The Green Sheet Online Edition
October 24, 2016 • Issue 16:10:02
World Payments Report 2016 released
Capgemini and BNP Paribas published the World Payments Report 2016 Sept. 22, 2016. The 12th annual comprehensive global payments study found continued growth in noncash and electronic payment transactions. Authors James Methe of Capgemini and Jan Dirk van Beusekom of BNP Paribas attribute growth to a number of factors, including economic progress in key regions and rising costs of cash management.
The report substantiates key trends in the World Payments Report 2015, co-authored by Capgemini and the Royal Bank of Scotland, which cited growth in noncash transactions, as well as in the regulatory and fintech sectors. Last year's report estimated an 8.9 percent increase in noncash payments for a total of $389.7 billion in 2014. The noncash transaction growth forecast for 2015 was adjusted to 10.1 percent and $426.3 billion in the current report.
Noncash, fintech, regtech growth
According to the report, noncash transactions have been highest in emerging Asia (Taiwan, Korea, Singapore, Indonesia, Malaysia, Philippines, Thailand and Vietnam). The report also stated, "The accelerated rate of growth in global non-cash transactions in 2015 will have been driven by a variety of factors, including improved U.S. economic growth, stronger security measures such as EMV, biometrics, and Host Card Emulation, increased penetration
of smartphones and POS terminals, and moves by governments in developing markets to encourage digital payments."
The authors expect the banking industry to face multiple challenges from regulators and fintech innovators. They urged banks to collaborate with fintechs to improve and enlarge their value proposition and digital transformation, which is the focal point of this year's report.
James Methe, Principal of Payments and Transaction Banking, Financial Services at Capgemini, said rapidly changing regulatory environments have prompted numerous corporations to evaluate how much of their budget is spent on regulatory items. "Corporations are updating the capacity and capabilities of their existing infrastructures," he said. "Implementing multiple compliances can be costly and time-consuming, and many have begun outsourcing to regtech [regulatory compliance and reporting technology] providers."
Greater cooperation, faster payments
Jan Dirk van Beusekom, Executive Director of Advisory & Strategic Marketing Cash Management at BNP Paribas, said institutional banks are dealing with more and more regulations and security mandates and need to adopt a spirit of cooperation, open-mindedness and pricing transparency to deal with increasing competition from well-known fintechs like Uber Technologies Inc. and Airbnb.
"The ISO 2002 Standard is old news for Europeans, but U.S. banks have been rushing to get up to speed on ISO standards," van Beusekom said. "Interbank cooperation will enable financial institutions to compete with closed loop systems that facilitate instant fund transfers from one account to another."
Despite a series of initiatives designed to eliminate paper currency, the authors expect cash to remain "a significant payment instrument in the near future, even in markets that offer advanced digital payments." They expect immediate payment services to accelerate the migration to digital payment methods, particularly in entertainment, dining and peer-to-peer payments.
The authors additionally noted that Sweden's central bank, Sveriges Riksbank, mandated that all banks must offer their customers at least one form of free payment service, such as cash. This and similar initiatives led the authors to conclude that "while there is a drive towards decreasing cash usage, the persistence of cash has prompted some countries to prioritize their efforts on reducing the cost of cash, rather than its elimination."
Following are additional key findings cited in the report:
- Immediate payments may displace cash and checks in many markets but must overcome challenges to take market share away from traditional payment card brands.
- Banks have expanded product offerings beyond payment processing, some through partnerships with fintech firms, in an effort to compete in the digital arena.
- Banks face numerous challenges related to the ever-changing regulatory environment. Fintechs and regtech firms can help financial institutions achieve a holistic compliance vision.
- Developing markets experienced the highest noncash payment growth rates, but mature markets still hold the largest volumes of noncash payment transactions.
- The Asia-Pacific region held the highest growth in noncash payments and noncash transaction volumes.
- Latin America is the only region where payment card use is not expected to grow.
For a full copy of the report, visit www.worldpaymentsreport.com/.
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