The Bankwatch

Tracking the consumer evolution of financial services

Posts Tagged ‘BofC

The Canadian Economy Beyond the Recession | Bank of Canada


In this talk at Kingston last Tuesday, Tim Lane, Deputy Governor Bank of Canada lays out a quite lucid view [ 9 pages] of the opportunities and challenges facing Canada in recovery.

Highlights:

  • labour productivity and output is the fundamental challenge that existed before and will continue post recession
  • the size of the working population is to decrease significantly for demographic reasons, and neither immigration nor baby boomers remaining longer in the workforce will significantly alter that prediction
  • the financial services industry is critical to Canada at 20% of the economy
  • Canadian producivity has been dropping because of insifficient investment in technology and lack of innovation. Productivity is further hampered by por re-allocation of capital and labour across industries and this is exacerbated by the recession. Think auto employees in Oshawa having to move to mining in the prairies.
  • The financial services sector productivity is described as particularly worrisome:

How productive is the Canadian financial services sector? Data from Statistics Canada point to a possibly worrisome trend. Productivity growth in this sector has declined from an average of 2.8 per cent per year in the 1990s to just over one-half per cent in this decade.

  • Lane goes on to effectivley dismiss that StatsCan assessment with based on a BofC 2006 survey. I located the referenced BoC paper, and will review that later. It is also attached below. I note it is 3 years old, and thats an odd comparison to a 2009 StatsCan survey.

That said, if we compare Canada with the United States, our own research suggests that generally, the productivity of Canadian banks compares favourably with the productivity of U.S. banks.

Relevance to Bankwatch:
All in all the main concerns are the labour market, overall productivity, the financial services sector, and potential for inflation; he counters the latter with the Banks capability for Quantitative Easing which Canada has largely not employed yet.

recovery canada aug 2009 tim lane kingston r090828e.pdf
canadian bank productivity 2006 research_1206.pdf

Written by Colin Henderson

August 29, 2009 at 16:54

Posted in economy

Tagged with , ,

Report: “The Role of Convenience and Risk in Consumers’ Means of Payment” | Bank of Canada


This is an unusual but insightful new working paper released today, on what the Bank of Canada refer to, in a somewhat quirky fashion, as “means of payment”. The survey and analysis compares use of cash, debit and credit. What is insightful, is that after establishing the consumer view on the three payment methods it tries to get at why people feel this way. When I asked Dave Birch the other day – what is the right strategy of banks and payments providers to increase their volumes? …. his answer was simple – increase share by taking it from cash. Even in Canada, cash is far and away the largest payment method. Anyhow, here is some analysis of the report, which can be downloaded at the foot of this post or at BofC site. [pdf 27 pages]

The Role of Convenience and Risk in Consumers’ Means of Payment | Bank of Canada

The survey results indicate that Canadians perceive debit cards to be the most convenient payment method: 70 per cent of respondents state that debit cards are very convenient, compared to 62 per cent for cash and 59 per cent for credit cards. Credit cards are seen as the most risky MOP: 36 per cent of respondents perceive credit cards to have high risk, compared to 21 per cent for cash and 19 per cent for debit cards.

The survey also suggests that cash is the most frequently used MOP: 73 per cent use cash at least once a week, compared to 64 per cent for debit cards and 36 per cent for credit cards. While all respondents use cash, 18 per cent of respondents say they never use debit cards and 24 per cent
say they never use credit cards.

There are several conclusions embedded in their summary, although its easy to imply a ‘but …. ‘ after each:

  1. cash is most used payment method
  2. debit is most trusted
  3. debit is most convenient
  4. credit cards are most risky

Beyond the summary are the demographic, educational and income there are impacts on the conclusions. Incidentally the survey was conducted over a reasonable spectrum of income and demographic Canadians. I won’t post the tables here because they are hard to follow. For the mathematicians, I suggest you download the report.

According to the ordered probit analysis shown in Table 2, consumers with higher education and income perceive significantly higher levels of convenience for debit and credit cards. Older consumers tend to find debit cards less convenient and credit cards more convenient. Men perceive cash to be more convenient than do women, and perceive debit and credit cards to be less convenient. As confirmed by a joint test of significance, there are no significant differences across demographic groups when it comes to the convenience of cash, aside from gender.

Relevance to Bankwatch:
While noting that more detailed and granular work is required, the study concludes that perceived risk is a strong driver of consumer decisions in payment methods choice. While there are variances by income and age, the importance of risk and convenience remains. There are embedded risk issues that are common to all demographic types. Finally the use of cash remains high largely because of convenience.

There are two aspects for payments to address and encroach on cash usage – convenience and risk. What I take away from this paper is that both must be addressed to be successful.

the role of convenience and risk in consumers means of payments dp09-8.pdf

Written by Colin Henderson

July 17, 2009 at 10:02

Posted in Payments

Tagged with ,

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