The Canadian payment processing industry has grown exponentially since the turn of the millennium. Currently, credit and debit card transactions dominate the payments market, accounting for $462 billion and $226 billion, respectively, in 2016. But digital payments are starting to push into a bigger market space; Statista shows digital payments accounting for $48.981 billion in 2018, and estimated to reach over $68 billion by 2022. This segment, spurred by mobile technology, figures to continue pushing for greater market share over time, and will drive many of the immediate developments in the future of Canadian payment processing.
Mobile Expansion Will Continue
As of 2016, 62.37% of Canadians used smartphones. As this number continues to rise, the ways in which consumers in Canada can use mobile and digital payments will grow as well. Digital payments already account for tens of billions of dollars in the Canadian payment processing industry. Developers are building new apps every day to allow retailers to accept payments, and to allow consumers to make them.
Technology will continue to drive this in two directions. One is the growth of ways that consumers can make payments. Just as important is the growth and development of the processing technology itself. Canadians can pay for goods and services from virtually anywhere. The processing technology, in turn, is moving toward every mobile device serving as a payment processing hub.
Consolidation and Partnerships
The flip side of this expansion will become consolidation. Every industry that goes through rapid, far-flung growth soon contracts through partnerships and mergers. Some of this is simple opportunism: small players find opportunities to sell at high profits. But more comes through finding synergies among different companies that just fit together.
A key combination for this latter side of consolidation will come through fintech and the banking industry. Large financial institutions have traditionally been slow to adopt major changes. In today's payment processing environment, though, these changes are coming faster.
To maintain their substantial place in the financial world, banks will need to not only work more closely with Canadian payment processing technologies, but to pull them in to what they do. Mergers and buyouts involving major financial institutions and the companies developing payment processing solutions will surge in the coming years.
Security Innovation Is Essential
Finally, against the growth of Canadian payment processing technology and the organizations that rely on it, one must keep in mind security concerns. Every non-cash payment transaction involves the transmittal of personal financial and other private information.
Canada's financial laws and regulations evolve constantly, and its privacy laws continue to address new concerns about outside intrusion on personal data. These legal and regulatory frameworks intersect in the world of electronic payments. Maintaining legal and regulatory compliance, then, represents an ongoing and evolving challenge for Canadian payment processing.
Perhaps the biggest part of the challenge, though, is that laws and regulations always lag behind the threats themselves. Cyber thieves and hackers constantly develop new ways to get around protections in place. The legislative and regulatory process seeks to keep up, but it will never entirely do so.
The private market will therefore rely on its own development teams and white hat hackers to create and implement software solutions to prevent and detect theft and intrusion. Security experts will play an ever-expanding role in building the market.
Much of the future of this, as any industry, will only become known as it unfolds. But Canadian payment processing is approaching a critical inflection point where growth and maturation come together. The market is maturing in ways that should ultimately benefit Canadian companies and consumers alike.