The evolution of how we pay for things

You’re thumbing your way through your social media feed when you see an outfit that jumps off the screen. You select your size, click buy and just like that, your new threads are on the way. Easy-peasy.

This seamless experience is made possible by embedded finance, and it’s just one of the ways that technology is changing how people buy things. These days, you can buy a coffee, split a restaurant tab with your friends, or send money to your relatives on the other side of the world—all with just a few clicks on a cell phone.

Financial technology—or fintech for short—can have many benefits. It can make financial services cheaper, more convenient and easier to access. An app or a website is available 24 hours a day, 7 days a week. So, you can use financial services when you need them. And without the need to maintain a storefront, many fintech firms have lower operating costs than traditional financial institutions. So, they can choose to charge lower fees for their services.

Thousands of fintech companies already provide financial services in Canada, and there's still room to grow. In many other countries, fintech is even more widely used.

New technologies, new risks

Financial innovation is nothing new. People have been finding new ways to pay for things for centuries. Paper money was first used about a thousand years ago, and cheques have been around for centuries. Credit cards came onto the scene in the early 1950s, and the first contactless payment system launched in Seoul, South Korea in 1995.

Each of these innovations has made making purchases easier, encouraging economic activity. When transactions can happen more quickly and more easily, businesses can make more sales, and more money circulates through the economy. But the rise of fintech has also introduced new risks. Fintech apps and websites that provide financial services often rely on multiple software providers to give you a more personalized experience. With more players involved in every transaction, there is a higher risk of data breaches and fraud. And so far, most fintech companies have not been as strictly regulated in Canada as banks or credit unions.

But for payment service providers, Canada has implemented a federal law that requires them to register with the Bank of Canada. Our job is to supervise these payment service providers on behalf of all Canadians, so you can be confident in the payment systems you use.

Not cashing out—bank notes are still an essential part of the economy

Despite the rapid rise of fintech, cash is not going anywhere. Every single day, millions of payments are made using bank notes in Canada. And that will continue because cash still has many advantages over other forms of payment.

Cash is the most private way to make a transaction and does not require any information to be exchanged. It is accepted by most stores, and it can be used by anyone—no smartphone or credit card required. About one million people in Canada don’t have a bank account, and for them, cash purchases are essential.

The way Canadians pay for things is changing, and the Bank is playing an important role in ensuring the safety and security of Canada’s bank notes and payment systems. So, whether you’re withdrawing some cash from the ATM or enjoying the benefits of new payment technologies, you can pay with confidence.