The global payments industry is set to enjoy revenue growth of more than $800 billion between now and 2025 on the back of strong growth within emerging markets. While retail payment revenues remain the most dominant, wholesale manages slightly stronger CAGR to 2025, at 5.7% and 6.6% respectively. While credit card payments and account revenues continue to dominate revenues in North America and Western Europe respectively, different e-commerce scenarios may yet change the longer-term outlook.
Regional payment revenue growth
The payments industry is ripe for growth, according to the new The Boston Consulting Group (BCG) report entitled ‘Global Payments 2016’; particularly across emerging economies in the Asia-Pacific region and across the Middle East and Africa, where compounded revenue growth to 2025 is projected at 8% and 9% respectively. North America, building on a relatively large base, will see revenues increase by 5% annually for a total increase of $187 billion in revenues, while Asian emerging economies see absolute growth of $308 billion in revenues in the ten year period.
The total payments market will, according to BCG’s projection, see a CAGR of 6% between 2015 and 2025, jumping from around $1.1 trillion to almost $2 trillion. During that period there will be a considerable shift of revenue share between global regions, the Asia-Pacific region will come to generate the highest share at 28% of total to its current 23%, while the current forerunner, North America, sees its share fall from 29% to 25%.
Growth in emerging markets is being propelled, in part, by increased e-commerce transaction and inclusion within the formal banking system – thereby reducing the numbers of cash transactions.
Global payment revenues
In terms of the payments segment that has the highest growth in revenues in the retail market, debit cards come out on top with a CAGR of 7% between 2015 and 2025, up $94 billion, while credit card revenues are projected to grow at CAGR 6% to $303 billion. The total retail market is set to grow by 5.7%, up from $828 billion last year to $1,446 billion by 2025 – with little change in market share between payment types.
The wholesale payments market will see a slight evolution in favour of debit card revenue growth, which jumps from a 4% share in 2015 to a 7% share in 2025 on the back of a CAGR of 13% in the intervening period. The total market, relative to retail payments, remains relatively low – increasing from $290 billion to $548 billion – all segments in the wholesale market see relatively strong revenues, at above 6% growth.
Granular regional retail payment revenues
In terms of payment revenue type within the retail segment, considerable variation exists between different regions across the globe. North America and developing Asia-Pacific countries are currently dominated by credit card transactions revenues, with account revenues generating 10% and 17% of revenues respectively – the coming ten years will see little change. In Western Europe and the Middle East and Africa, account revenues represent 48% and 49% of revenues respectively, which, by 2025 sees a small increase in Western Europe to 51% and a drop in the Middle East and Africa to 39%.
Digital payment adoption
Increased focus on digital payments is being opened up by a ‘confluence’ of forces, including technological advance, changes in consumer behaviour, and regulatory initiatives. Technologies, from We Chat shopping environments to the expansion of smartphones and internet penetration in markets across the world, has opened up e-commerce – China has since become the world’s largest e-commerce market. Tech giants, like Google and Apple have developed propositions that are transforming consumers’ expectation towards seamless and convenient services across platforms, creating pressures to develop experiences that meet expectations, including easy payments. Finally, regulators are seeking to boost financial inclusion, consumer protection and infrastructure investments – many of which favour digital and traditional banking payment expansion.
The changing landscape could see different levels of expansion of digital payment types across the retail space. In the firm’s bullish analysis, digital becomes more mainstream, as technology adoption increases, resulting in the total share of the retail market increasing from 6% to 26%, with the largest increase stemming from contactless payment methods. In the moderate scenario, in-app payments are less often used, while contactless payment too is not adopted, resulting in a total growth of 19% of market share. The low-ball scenario has low levels of adoption of contactless payment systems, with digital payments limited to browser-based systems.