Replacing Cheques with Electronic Payments

In order for Canada to live up to its reputation as a banking and payments leader, it must do more to reduce its reliance on the antiquated cheque. Open-loop prepaid products solve many of the problems cheques cause businesses, and offer consumers a familiar and comfortable step into the fast-growing world of electronic payments.

In 1990, 2.3 billion cheques were processed, with little competition for a better means of money transfer for consumers, businesses and governments. Fast forward 25 years and digital payment solutions have flooded the Canadian payments system. Cheque usage fell by nearly 30 percent between 2008 and 2014, with less than one billion cheques written in 2014. But that is still a billion cheques for a country of 34 million people.

So what is driving cheque usage in Canada?

GOVERNMENT

The Canadian government issues millions of cheques every year in pension and social payments, but direct deposit is not mandatory, so cheques are the default solution.

While 94 percent of Canadians have a bank account and the ability to receive an electronic payment, many don’t utilize online banking or other digital banking services. And the Canadian government has not mandated electronic payments for social payments like the U.S. Federal government has done. According to Brigitte Fortin, assistant deputy minister for accounting, banking and compensation at Public Works and Government Services Canada, direct deposit is not mandatory and those not enrolled will continue to receive their payments by cheque.


Prepaid Cards Are Best For Government Programs, And Here’s Why

However, prepaid cards are becoming more and more popular among government agencies because of the many benefits they provide. In addition to reducing processing and administration costs, they provide a safe and simple distribution mechanism, especially for recurring payments, they allow instant access to funds, and they do not require a bank account. This makes them ideal for a wide variety of government programs, such as benefits payments, tax refunds, education funding, emergency and disaster relief assistance, etc.


Government Prepaid Programs on The Rise

BUSINESSES

Businesses have also been slow to change their systems to adopt an electronic payment process for suppliers and contractors.

According to “ePayments Rising: The 2014 Market Report,” conducted by Ardent Partners, 71 percent of B2B companies are now fully capable of paying their suppliers electronically. Despite this potential, a recent survey by the Association of Finance Professionals found that only 50 percent of companies are taking advantage of this technology. Many small suppliers have not even invested in the acceptance of electronic payments, even if a business is ready to pay electronically.


Different Ways Prepaid Cards Can Reduce Business Expenses

THE GENERAL PUBLIC

Canadian consumers and businesses are very comfortable and familiar with cheques, so seem reluctant to move to new technologies.

So what is the solution? Open-loop prepaid products.

Because consumers are used to using both debit and credit cards, prepaid cards provide them with a familiar solution that also provides many additional benefits:

– Prepaid cards offer a less expensive and more secure option for issuing payments.

– Funds can be electronically transferred and distributed within seconds to the intended recipients without the hassle and delay of mailing cheques.

– They can replace a direct deposit or wire transfer, giving the end user quicker access and more flexibility to use the funds.

– The funds are immediately available to the consumer to make purchases or withdraw cash at an ATM.

– Businesses can use the card to pay wages and commissions, reimburse expenses immediately, pay contractors and more, using a single tool, in a faster, more cost-effective and controlled manner.

– Open-loop prepaid cards can also replace traditional company credit cards, direct deposit transactions and petty cash in a form that is easier for the end user to use at the point of sale.

– The federal and provincial governments also save time and money and reduce fraud by issuing payments on open-loop prepaid cards vs. cheques.

– A card offers an easier transition to electronic payments than an automated clearing house (ACH) deposit.


Prepaid Cards Are The Future For Millennials

The previous information has been provided by the Canadian Prepaid Providers Organization (CPPO, a nonprofit organization and the collective voice of the open-loop prepaid payments industry in Canada. For the full report, click here.

Have questions or looking to learn more about prepaid cards? Feel free to contact us by visiting our contact page. DCR offers you years of experience and expertise in prepaid card program—from the launching stage all the way through fulfillment.