Banks' Payments Businesses Are Facing New and Tall Challenges

BOSTON, MA--(Marketwired - Sep 17, 2014) - Although the next ten years should bring substantial growth in the payments and transaction-banking businesses, banks will grapple with a host of forces that will require them to sharpen their capabilities, according to a new report by The Boston Consulting Group (BCG). The report, Global Payments 2014: Capturing the Next Level of Value, is being released today.

The report, BCG's twelfth study of the global payments business, provides a comprehensive overview of the industry. It takes a regional look at retail (consumer) payments -- exploring key trends in Europe, North America, and rapidly developing economies (RDEs) -- before closing with a global examination of the wholesale transaction-banking business. In preparing the report, BCG for the third consecutive year collaborated with SWIFT, the global provider of secure financial-messaging services.

In conjunction with the report, BCG is launching its first Global Payments Model Interactive, to be found on www.bcgperspectives.com, which explores how regions and segments of the payments market will shift from 2013 through 2023. The interactive provides extensive detail on the volume and value of noncash transactions worldwide.

"Never in the history of the payments industry has there been a time of such disruption and opportunity across regions," said Stefan Dab, a coauthor of the report and the global leader of BCG's transaction-banking segment. "Payments players, depending upon their strategic decisions over the next ten years, will have much to lose or gain."

Global Overview. In 2013, payments businesses generated $425 billion in transaction revenues, $336 billion in account-related revenues, and $248 billion in net interest income and fees related to credit cards, according to the report. The total represented roughly one-quarter of all banking revenues globally. Banks handled $410 trillion in noncash transactions in 2013, more than five times the amount of global GDP. The value of noncash transactions will reach an estimated $780 trillion by 2023, a compound annual growth rate (CAGR) of 7 percent. Payments revenues will reach an estimated $2.1 trillion, a CAGR of 8 percent. The report says that in order to succeed, banks must broadly take three actions: approach payments as a platform, not simply as a product; identify the key initiatives that warrant investment; and pursue multiple paths in order to gain both broader experience and new customer insight.