Consumers in Canada shun cash and bank branches on virus fears
Canadian consumers are changing their banking habits to reduce physical contact with others because of COVID-19, according to a new study by McKinsey & Co.
The survey, which polled about 1,000 people in Canada, found that 26% of respondents have increased their use of contactless payments and 42% have decreased their use of cash.
In the U.S., only 22% reduced their use of cash, McKinsey found. The survey was taken in June and asked consumers about changes they made in the previous month.
"Canadians, more than people from other countries, are looking to reinvent how they will pay," Miklos Dietz, a senior partner at McKinsey, said in an interview. Examples of contactless payment include paying bills online, ordering pizza via delivery apps or tapping a debit card on a payment machine at the supermarket instead of using cash.
"Financial institutions need to put payment strategy quite high on their strategic agenda because the shaping of the future of the Canadian economy will be heavily influenced by what's happening with payments in the next year or so," Dietz said.
This digital transition may be here to stay. According to McKinsey, 16% of respondents say they will use online banking services more even after the COVID-19 crisis is over, and 23% say they will visit branches less often for transactions.
The latter number is higher than in France, Germany and the U.S., where between 13% and 17% said they'll use branches less often after the pandemic.
The survey also showed that people wanted help from banks through the economic uncertainty. Half of Canadians want financial institutions to waive late fees on credit card and loan payments and 42% want them to reduce minimum credit card payments.
As such, less mainstream banking options may appear more attractive for customers, Dietz said. "I would expect new ideas coming from all financial institutions," he said. "I think this is an unusually good opportunity for smaller financial players, credit unions, to be ahead of the curve."