Canadian small businesses face continued struggles from pandemic headwinds

Digital innovation and payment fraud concerns create shifts in small business behaviours and attitudes

More than two years after the World Health Organization declared the outbreak of the COVID-19 global pandemic, new research by Payments Canada reveals that Canadian small businesses continue to navigate through financial, operational and payment-related challenges. The new study, the Payments Behaviour Tracker - Business survey (Wave 1, 2022), explores the trends, sentiment and outlook for Canadian small businesses (total revenue of less than $10 million) that make up 98 per cent of all businesses in Canada. The study incorporates insights from interviews conducted from March 28 to April 8, 2022, through Leger’s online panel with 501 businesses.

Key study findings

Small businesses continue to grapple with financial and operational challenges.
The study indicates that there are a number of challenges and adverse impacts that Canadian small businesses continue to navigate at the two-year anniversary of the global pandemic, including:

• Negative impact on sales (37 per cent)
• Managing margins and profits (33 per cent)
• Overall business spends (33 per cent)
• Managing cash flow (27 per cent)
• Impact of regulatory/ legislation change (26 per cent)
• Currency fluctuations in foreign exchange (24 per cent)
• Employee recruitment (23 per cent)

Canadian small businesses report improvements in certain financial and operations areas.
A number of small businesses report improvements in certain financial and operational areas since the onset of the pandemic:

• Sales (20 per cent)
• Access to funding (14 per cent)
• Management of cash flow (12 per cent)
• Management of margin and profit (10 per cent)
• Overall business spends (10 per cent)

“Many Canadian small businesses continue to face financial and operational challenges as we emerge from the pandemic. The shift away from paper payments to electronic payments is ongoing. Unfortunately, many small businesses have experienced an increase in payment fraud attempts, but indicate that they feel better prepared to identify fraudulent activity,” said Tracey Black, President and CEO of Payments Canada. “The results of the study confirm that many small businesses have demonstrated incredible resilience and have continued to innovate and adapt to changing market dynamics.”

Businesses continue the shift to electronic payments.
The pandemic has significantly accelerated the adoption of digital payment methods as evidenced by a decrease in the use of:

• Cash (33 per cent)
• Cheques from deposit accounts (25 per cent)

And an increase in the use of:

• Interac e-Transfer (33 per cent)
• Virtual currencies (25 per cent)
• Electronic funds transfers (23 per cent)
• Wire transfers (21 per cent)
• Prepaid cards (20 per cent)

Businesses report increased payment fraud attempts since the onset of the pandemic – but feel better prepared.
When it comes to payment-related fraud and cybercriminal activity, businesses report experiencing significant increases in suspicious activity, as well as in their level of preparedness. Many businesses report experiencing an increase in fraudulent activity since the onset of the pandemic directed through different channels, including:

• Text messages via a smartphone/ mobile device (39 per cent)
• Email (38 per cent)
• Social media platforms (34 per cent)
• Online retail merchant sites; e-commerce sites or apps (25 per cent)

Despite the increase in fraudulent activity directed at businesses, 51 per cent of businesses say that they are more aware of how to recognize payment fraud scams compared to prior to the pandemic, and 47 per cent say they are more aware of how to protect themselves from payment fraud scams.

Businesses report being wary of — and having less comfort around — certain activities since the COVID-19 crisis started, including:

• Opening unsolicited emails or text/SMS messages; for example, sales and promotional offers, advertisements, etc. (36 per cent)
• Sharing their business identify and payor information online/with e-commerce sites/apps (25 per cent)
• Downloading and using social media apps, such as Facebook, Instagram, and LinkedIn for business purposes (22 per cent)
• Downloading and using lifestyle social media apps such as Uber and Trip Advisor for business purposes (17 per cent)

About the study

The payments trends during COVID-19 study was compiled by Payments Canada to help build an understanding of how the Canadian payments landscape has shifted in light of the COVID-19 pandemic. In total, 501 Canadian small businesses were interviewed from March 28 to April 8, 2022. The findings in this report are sourced from the Leger/Payments Canada, 2022 Business Payments Behaviour Tracker Survey.