Global payments are becoming a lot simpler for consumers, however, complexity keeps growing behind the scenes, according a report which explores this paradox and the options for providers.
The “tantalizing” vision for global payments has been that they’d be safe, simple, quick, inexpensive, and “ubiquitous,” the research report noted.
This “promise” has come closer with each technological advance. However, instant payments have ushered in the so-called Decoupled Era, which is a term coined in last year’s Global Payments Report.
In this environment, payments are becoming “disconnected from accounts, and the number of players is proliferating, fragmenting the value chain, increasing complexity, and endangering the vision.”
The report examines the evolving global payments ecosystem and highlights where players can “capitalize on new dynamics.”
The analysis is based on McKinsey’s Global Payments Map, which covers more than 25 payment products in 48 countries and “accounts for more than 90 percent of global GDP.”
Last year, the global payments industry reportedly “handled 3.4 trillion transactions, accounting for $1.8 quadrillion in value and a revenue pool of $2.4 trillion.”
It grew 7 percent annually from 2018 to 2023, but the analysis suggests revenue growth will likely slow to “5 percent a year over the next five years.”
This will result in an additional “$700 billion of revenue, for $3.1 trillion, by the end of 2028.”
That’s 35 percent of the total banking revenue pool, a share that “underlines the importance of banks investing in payment technologies to stay ahead of specialist players.”
Over the past decade, the combined market capitalization of specialist payments companies has “increased from $400 billion to $1.4 trillion.”
In addition, more than 384 unicorns with a combined “valuation of $1 trillion have emerged, a tenfold increase from 39 unicorns five years ago.”
It is now expected by the analysts that increasing system complexity and regulatory pressure will “fuel three trends that will characterize the future payments landscape.”
According to the report, these include the following: further market consolidation, increased orchestration of payments, and more regulatory action to “reduce costs and financial crime while increasing consumer protections and reliability.”
The document concludes that global payments are not yet “ubiquitously safe, simple, quick, and cheap.”
However, the goal is in sight, and the industry is “making progress on many fronts at once.”
