Is your cheque in the mail? Hopefully not for much longer

May 12, 2020

This COVID-19 pandemic has highlighted the value of everything digital. We can fill endless days by calling up our favourite shows on demand and social distancing has been made easier as we replace ‘being there’ with digital interactions. From a payments perspective, use of cash has declined significantly, contactless payments have increased, as has use of e-Transfer. Digital online purchases bring almost anything we need to our doors with a click.

In March and April, the Prime Minister announced a new set of economic measures to support Canadians and Canadian businesses impacted by COVID-19, including the new Canada Emergency Response Benefit (CERB), the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Student Benefit (CESB). Over seven million Canadians have registered for CERB, and it is estimated that CERB alone will result in approximately 33 million additional government payments over the four months of the initiative.

To support the fast, safe and convenient distribution of these benefit payments, Canadian financial institutions collaborated with the Government of Canada to quickly implement and offer online enrollment for CRA Direct Deposit. What used to be a complex registration process for direct deposit of cheques issued by CRA, requiring an interaction with Service Canada, is now a one stop experience easily accessed through online banking. Direct deposit is not new; it has been around for more than 25 years. The value proposition has not changed - direct deposit is a faster, safer and more convenient payment option than cheque.

For COVID-19 benefit payments, direct deposit means access to the first payment in about three days rather than up to ten days. Direct deposit payments are not subject to any hold: 100% of funds are available immediately upon deposit. That’s fast. Direct deposit payments cannot be damaged, lost, stolen or delivered to the wrong address. That’s safe. Direct deposit payments are predictable and available. There is no need to go to an ATM or branch to deposit the payment. That’s convenient.

Canadians are comfortable with technology. Over 80% of Canadians own a smartphone (that number increases to 91% if children under 10 are excluded). According to the World Bank, 99% of adult Canadians have an account with a financial institution, including 98% of adults in low income households. Over 90% of Canadians believe that banking has become a lot more convenient because of new technologies, and 76% of Canadians do most of their banking digitally, using online and mobile banking.1 Canadians prefer debit and credit for retail purchases and we are increasingly replacing cash and cheques with faster, safer, more convenient digital payment options.2,3,4,5

Every Canadian with a bank account can have immediate access to a government payment, but at time of writing, only 82% of CERB payments are being delivered via direct deposit. The government has already issued almost 1.4 million cheques. Assuming four CERB payments each, those Canadians who have not signed up for CRA Direct Deposit will generate over 5.5 million cheques. They will wait a week or longer to receive each cheque in the mail than if they had registered for direct deposit. They then have to deposit that cheque and may wait up to a further five additional days after deposit for access to the funds, depending on whether or not their financial institution applies a hold to the payment.

Last year, the Government of Canada issued approximately 328 million federal payments. These payments include Income Tax refunds, GST/HST credits, Canada Child Benefit payments, Canada Pension Plan payments and Old Age Security Pension payments. Although the number of government payments paid through direct deposit has increased following focused awareness campaigns, 30 million government payments were still made using cheques in 2019. The conversion of these cheque payments to direct deposit represents a significant opportunity to accelerate access to funds for millions of Canadians.

Distribution of Government Payments

COVID-19 brought payment stakeholders together to deliver CRA Direct Deposit, a registration process that is simple and convenient. Registration for CRA Direct Deposit is now offered by many financial institutions in Canada, and the number is growing. This capability is game-changing. Delivery of COVID-19 benefits provides an opportunity to increase awareness of, and remind Canadians about the benefits of direct deposit. We should set aggressive direct deposit targets for CERB, CEWS and CESB payments.

The opportunity to leverage CRA Direct Deposit to facilitate the conversion of government cheque payments across all programs to faster, safer, more convenient direct deposit payments is significant. Converting 30 million cheque payments won’t happen instantly, and there will be challenges. The launch of CRA Direct Deposit has created momentum that will continue to build over the coming weeks as education efforts continue and awareness grows.

Let’s continue to collaborate and define the activities required to significantly reduce the number of government cheques that arrive in the mail. Working together, as an industry, we can take important steps to improve a payment experience and make a difference for millions of Canadians.

Tracey Black
President & CEO
Payments Canada