From Globe and Mail Another reason to say "NO" to Royal Bank|
Canadian shoppers prefer to use plastic
Study shows that, for first time, most people
pick debit or credit cards over cash or cheques
Technology Reporter; With files from reporter Susan Bourette.
Friday, June 11, 1999
Canadian shoppers' love affair with plastic continues to flourish.
According to a new study released yesterday, 57 per cent of people prefer to use debit or credit cards to make purchases rather than cash or cheques. That represents the first time more Canadians have picked plastic over paper.
It is also welcome news for Canada's major banks, which have been encouraging customers to use debit and credit cards because these types of transactions are less expensive to process than paper.
Albert Wahbe, executive vice-president of electronic commerce with Bank of Nova Scotia, said plastic has become more popular as the number of automated banking machines (ABMs) and retailers offering payment via the Interac system increases.
A decade ago, he said, a consumer would go to the bank and withdraw $500 to spend over two weeks. When ABMs were introduced in the early 1980s, the $500 transaction was replaced by five $100 withdrawals. Today, many consumers will make several debit card purchases rather than going to an ABM.
"What it boils down to is that we have given customers more choices than ever before," he said, adding that the use of debit or credit cards at liquor stores was not possible a couple of years ago.
Kevin Beck, a manager in training at the UR2B clothing store in Toronto's Eaton Centre, said debit cards have become popular with both consumers and retailers.
"Over the last two years, you just see it keep increasing more and more and more. The t card is a lot more convenient; it's easier and there's less cash to worry about carrying around."
He said debit cards are also much safer for retailers because stores are not left with as much cash in their registers.
In 1998, the Interac Association found that 49 per cent of Canadians preferred to use plastic, compared with 50 per cent for paper and 1 per cent for other methods.
In 1998, there were 1.36 billion debit card transactions worth $58.4-billion, compared with 185 million transactions worth $9.4-billion in 1994. There are now about 276,000 merchants with Interac machines, and 22,000 ABMs. The typical Canadian uses a debit card 8.5 times a month to make purchases.
In the year ended Oct. 30, 1998, there were a billion credit card purchases worth $84.1-billion, compared with 778 million in fiscal 1994 worth $55.1-billion.
Although the study found that consumers prefer to use plastic, the use of cheques is still alive and well.
Sandy McFarlane, chairman and chief executive officer with Toronto-based Davis & Henderson Ltd., which makes more than half of the personal and small-business cheques in Canada, said: "You are seeing a shift happening [to plastic], but people are doing more transactions than ever before," he said, adding that the demise of cheques has been slowed as new players in the financial services market such as brokerage firms offer chequing accounts.
While Canadians prefer to use plastic more often, they have yet to embrace smart cards -- plastic cards with an imbedded microchip that can be programmed to carry electronic cash.
The most ambitious project, conducted by the Mondex Canada Association in Guelph, Ont., was stopped in October when three of Mondex's bank members would not contribute money to finance the project.
The setback delayed the national rollout of the Mondex card, which had been expected to take place by year's end. However, a Mondex spokesman said smart cards are far from dead, and that pilot projects are being conducted in Barrie, Ont., and Sherbrooke, Que.