The World Payments Report 2011 shows key regulatory and industry initiatives are driving significant change across the global payments landscape.
Globally, cards remain the preferred non-cash payment instrument, with global transaction volumes up almost 10% and a market share of more than 40% in most markets. However, mobile payments are growing even faster than predicted in the last report reflecting strong user adoption.
Mobile payments will represent 15% of all cards transactions by 2013 and will overcome cards volumes within 10 years if growth continues at the same rate. The report found the use of e-payments and m-payments is expanding, accounting for an estimated 22.5 billion transactions worldwide in 2010. E-payments are expected to grow globally from 17.9 to 30.3 billion transactions between 2010 and 2013, according to the report, and m-payments from 4.6 to 15.3 billion transactions over the same period. At present, the proportion of these transactions handled outside bank payments systems remains relatively small but is growing rapidly. The use of checks continues to lessen, accounting for just 16% of all non-cash global transactions in 2009, down from 22% in 2005, and remains in demand in key markets.
Payments volumes showed resilience during the global financial crisis with volumes growing in all regions, says Scott Barton, CEO at Global Transaction Services at RBS. Banks face challenges from the rapidly changing payments landscape including the need to respond to new regulatory initiatives, and we can expect to see changes to business strategies and models as a result. However, these changes will also present new opportunities.
Through analysis of a wide range of global and regional regulatory and industry initiatives, ranging from Basel III to the Digital Agenda for Europe, from the Dodd-Frank Act to the work of the National Payments Corporation of India, the report identifies five key industry transformation trends: systemic-risk reduction and control; standardization initiatives aimed at improving efficiency, streamlining processes and reducing costs continue; a drive for higher levels of transparency; convergence; and innovation. Together these are reshaping, or soon will, aspects of the payments market and the positioning of the players who operate within it.
Regulatory pressure has increased since the economic crisis and, together with the drive toward standardization and commoditization, is fuelling a fundamental transformation in the payments landscape, says Jean Lassignardie, global head of Sales and Marketing at Capgemini Financial Services. Banks and financial institutions faced with this combination of challenges may wish to look at the examples of the energy and telecoms industries which have responded to similar external pressures by enhancing the level of specialization among key players to differentiate their propositions.
As the trend toward further standardization in the payments market continues, it is driving increased commoditization of many aspects of the value chain. Banks and other Payment Services Providers (PSPs) face a heightened challenge to distinguish their propositions and may increasingly need to specialize to demonstrate their ongoing value to their customers. Innovation in this area remains vital for banks/PSPs, allowing them to differentiate their propositions and prove their value.
In the mid to long term, the traditional fully-integrated payments model (from supply to delivery) may no longer be optimal for most PSPs. We could see the emergence of two specialist roles: Wholesale Payments Provider (WPP) and Retail Payment Services Provider (RPSP), with very few players in the market able to support the investments needed to play both roles. Evolving into a WPP, RPSP or both requires important strategic decisions to be made, and will drive banks to understand the roles they wish to play in such a future and prepare for this potentially radical shift.
The evolution of the payments sector is accelerating, says Patrick Desmars, secretary general at Efma. As banks and PSPs consider this reality, they will need to find ways to thrive in the payments market in the nearer term while positioning themselves to mitigate the risks and capitalize on the opportunities created by the industry’s transformation in the longer term.
(CM)