction
- Growth Forecast for Canadian Payments to 2025
  - Table: Canadian Debit and Credit Card Value, 2018-2025 ($ Billions)
- Canadian Payment Ecosystem
- Overall Economy Is Back to 2019 Levels
- Strong Economic Growth Ahead
  - Table: Growth Rates and Forecasts for Canadian GDP, 2019 - 2025
- In Wake of Pandemic, Consumer Financial Behaviors Are Changed
Canadian Banking
- The Big Five
  - Table: Big Five Banks Ranked by Assets, 2019-2021, ($ Billions)
- Caisse Populaire and the Desjardins Group
The Pandemic and Consumer Spending
- Retail Category Patterns
  - Table: Early Pandemic Impact on Key Retail Categories: Seasonally Adjusted Sales, 2019 - 2020 ($ Billions)
- Pandemic Created Waves of Lockdowns
  - Table: Total Retail Sales, Change QoQ, 2019-2021 ($ Billions, Current Dollars)
- Pandemic Devastated Industries Central to Credit Cards: Airlines and Hotels
- Airline Industry Is Still Recovering
- Hotel Industry Hard Hit in Pandemic
Payments in the Pandemic
- Government Actions
- Cardholders With the Highest Interest Rates Were the First to Pay Off
  - Table: Percentage of Credit Card Debt Repaid in First Year of the Pandemic, by Credit Score, Q4 2019 to Q1 2021
- Paydown in Credit Card Debt a Sharp Reversal Over Historic Trends
- Lower Credit Card Outstandings Will Last Until 2024
- Natural Disaster and the Pandemic Affected Huge Swaths of Canada's Citizens
Canadians and Payment Products
- Payment Transactions
  - Table: Canadian Payment Transactions by Product, 2015 and 2020
  - Table: Canadian Payment Value by Product, 2015 and 2020
- Electronic Funds Transfer (EFT)
- Online Transfers
- Interac e-Transfers Dominate Canadian P2P Market
- Pandemic Drove Retail Sales to E-commerce
  - Table: Quarterly Retail and Ecommerce Sales, 2019-2021
- Debit Cards
- Prepaid Cards
  - Table: Growth of Prepaid Card, Transaction Volume and Value and Average Growth Rate, 2015-2020 103%
- Contactless Payments
  - Table: Contactless Payments: Transaction Volume and Value and Average Growth Rate, 2015-2020

Consumer Attitudes and Behavior

Pandemic Sparked Changes in Payment Product Preferences
- Table: Card Product Use After the Pandemic. Consumers respond to "Since the COVID-19 crisis started, I am using..."
Canadian Consumers Use of Credit Cards
Why Consumers Use Specific Credit Cards
Value and Choice of Primary Card
- Table: Drivers of Credit Card Use Among Consumers
Consumers' Satisfaction with Primary Credit Card
Canadians Feeling Positive About Their Own Finances and the Economy
Consumers Respond Positively to Issuer Communications During the Pandemic
Financially Vulnerable Cardholders Are Least Satisfied with Their Issuers
Rewards Redemptions Were Down, But Rewards Satisfaction Was Up
No Annual Fee Cardholders Are the Most Satisfied
Call Centers Remains the Industry's Weakest Spot
Debit Card Use
What Consumers Value About Debit Cards
- Table: Top Drivers of Consumers Use of Debit Cards
Retail Rewards Drive Prepaid Card Use
- Table: Drivers of Prepaid Card Use
Online Purchasing
Prepaid Cards
Primary Research: Packaged Facts 2022 Survey of Canadian Consumer Payment Patterns
- Table: Overview of Consumer Payment Patterns: Overall and by English vs. French as Primary Language, 2022 (percent of Canadian adults with credit cards)
Primary Research: Packaged Facts 2022 Survey of Canadian Consumer Payment Patterns
- Table: Overview of Consumer Payment Patterns: Overall and by Generational Cohort, 2022 (percent of Canadian adults with credit cards)
Primary Research: Packaged Facts 2022 Survey of Canadian Consumer Payment Patterns
- Table: Overview of Consumer Payment Patterns: Overall and by Household Income Bracket, 2022 (percent of Canadian adults with credit cards)
Primary Research: Packaged Facts 2022 Survey of Canadian Consumer Payment Patterns - Psychographics
- Table: Selected Credit Card and Store Card Psychographics: Overall and by Generational Cohort, 2022 (percent of Canadian adults with credit cards)

Canadian Credit Card Issuers

Canadian Tire
- Overview
  - Table: Financial Services Segment Key Performance Measures, 2020-2021
- Triangle Rewards Program
CIBC
- Overview
  - Table: Geographic Components of CIBC Credit Card Receivables, 2019-2021 ($ Millions)
- Costco Partnership Grows CIBC's Credit Card Portfolio by 30%
- Capital One Exits Canadian Retailer Cobranded Market
- The New CIBC Costco Mastercard
- CIBC Wins for Costco Rewards
Royal Bank of Canada
- Overview
- RBC's Summer Promotional Campaign Drive Card Value and Points Utility
- Petro-Canada Promotion
Scotiabank
- Overview
  - Table: Scotiabank, Quarterly Credit Card Average Balance, 2019-2021 ($ Billions)
TD Bank
- Overview
  - Table: TD Bank Canadian Credit Card Portfolio ($ Billions)
- Air Canada Partnership

Retailer Credit Cards

Overview
Costco
- Overview
- Marketing Strategy
  - Table: Costco Canadian Revenue, 2019-2021 ($ US Millions)
- The New CIBC Costco Mastercard
- Features of New CIBC Costco Mastercard
The Hudson's Bay Company
- Overview
- New HBC Mastercard Partner, Neo Financial
- Neo Financial: Eager for HBC Partnership
- Some HBC Customer Skepticism About Card Switch
- Why a Selfie?
Air Canada
- Overview
- Airline Loyalty Programs
- From Humble Beginnings to Millions of Members
- Co-branding and Air Canada
- New Card Partnership with Chase
Amazon Canada
- Overview
- Interchange
- Push to Lower Interchange Fees for Smaller Businesses
- Online and In-App Card Payments Incur Interchange Fees Twice Those of In-Store
- E-commerce is Costing Canadian Businesses More Than In-Store Transactions
- Big Retailers and Card Issuers
- Walmart vs. Visa -- Battle of the Titans
- First Walmart, Then Amazon
- Amazon Introduced Visa surcharges and Threats to Relationship with Visa
- Canada Poised to Be Next Arena in Amazon-Visa Fight
- Amazon-Visa Truce Announced

Canada's Buy-Now, Pay-Later Industry

Top Canadian Financial Institutions Are Strong Players in BNPL
Alternative to Debit and Credit Cards
Focus on BYPL Providers
- Affirm: PayBright Acquisition and Beyond
  - Table: Affirm's Key Metrics, YOY, 2021 (US Dollars)
- American Express Pay It Plan It
- CIBC's Pace It
- Mastercard
- MBNA Payment Plans
- Scotia SelectPay
- RBC PayPlan
- Sezzle: Over 3,000 Canadian Merchants
- Visa Installment
- Walmart Canada