The financial services industry is in the midst of a significant transformation, accelerated by the COVID-19 pandemic. And given the key role digitisation plays in the financial lives of more and more of the world’s population, electronic payments are at the epicentre of this transformation.
Payments are becoming increasingly cashless, and the industry’s role in fostering inclusion has become a significant priority. Payments also are supporting the development of digital economies and are driving innovation—all while functioning as a stable backbone for our economies.
We are therefore delighted that the first report we are launching in our 2025 & Beyond series focuses on the payments industry and the key themes that are influencing it. How the industry responds to these trends will define how successful it is in the coming years and its impact on society overall.
Where are we now?
Sending a text to pay for a bus ticket in Turkey, using a QR code to pay for groceries in China, or tapping a sales terminal with a mobile phone in the US.
Even before COVID-19, these ways of paying for goods and services were evidence of a steady shift to digital payments—a shift that might ultimately lead to a cashless global society. Global cashless payment volumes are set to increase by more than 80% from 2020 to 2025, from about 1tn transactions to almost 1.9tn, and to almost triple by 2030, according to analysis by PwC and Strategy&.
Asia-Pacific will grow fastest, with cashless transaction volume growing by 109% until 2025 and then by 76% percent from 2025 to 2030, followed by Africa (78%, 64%) and Europe (64%, 39%). Latin America comes next (52%, 48%), with the US and Canada growing least rapidly (43%, 35%).
During COVID-19 lockdowns, many people adopted digital behaviours, accelerating the proliferation of mobile-first digital economies and rendering cash even less relevant to daily life than it already was (although in less developed economies, cash remained essential). In our latest global survey of banking, fintech and payments organisations, 89% of respondents agreed that the shift towards e-commerce would continue to increase, requiring significant investment in online payment solutions. Not only that, but they agreed (97%) that there will be a shift towards more real-time payments.
Underneath the shift to cashless lies a larger, more profound change. Not only are traditional ways of paying for goods and services—including the humble paper check and analogue invoices—set for radical transformation, but the entire infrastructure of payments is being reshaped, with new business models emerging.
That reshaping involves two parallel trends: an evolution of the front- and back-end parts of the payment system (instant payments; bill payments and request to pay; and plastic cards and digital wallets); and a revolution involving huge structural changes to the payment mix and ecosystem (emergence of so-called “buy now, pay later” offerings; cryptocurrencies; and work underway on central bank digital currencies).
Both evolution and revolution are sweeping the globe, but in different ways and at different paces, creating a complex payments matrix. Many organisations are trying to figure out where to play—and win—in that matrix, as evidenced by the intense level of merger and acquisition (M&A) activity since 2017.
Fast-growing Asian markets are driving new business models and innovation. In China, Alipay and WeChat Pay have created a new paradigm around “super-apps” as payment platforms. Our latest global survey of senior financial services executives showed that 78% of respondents said Asian institutions will move at a faster pace on globalisation and convergence than the rest of the world up to 2025, with those in Europe and the Americas struggling to keep up.
With rising strategic significance, some governments are developing payments infrastructure as part of industrial policy to control money flows and own digital and data platforms. These changes have resulted in a mushrooming of domestic payment methods on the back of those infrastructures, such as TROY in Turkey, Mir in Russia, and Brazil’s Elo and PIX systems.
The sector has also become increasingly important as a catalyst for reducing transaction costs, fostering growth and supporting the transition towards digitally enabled and inclusive economies. In developing economic regions in Africa, payments are growing faster than the global average and are allowing millions of “unbanked” people to gain access to goods and services without cash.
The key asset in all of this is data. Payments generate roughly 90% of banks’ useful customer data—information about who is buying what, how much, and when. This is creating new revenue streams for payments businesses that can monetise that data, yet also exposes them to issues and risks related to data privacy.
In our survey, data privacy and cybersecurity were the joint top concern (48%) in terms of the impact of regulatory changes over the next five years. This far outstrips second-ranked digital identity and authentication (31%), and well ahead of cryptocurrencies and central bank digital currencies (CBDCs) (both ranked joint fifth at 28%).
How the payments matrix develops will be determined by the response of banks, technology companies, regulators, governments and consumers to arguably the most profound change in how money moves—even what defines money in our society—for decades to come.
Read the full report at pwc.com
