World Payments Report 2013 unveiled at Sibos shows non-cash payments to top 333bn

16 September 2013

Global non-cash payment volumes are expected to top 333 billion transactions for last year, after transactions grew by 8.8% in 2011, according to the latest figures available from the ninth annual ‘World Payments Report 2013’ published today at the opening of the Sibos 2013 trade show by the Capgemini consultancy and RBS. [bobsguide is producing a daily show report live from the Sibos 2013 show in Dubai, UAE, which can be viewed via the homepage].

The growth in non-cash payments, still a minority of total payments, is being driven by traditional credit, debit and prepaid cards, although online and mobile payments are also making a considerable contribution to transaction banking volumes, says the ‘World Payments Report 2013’.

While cash is still the dominant payment form and likely to remain so for many many years to come, the rise in cash payments is most marked in developing countries in Central Europe, the Middle East, Africa (CEMEA) and Emerging Asia, including China, which saw transaction volumes grow by more than 20% as card, online and mobile payments penetrate the markets there as they have already done in developed markets. Indeed, the legacy situation in ‘the West’ means that some transactional technologies such as mobile m-payments or remittances perhaps stand a better chance of growing in evolving markets where branch banking, card and other acceptance networks are less developed.

Latin America also registered non-cash growth volume with a 14.4 % rise recorded by the ‘World Payments Report 2013’. Compare this to North America, Europe and Mature Asia - meaning Australia, Japan, Singapore, and South Korea - which recorded single digit growth rates and it is obvious where future volume expansion can be expected.

Nevertheless mature markets still account for more than two-thirds of global non-cash transaction volumes with a total 76.9% share of the market so there is a lot of catching up to do for emerging markets. The ‘World Payments Report 2013’ is forecasting that the surging economies of Asia and Latin America will take at least 10 years to overtake mature markets in total non-cash transaction volumes.

“The unabated rise of non-cash payments is a sign of the interconnected lives we live today. With estimates showing 8.5% growth in 2012 non-cash payment transactions [based upon the previous year’s hard figures gathered in the report] this means that nearly 47 transactions per year are carried out for every man, woman and child on the planet,” explains Kevin Brown, global head of transaction services at RBS International Banking. “In the developing markets, mobile m-payments are giving more people access to financial transactions, while customer-centric innovation has helped prepaid cards and virtual currency gain traction in the more developed markets.”

Cards Ahead of Online and Mobile Payments, but Cash Still King
Debit and credit cards continue to be the most popular non-cash payment instruments, according to the ‘World Payments Report 2013’ from Capgemini and RBS, ahead of electronic e- and mobile m-payments. Global debit card usage grew by 15.8% (to 124bn transactions) during 2011, the latest available figures, and credit card use went up by 12.3% (to 57bn transactions).

The report partners are predicting that online and mobile payments will grow at 18.1% and 58.5% respectively for next year based upon the trends they are seeing. Electronic e-payments online are expected to reach a total of 34.8bn transactions by 2014, claims RBS and Capgemini, alongside 28.9bn mobile m-payment transactions in the same year. However, the ‘World Payments Report 2013’ raises some important questions about the veracity of these estimates.

The report rightly points out that in some fast-growing regions such as Africa payment usage figures are becoming less reliable, particularly as more non-banks enter the market with e- and m- payment offerings. For instance, M-Pesa’s well-known mobile money programme in Kenya would not traditionally be counted as a non-traditional financial services (FS) provider but it does have considerable volume and could lead to udner-reporting.

The ‘WPR’ report authors state that the size of the mobile m-payments market could therefore be inflated by a factor of up to 50%, although they do admit this is on the optimistic end of the equation. A call for more reliable, centralised data collection is included in the report. It urges the payments industry and regulators to facilitate such a move. Improved statistical data collection would help payment services providers (PSPs) make more informed investment decisions, as well as help combat future market risk.

“Reducing market risk and regulatory complexity continues to be a challenge for banks and other PSPs alike, particularly as regulations proliferate and the overlap between individual initiatives continues to increase,” said Jean Lassignardie, marketing officer for Capgemini global financial services. “PSPs can ‘cluster’ how they implement individual regulatory initiatives to take into account cascading effects across geographies, complementary reinforcement effects, and competing effects.”

In North America, most new regulation is focused on transparency and customer convenience. In Asia Pacific, the regulatory focus is on standardisation and bringing new participants into the financial system. While in Europe, the single euro payments area (SEPA) Regulation is dominating the landscape mandating the ISO 20022 messaging standard and cross-border harmonisation within the EU.

Innovation
The proliferation of non-bank payments entrants from PayPal to the various mobile point of sale (MPoS) entrants such as Square, Intuit Pay and so forth, mean that the payments market is fragmenting somewhat and for the time-being at least acquisition has emerged as one of the areas for future growth for larger traditional banks.

The acquisition of customers via holistic offerings is also offering the greatest potential for customer-centric innovation in the payments market at present, says the ‘WPR 2013’ report. Drivers of innovation for PSPs include:

• The desire for proximity to customers.
• Need to meet new and changing demands.
• The fragmentation of the value chain.

Through payments acquisition innovation, PSPs can offer both retail and corporate customers’ choices between instruments, locations, channels and currencies which is increasingly being demanded.

Innovation is evolving in the consumer-to-business (C2B) space towards ‘any form,’ ‘anywhere,’ and ‘anytime’ payments which can be found in alternative models from PayPal (Order Ahead application with Jamba Juice) and WorldPay (accepting multiple instruments.) In business-to-business (B2B) acquisition, innovation is seen in the SWIFT (3S Key security solution) and ErsteConfirming (supply chain solution), concludes the ‘WPR’ report.

“Both new and legacy payments providers recognise that not all players need to provide end-to-end services and are focusing on the four ‘Innovation Value Hotspots’ of origination; acceptance and capture; security and fraud; and value-added loyalty and data services,” said Capgemini’s Lassignardie.“In choosing one or more of these hotspots, payments providers have an opportunity to differentiate and meet the new and changing needs of both retail and business customers.”

The Report concludes that the trajectory of change in the payments acquisition space is too steep for PSPs to stand still. Strategies must be revisited and reformed in order for PSPs to stay in the game and to benefit from the changes innovation will deliver.

• bobsguide is producing a daily show report live from the Sibos 2013 trade show in Dubai, UAE, all this week. Please check the homepage or visit the bobsguide Sibos 2013 blog section to view the daily reports. More general blogs and the new bobsguide blogger (aka contributing editor) section can be viewed via the highlighted link.

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