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March 27, 2023

Post-COVID, Canadian Merchants Stay Committed to Cash

New research from Bank of Canada Adobe PDF file formatOff-site link reveals what merchants in North America were doing vis-à-vis cash and card acceptance in the post-COVID environment of 2021–22. The payments market in Canada differs from the United States, of course, with far fewer financial institutions and different pricing for payment cards. Still, we can learn from this study of small and medium-sized merchants, defined as independently owned and operated merchants with brick-and-mortar operations and fewer than 50 employees.

The telephone survey of about 500 retail, food, and services businesses found that cash is accepted by almost every small and medium-sized business at the point of sale. In addition, card acceptance has increased. Before COVID, two-thirds of the merchants accepted debit cards; after, almost 90 percent. The shares are the same for credit cards.

The smallest businesses, with zero to five employees, changed most during the COVID pandemic. In 2018, 31 percent of these businesses accepted only cash. This share declined sharply to 10 percent in 2021–22. I think this notable change could be due not only to the physical distancing constraints imposed by the COVID pandemic, but also to fintech innovations making it easier and less expensive for the smallest businesses to accept digital payments. That is, the constraints coupled with timely innovations to create an opportunity for growth.

The survey shows increasingly widespread adoption of multiple digital payments methods by the small and medium-sized merchants. In addition to debit and credit cards, 60 percent accept electronic transfers through an account-to-account transfer system (Interac e-TransferOff-site link) and 43 percent take mobile payments.

Prospectively, the survey of merchants indicates cash is not going away anytime soon. Ninety-two percent say they expect to continue accepting cash at the in-person point of sale. Just 3 percent said they are already cashless and plan to remain so for the near future.

For more on the effects of COVID-19 on payment behaviors in the United States, read my Atlanta Fed paper with Joanna Stavins and Ellen Merry, "Has COVID Changed Consumer Payment Behavior? Adobe PDF file format"