To Defend Payments Businesses, Banks Must Focus on Customer Pain Points

BOSTON, MA--(Marketwired - Oct 9, 2015) -  As payments and transaction-banking businesses evolve at a dizzying pace amid a toughening regulatory climate and digital innovations, banks can prevail over rivals by using their own vast infrastructure and customer knowledge, according to a new report by The Boston Consulting Group (BCG). The report, Global Payments 2015: Listening to the Customer's Voice, is being released today.

The report, BCG's thirteenth study of the global payments business, offers a comprehensive overview of the industry. It also discusses the findings of a recent BCG survey of nearly 5,500 consumers in four countries concerning payments preferences, and takes a detailed look at the wholesale transaction-banking market. In preparing the report, BCG for the fourth consecutive year collaborated with SWIFT, the global provider of secure financial-messaging services.

In conjunction with the report, BCG is launching the second edition of its Global Payments Model Interactive, available on bcgperspectives.com, which explores how regions and segments of the payments market will shift from year-end 2014 through 2024. This feature provides interactive charts on the volume and value of noncash transactions worldwide.

"There will be both significant disruption and immense opportunity over the next decade in payments," said Stefan Dab, a coauthor of the report and the global leader of BCG's transaction-banking segment. "While banks face intensifying competition, they actually have the assets to play a critical role in how markets evolve. To continue to extract value from their payments businesses, they must take decisive action along multiple dimensions: improving the richness of their digital interfaces, broadening their range of services, raising the effectiveness of their operations, and forming partnerships in the larger payments ecosystem. Banks also need to recognize that the value of payments will increasingly be realized by deepening customer relationships, not just by direct revenue generation."

Industry Overview. According to the report, global transaction-banking revenues in 2014 were nearly $1.1 trillion, or about 27 percent of total global-banking revenues. By 2024, they are projected to reach nearly $2 trillion, with growth driven by a combination of account revenues (40 percent), transaction revenues (34 percent), and non-transaction card revenues (26 percent). Rapidly developing economies (RDEs, also commonly referred to as emerging markets), most of which are moving toward higher rates of financial inclusion and greater migration from cash to e-payments, are enjoying stronger growth in all metrics than mature markets and will continue to do so. Although retail payments accounted for a small fraction of global transaction values in 2014 (11 percent), they generated 78 percent of total payments revenues and will account for a projected 73 percent of total revenue growth through 2024. North America remains the largest payments and transaction-banking market globally, generating $238 billion in total retail-payments revenues in 2014 (28 percent of the worldwide total), with a projected CAGR of 4 percent through 2024.