Punching in a security pin is rapidly becoming passé for Canadian credit card users when making small purchases. Cards equipped with technology that allows a user to pay with a simple wave or tap of a card is surging, new data shows.
But shoppers could be tapping their way to bigger monthly statements, some suggest.
Moneris Solutions Corp., the largest card payment processor in the country, says the dollar volume of “contactless” payments made across its terminals jumped 162 per cent in the three months between July and the end of September, compared to the same three-month stretch a year ago.
Purchases at drug stores, gas stations and convenience stores were the chief drivers of the spike, Moneris said.
Canada’s two biggest card providers, Visa and MasterCard, have offered cards with contactless technology for the past several years, but it now appears usage has hit a “tipping point,” according to Michelle Michalak, Visa Canada’s head of public affairs.
“Our contactless cards have been issued over the past 10 years but really have taken off at an accelerated pace in the last two or so,” Michalak said.
One big reason for that is the number of merchants, or store owners, that have terminals that can handle tap payments appears to have hit a critical mass, experts say.
Visa says contactless transactions represented 12.1 per cent of all store purchases made by cardholders in June 2014. That number was approaching nearly a quarter of purchases on Visa cards in June 2015.
At MasterCard, which has been quicker to roll out tap-enabled cards, 27 per cent of in-store purchases were contactless as of September, a spokesperson said.
Tap payments are designed for making small purchases more convenient, and are capped at $100, Visa says.
But if shoppers aren’t careful, many small purchases can add a lot more debt to a monthly credit card statement.
A 2012 study commissioned by MasterCard found that cardholders that received tap-enabled cards spent almost 30 per cent more than previously.
The study divided accounts into low-, medium- and high-spending segments based on their monthly spending habits prior to adoption.
“The lift was consistent across the three segments, regardless of their spend levels prior to adoption,” the study said.
A recent study from the Bank of Canada found credit is rapidly overtaking the use of cash in retail transactions: cash still accounted for 44 per cent of transaction volumes in 2013, but that was down fully 10 percentage points from 2009. Debit transactions also fell.
“Increased use of credit cards, particularly contactless credit cards, was a key factor in this development,” the central bank said.