Cashless society: A consumer study of digital wallet usage in Canada

Does the popularity of digital wallets indicate that Canada is moving towards a cashless society? We surveyed over 1,000 smartphone users in Canada to find out.

Our own research shows that digital wallets have become hugely popular in Canada, especially since the start of the pandemic. Nearly half of smartphone users use them, another quarter are interested, and over 80% of users began doing so in the past three years.

Small to midsize enterprises (SMEs) should be aware of this trend. The growth of digital wallets is made possible by a string of technological developments and reflects changing attitudes to retail, payments, and data privacy. Even if you don’t use digital wallets in your business, knowing more about the topic will help you understand how customer expectations are changing.

In this second article on the subject, we help SMEs understand how people use their digital wallets when they shop and pay. We also take a closer look at the issues around data privacy when using digital payment methods, as well as people’s broader opinions on regulation of digital payments and the shift towards a cashless society.

You can scroll down to the bottom of this page for a full methodology.

Are digital wallets a mainstream payment method in 2023?

Digital wallet apps can be used at many retail stores, from small independent outlets to giant supermarkets. The infrastructure required is widely available to vendors, and most modern point-of-sale (POS) systems allow for contactless payment via either a bank card or a mobile device with a digital wallet app. All shoppers need to do is link this app to their credit or debit card.

People who use their digital wallets as a way to pay with their debit or credit card tend to see this as their default payment method. 87% said they have configured their main debit or credit card as a digital wallet, and the data suggests that they use this as their preferred payment method in a variety of scenarios. However,  it’s not quite the outright favourite way to pay —at least not yet.

With the exception of public transport, around one-quarter to one-third of users always use a digital wallet as their first choice of payment, with many more saying that they use it sometimes for grocery, retail, and drinking or dining out. The fact that fewer choose to use it for public transport may be because respondents to the survey don’t use public transport, or that the transport networks they use don’t yet accept contactless payment.

Digital wallets pose uncertainty about data privacy, but this has little impact on usage

Data privacy was a recurring theme throughout the survey. Four distinct user groups expressed some level of concern about this:

• People who had no interest in digital wallets said the two main reasons for this were worries about data protection (60% agreed) and worries about losing sensitive information if their phone was stolen (58% agreed).
• People who had stopped using digital wallets ranked the same concerns highly (albeit to a lesser degree).
• 41% of people who were interested in digital wallets but hadn’t used them yet said that data protection concerns had put them off.
• Loss or theft of a smartphone and the subsequent loss of sensitive information was the biggest disadvantage among digital wallet users, cited by 46%.

Those who use digital wallets to pay with their debit or credit card were also alive to the fact that their spending data was being collected. 15% said they were extremely concerned about this, and 46% were somewhat concerned. But of those who were concerned, a majority (54%) said that this didn’t affect how they use their digital wallets. 43% of them conceded that they only try to use the apps on certain occasions, and just 4% wanted to stop altogether. 

It seems that those who use digital wallets to pay are not altogether convinced about the level of protection they have through apps and how the app providers and government might act. Most (52%) said they were unsure whether the government is doing enough to regulate how information collected from digital wallets is stored and used —only 16% said it is. (That said, there are significant efforts underway to improve data protection law in Canada, with potential impacts for business on AI and security.)

Similarly, a plurality (42%) wasn’t sure whether the financial companies who offer digital payment methods are doing enough to protect digital payment information. But respondents were twice as likely to think that these companies were doing enough (32%) compared with the government.

How do Canadians feel about a cashless society?

One advantage of digital wallet apps is that they allow people to leave home with just one item in their pockets —their phone. Because the apps can store all the payment and card details they need, plus their car keys, they could be a major driver towards a supposed cashless society in the near future. Of course, this depends on how widely they are adopted and whether a sufficient infrastructure exists to support them.

Overall, people who pay using their credit/debit card via digital wallets believe that Canada is well set up for this. As we explored in part 1, the usage of digital wallets has increased substantially since 2020, and this wouldn’t have happened if they were not widely accepted by retailers. 52% somewhat agree that ‘there is a good infrastructure to use digital wallets in my country,’ while 36% strongly agree. 

However, these users don’t show an overwhelming enthusiasm to drop traditional payments just yet. While 61% said that they are willing to stop using cash and move to digital-only payments, a majority (58%) also say they always have some cash with them. This group is also split about the implementation of a society-wide cardless system. 49% would not be interested, while 51% would like to see it.

Canada isn’t cashless yet, but times are moving on

Canada may be a long way from a cashless society. Even those who have adopted digital wallets don’t see them as the only way to pay just yet. Depending on your business and how it operates, you may have little need to handle cash, but if you deal with the public, you should account for cash transactions while also encouraging digital payments.

Our survey revealed further concerns and uncertainty about the privacy and protection people get when using digital wallets. As we noted in part 1, there is an opportunity here for brands to demonstrate their credentials in this area to customers and potentially differentiate themselves from their competitors.