Digital payments growing rapidly worldwide

Worldwide, digital payments are growing at a rapid clip, driven largely by developing markets, according to a new report from Capgemini and BNP Paribas. The trend should be a wake-up call for U.S. banks to rethink their payment strategies to focus more on emerging economies, said Anirban Bose, CEO of Capgemini's financial services practice. Corporate treasurers, too, added Bruno Mellado, head of international payments and receivables at BNP Paribas.

The World Payments Report 2018 forecasts a 12.7 percent compound annual growth rate for noncash payments worldwide through 2021. This comes on the heels of 10.1 percent growth from 2015 to 2016. Noncash payments, worldwide, grew to total 482.6 billion in 2016, according to the report.

The noncash boom is being driven by developing countries, with the biggest growth spurts charted in Russia (with a CAGR of 36.5 percent in recent years), India (33.2 percent) and China (25.8 percent). Mature markets, such as the United States, have been maintaining steady growth – a CAGR of 7 percent, Capgemini reported.

By 2021, developing countries are expected to account for half of all noncash transactions worldwide, overtaking mature markets, which currently account for 66.3 percent of noncash payments, the report noted.

Fintechs poised to dominate e-wallets

The World Payments Report 2018 also revealed that financial technology firms are making notable inroads in the bank-dominated payments industry through their support for e-wallets. In 2016 e-wallets accounted for just 8.6 percent of all noncash payments, and 71 percent of those transactions were facilitated by fintechs, not banks.

"As demand for digital payments is strong, especially in developing markets, some banks may want to revisit their choice to not seek an anchor role in the new emerging payments ecosystem," said Bose. "With their significant market share in the payments industry and implementation of new technologies, banks are in a unique position to shape the marketplace. They can also create new revenue streams through innovative, collaborative relationships with fintechs and active participation by the broader financial services community."

Like banks, corporate treasurers also need to reconsider their role in the new payments ecosystem. They should consider working with banks to co-design services to ensure greater payments security, efficiency and reliability, Mellado suggested.

"Large payments users are also a key constituency in the evolution of innovation in the payments industry," he said. "Without their participation, payments services providers are missing a vital opportunity to shape new offerings in transaction banking, such as cash aggregation, cash forecasting and automated treasury."

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