Younger Canadians are adopting alternative forms of payment and paying directly from their bank account less frequently, according to a study commissioned by the Canadian Prepaid Providers Organization (CPPO).
The annual How Canadians Pay Today survey found that 59 per cent of respondents have used alternative forms of payment, citing that the affordability and convenience of these alternative forms of payment are the biggest draw.
“Canada has both a highly-banked population and many consumers with a strong willingness to try new financial services products,” ran a statement released by CPPO co-founder and chairman David Eason.
Prepaid cards were found to have the highest satisfaction growth among all other payment options, totaling a 95 per cent satisfaction rate – a 22 per cent increase from 2015.
“This year’s survey revealed that younger Canadians in particular are adopting emerging payment tools that are more convenient and secure,” said Eason. “Prepaid cards topped the list as the fastest-growing payment product and boasted the highest level of satisfaction among payments tools.”
According to the CPPO survey, a prepaid card user is most likely a millennial consumer who is university educated, makes less than $40,000 a year and is an adopter of other emerging payment and financial planning-related products.
“Younger consumers are early adopters and are comfortable with using prepaid forms of payment as they do their research and overall due diligence during the pre-purchase stage,” said Yvonne Yip, professor at Humber College’s School of Business.
“They read reviews, shipping costs, check on warranty/guarantee info, return policies, compare products and websites and conduct their information gathering as a buying habit.”
Aside from prepaid credit cards, digital and mobile systems continue to come into play to help Canadians become more financially responsible.
Mogo, a Vancouver-based company, is one of those companies that provides various mobile applications to help Canadians keep track of their spending and navigate any debt.
Chantel Chapman, financial fitness coach, mortgage and credit score expert at Mogo, has noticed that convenient forms of payment has helped millennials with overspending. This falls in line with the CPPO study which found 44 per cent of respondents struggled to stick to a budget and 40 per cent declared they carry regular credit card debt.
“One of the biggest financial challenges consumers face is overspending. Credit cards are designed to incentivize spending and since they’re revolving credit they tend to keep people in debt,” Chapman said.
“The millennial mindset is forward-thinking, highly connected, adaptable, and authentic. We aim to speak to our customers in a way that traditional banks can’t, and give financial education in a way they can relate to.”
Mogo currently has over 350,000 members with a focus on the millennial demographic.
The How Canadians Pay Today survey was conducted by Leger in November 2016 with 1,006 Canadian consumers.