Global digital payments volumes are predicted to increase by an average 10.9 percent through to 2020, reaching nearly 726 billion transactions, according to the World Payments Report 2017 (WPR 2017). Released today by Capgemini, a global leader in consulting, technology and outsourcing, and BNP Paribas, a global banking player and recognized leader in transaction banking and cash management, the WPR 2017 estimates that volumes generated by emerging economies will grow by 19.6 percent, or three-times the rate of mature economies. Emerging Asia, led by China and India, is projected to grow 30.9 percent in volumes. Worldwide non-cash wholesale transactions by corporates, mid-sized enterprises and public authorities are estimated to record a CAGR of 6.5 percent from 2015 – 2020, or more than 122-billion wholesale transactions.
Global non-cash transaction volumes grew 11.2 percent to reach 433.1 billion during 2014-2015, the highest growth in a decade. Developing markets drove this growth with a 21.6 percent increase. Mature markets increased by 6.8 percent, a nominal rise of over 6 percent in 2014.
Despite increased adoption of digital payments, cash remains in the mainstream, especially for low-value transactions. This year’s WPR states that mobility, connected homes, entertainment, and media are expected to boost non-cash transactions in the future, as will alternate channels, including contactless, wearables, and augmented reality.
Increased digitization of corporate B2B payments is affecting regional trends. In Mature APAC markets, small and medium-sized businesses are using digital invoicing, virtual cards, and cloud-based finance and accounting. In Emerging Asia, charge cards are popular among corporates to simplify and secure supply-chain payments.
A New Payments Ecosystem Emerges
The WPR 2017 highlights the emergence of a new payments ecosystem driven by a number of converging factors. The dynamic regulatory landscape including the requirements of PSD2 compliance, FinTechs, changing corporate and customer expectations for value-added services, and an increase in payments-enabling technologies represent some of the forces creating change.
“Within this new and dynamic ecosystem, payments industry participants must strategically reassess their roles,” said Anirban Bose, Head of Global Banking and Capital Markets for Capgemini. “Banks must embrace this opportunity to enhance their offerings in collaboration with FinTechs and third-party developers. Breakthrough technologies and significant industry advances, such as Open APIs, instant payments, blockchain, and regulatory standardization, will encourage collaboration.”
Opportunity Arises for Corporate Treasurers
The report also looks into the value proposition – as well as the challenges – for corporate treasurers from the new ecosystem, based on findings from the interviews carried out. Corporate treasurers’ demands for better, more reliable end-to-end services are impacting the payments ecosystem. In this time of intense competition, banks can seize the opportunity to nurture business with existing corporate clients and also acquire new clientele. Treasury management is going digital as repetitive task automation allows treasurers to focus on cash forecasting and fraud prevention. In trade finance, banks and FinTechs are exploring blockchain-based smart contracts to optimize processes. In cross-border payments, banks are experimenting internally with blockchain to develop scalable digital payments platforms.
Collaboration and open systems pose security threats within corporate treasuries; however, corporations now expect their banks to help them improve their security infrastructures. In the new payments ecosystem, third-party developers interact directly with a partner banks’ customers, raising questions about data privacy, security and identifying attackers.
The report also highlights a key challenge in the new payments ecosystem: the lack of standardization caused by national regulators’ different standards and individualized interpretations. Bruno Mellado, Global Head of Payments and Receivables, BNP Paribas comments, “Multinational banks and corporations seek better industrywide standardization and harmony among regulations. As security issues are overcome, increased collaboration and partnership within the new payments ecosystem will create business value for corporates, banks, and FinTechs. The new ecosystem may diminish most, but not all, challenges faced by banks and corporates. Industry participants can prepare for uncertainties as the payments ecosystem develops by working with banks and partners with the appropriate expertise.”
Impact of KRIIs on the Regulatory Landscape
Key regulatory and industry initiatives (KRIIs) aimed at competition and risk reduction are called out within the report as complicating the regulatory landscape, by stimulating service provider competition and disrupting traditionally inert segments of the payments value chain. However, KRIIs have the potential to improve standardization and transparency, which are expected to bring substantive and long-term innovation to customers. KRIIs introduced since the publication of World Payments Report 2016 focus on digital currency, reduction of cash, FinTechs, and APIs.
The report also covers the challenges faced by stakeholders while implementing PSD2 regulation in Europe. When the revised PSD2 is rolled out in January 2018, Europe will take an important step toward becoming a fully interoperable digital market. Far-reaching effects across banks, payment service providers (PSPs), FinTechs, and corporates are expected. However, the WPR 2017 highlights that a lack of regulative coordination and integrated data management among EU banks may create conflicting objectives and competing agendas while diminishing expected standardization and transparency. KRIIs around instant payments, cash reduction, and cybersecurity could act as catalysts for payment services providers to create solutions that enhance customer satisfaction.
World Payments Report 2017 Methodology:
This year’s World Payments Report offers insights on the payments markets in the following regions grouped by geographic, economic, and non-cash payment market maturity criteria: North America: Canada and the United States, Europe, Mature Asia-Pacific, Emerging Asia, Latin America and CEMEA. Primary research for WPR 2017 included an online survey that was distributed to industry participants across banks, FinTechs, non-bank FSIs, and corporates in June 2017. Executive interviews were also conducted. Findings from the survey and interviews have been incorporated into analysis throughout the report.