Capgemini has published the World Payment Report 2020 highlighting that payment firms are being pushed rapidly into transformation. Also, even as they handle larger transaction volumes, the COVID-19 pandemic amplified the competition and risk factors.
Payment volumes hit new heights before the pandemic began, which are expected to continue, albeit at a rate that represents both the increased dependence on non-cash transactions and the impact of a dampened global economy. For global non-cash transactions for 2019 to 2023, the report forecasts that a compound annual growth rate (CAGR) of 12 percent is expected.
For global non-cash transactions, the highest growth ever recorded in the past decade surged nearly 14 percent from 2018 to 2019 that translated to 708.5 billion transactions. In 2019, at 243.6 billion transactions, Asia Pacific became the non-cash transactions volume leader; surpassed Europe and North America.
The rise was driven by increased use of smartphones, booming e-commerce, digital wallet adoption, and advances in mobile/QR-code payments, led by China, India, and other SE Asian markets (31.1 percent growth).
Increased Competition Forces Providers to Evolve
As the preference for digital payments increases, customers move away from cash. New players are increasingly becoming more popular. The report shows that 30 percent of customers are using BigTech for payment services. Meanwhile, 50 percent are already using some payments from a challenger bank.
Moreover, as of April 2020, more than 38 percent of customers said that during the lockdown they discovered a new payment provider. According to 68 percent of customer survey respondents, internet banking and direct account transfers were, and still are, the preferred form of payment during the global health crisis. Contactless cards came in second, 64 percent of whom said they also used them. The preferred option of 48 percent of respondents was digital wallets (including QR-based payments).
As customers seek speed, convenience, and a better customer experience, alternative payments will continue to expand the room for non-cash payments. It is anticipated that consumers of digital wallets will leap from 2.3 billion in 2019 to 4 billion by 2024. Between 2017 and 2022, invisible payments or automated payment systems such as those found in Amazon Go stores and Uber, are on track to hit a 51 percent CAGR.
Technology and collaboration can help payments firms
As the market continues to be disrupted and more payment options become available, payment firms through industry, regulation, and operations must cope with increased risk.
Payment executives state that companies are vulnerable to hazards such as cybersecurity (42 percent), regulatory (37 percent), operational (35 percent), and market risks (30 percent).
As criminals, leverage exposes opened by the COVID-19 lockdown that raises the possibility of cyberattacks, money laundering, and terrorist funding, 87 percent of executives believe they face a high probability of cyber vulnerabilities. To help alleviate the exposure to new threats, payment companies aggressively turn to technology.
The pandemic has forced them to look to digital as the solution to resolve counterparty risk, collaboration solutions, payment automation, and cybersecurity for corporate treasurers faced with business-to-business challenges and inefficiencies. Corporate treasurers are also looking to provide improved API integration, risk management, and real-time payments and monitoring for their banks and payment companies.