New research from the Canadian Payments Association (CPA) reveals compelling evidence of the strong relationship between the use of Automated Funds Transfer (AFT) payments and the declining use of cheques in Canada. In a newly released discussion paper, CPA researchers analyze this evolving relationship and identify key opportunities for future AFT growth.
AFTs are electronic direct credit or direct debit transactions, commonly known in Canada as direct deposits or pre-authorized debits (PADs). They are cleared by the CPA’s Automated Clearing Settlement System (ACSS).
AFTs have been a key contributor to the growth of electronic payments in Canada. In 2012, nearly 758 million AFT credits worth about $1.6 trillion cleared through the ACSS, representing over 25 percent of the total value of retail payments cleared through CPA systems. AFTs have also served as an important substitute for cheques since the early 1990s, and particularly since 2002.
However, despite two decades of growth in electronic payments and the declining use of cheques, some Canadian businesses are reluctant to transition to electronic payments. Research suggests this can be attributed to factors such as unawareness of the true soft costs associated with cheque use and a need for richer remittance data than is currently available via AFT. Due mainly to small and medium-sized businesses, cheque usage in Canada still remains moderately high compared to other G7 countries, at nearly 1 billion cheques per year.
In the short-term, AFT growth and cheque decline is anticipated to continue as more entities shift from paper to electronic payments. In the longer term, AFT growth will depend on how well this payment method meets the needs of small and medium-sized businesses.
Find out more in the full discussion paper: The role of Automated Funds Transfer payments in Canada’s declining use of cheques 2015-role-aft-cheque-decline.pdf.