Address by Dr. Supriya Syal, Deputy Commissioner, Research, Policy and Education, Financial Consumer Agency of Canada, at the Payments Canada Summit, May 2021

May 31, 2021

Virtual event, Ottawa, Ontario

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Good afternoon, and welcome to this panel discussion.

My name is Supriya Syal, and I am the Deputy Commissioner of Research, Policy and Education at the Financial Consumer Agency of Canada. It’s my pleasure to be here with you today.

During this session, we will be discussing “Accelerated change in retail consumer behaviours and its impact on the payments industry.”

I am joined today by:

• Kristy Duncan, the Founder and CEO of Women in Payments, who was named in the Women in FinTech Powerlist of UK’s Innovate Finance and Lloyds Bank in 2017, 2018, and 2019
• Sue Lewis, who is a leading thinker in financial consumer protection, a renowned consumer advocate, and previously chaired the Financial Services Consumer Panel of the UK FCA, and
• Richard Rémillard, the President of Rémillard Consulting Group, and who, among other things, currently serves as director with the National Crowdfunding and Fintech Association of Canada

It’s quite the line-up and I hope you’re looking forward to a bright and engaging discussion as much as I am.

I will start by briefly introducing the Financial Consumer Agency of Canada and explaining some of our work in payments.

We are an agency of the federal government and our role is to protect financial consumers. We do this by regulating the market conduct of banks and other federally regulated financial entities. And by educating consumers and helping them make better financial decisions

In my role, I run this latter business line that aims to understand and help the Canadian financial consumer.

Part of this body of work is present-focused.

We target our efforts at working with our stakeholders and partners to increase financial literacy – so how can we use the tools we have available to us – research, experimentation, policy to help people acquire the skills, the confidence and behaviours to meaningfully improve their financial lives.

And part of it is future-focused.

Which is how can we contemplate what the consumer experience will be and what consumer protections and enablers will need to be put in place in response to emerging changes in the financial landscape – such as innovation in payments.

A great example of this, of course, is Open Banking. Earlier this year, we published our submission to the Canadian government’s Advisory Committee on Open Banking.

Generally speaking, we at FCAC are supportive of open banking because of the potentially significant value it can bring to consumers through greater competition and real choice. Of course, we want to make sure that consumers don’t lose the hard-won protections that have been put in place to prevent harm from coming to them, and that I’ll say is the envelope of our perspective on all innovation, including that in payments. Innovation is inherently about questioning the status quo to make things better, so it shouldn’t make it worse for some.

Now to the topic more specifically in hand, perhaps – retail payments and changing consumer behaviours.

One of our research streams looks at changes in consumer behaviours and right now, this inquiry is of course linked to changes that the pandemic has brought about. We ran a monthly survey looking at Canadians’ Use of Bank Products and Services which ran from July 2020 to April of this year.

The results, unsurprisingly, showed that more consumers have moved to contactless payments (53% said they’re using tap to pay more often; 36% said they’re using credit cards more often, 46% are using e-transfers more often, and as a corollary, 67% are using cash less often).

So overall, more people are using card-based and online payment methods, and fewer people are using cash.

These data and others, are available on FCAC’s COVID-19 surveys data dashboard.   

Another trend we’re examining is the use of buy now, pay later plans, and how and when consumers choose to use them.

Our analyses indicate that the user base is younger (53% under 44), and the largest group who uses these products is between 35 and 44 (28%).

Also, in the under 35 population about a third of consumers (32%) have made four or more buy now, pay later purchases.

Common purchases include furniture and appliances, electronics, and clothing, but people are also buying small ticket items like household essentials, groceries, movies and so on.

The majority, or about 75% of buy now, pay later purchases, were for $200 or more.

Common wisdom would indicate that the reasons for using such plans are the inability to afford the entire purchase, which is true, but an equal percentage of consumers report using buy now, pay later plans to avoid paying interest fees or to help with budgeting, and a substantive number (about 25%) just do it because it was advertised, or because they wanted to try it out.   

Now of course, as a regulator, we are also interested in how this might impact consumers and the risks include:

• overborrowing
• negative impact on credit scores
• lack of recourse through a complaints-handling procedure

All are drawbacks which are poorly understood by consumers and can have wide-reaching consequences.

For instance, one in five people (18%) said they spent more using the buy now, pay later service than they otherwise would have with a different payment method (with 8% saying they spent “much more”).

Similarly, of the people who said they had made a complaint to resolve a dispute, 100% said the process was very unclear and that they were unable to resolve their dispute.

Twenty-three percent of those who said they spent more using buy now, pay later, had their income fall since March 2020.

Which brings me to the core line of inquiry that I hope we will find some time to discuss today, and that is, how do we promote and foster, and indeed accelerate innovation, while also not taking away the protections that provide safety nets and guardrails for consumers.

Do innovation and regulation have to be at cross purposes?

I will argue that they don’t; I suspect my fellow panelists will also have something to say about it. 

Thank you.