Payments are entering a new experience-driven era, marked by an accelerated transformation schedule due to Covid-19 and growing digital appetite from customers, according to the World Payments Report 2021 published by ACpgemini. With the Asia-Pacific region leading the way, the demand for digital payment options is greater than ever, along with the demands for fast transaction settlements, instant payments, electronic money, failsafe security, and an amazing customer experience.
The report reveals that almost Four. Five% of consumers frequently use digital wallets to make payments (> 20 transactions per year), compared to 23% of the 2020 survey. In addition to this trend, global transactions Cashless B2B to Rise to Nearly 200 Billion Transactions by 2025, up from 121.5 billion in 2020, according to Capgemini estimates.
“As payments and digital wallets become the norm rather than the exception, payment service providers must find a way to meet consumers’ expectations for speed and ease of use,” said Anirban Bose, CEO of Capgemini Financial Services and a member of the Group’s Executive Council. “To embrace the next generation of payments, banks must build an ecosystem of complementary partnerships to keep pace with change.”
As spending recovers, the next generation of payments will drive growth in cashless transactions
The report revealed that, with spending forecast to recover in 2021, cashless transactions will increase, with instant payments, e-money and next-generation payment methods (Buy Now Pay Later (BNPL), invisible, biometric and cryptocurrency) driving the growth of cashless transactions. After eight years of double-digit growth, global cashless transaction growth slowed to 7.8% in 2020, down from 16.5% in 2019, driven by doubt around uncertain market conditions due to to the pandemic. However, global cashless transactions are set to grow at a CAGR of 18.6% (2020-2025), driven by next-generation payments, and are forecast to reach 1.8 trillion in volume by the end of the period. forecast.
Globally, APAC is leading the digital payments revolution. By 2025, the region will account for more than half of global cashless transactions, with an annual growth rate of 28% between 2020 and 2025. More than 500 million Europeans say they will buy online in 2021, (25.5% of which is international). In Europe, mobile payments and international e-commerce will accelerate and propel the region beyond 400 billion transactions in 2025 with a CAGR of 13% (approximately 2020-2025). North America is expected to establish cashless payment volumes due to stagnant growth in card transactions and slow adoption of mobile payments.
As customer expectations rise, the existing payment infrastructure is put to the test
As digital adoption accelerates, increasing volumes and instant processing requirements are putting existing payments infrastructure to the test. About 55% of the executives surveyed said their technology investment priorities were the modernization of payments infrastructure (implementation of payment systems in real time, API integration, migration to ISO 20022, transformation in the cloud). Vendors must prioritize digital capabilities to remain competitive. Covid-19 fueled the digitization of both retail and B2B payments. The wide gap in customer satisfaction coupled with growing digital interest from retail and B2B customers continues to evolve and redefine customer engagement in the payments industry. The report revealed that attractive loyalty and rewards, a hassle-free transaction experience, alternative payment options and sustainable payment products are the key areas where there are differences between customer expectations and executives’ priorities. of payments.
Regulators seek the balance between innovation and safety
Payment service providers have been the beneficiaries of a new balanced approach from major industry and regulatory initiatives (KRII) to promote and facilitate a payment-friendly environment. For the first time since the follow-up to the KRII, regulators supported a balanced action on all main objectives (risk reduction, standardization, competition and transparency, innovation) to maintain balance in the payments landscape.
KRIIs are on a cyclical journey through efficiency, customer orientation, innovation and collaboration. By ensuring a level playing field through antitrust measures and transparent data sharing, policy makers point to a favorable future for open finance. According to the report, payment service providers should focus on benefiting from this approach of regulation while continuing to innovate to meet consumer demand.
Payment service companies need to prepare for the future with Payments 4.X
With spending expected to increase and non-traditional payment methods poised to grow, future-ready businesses will embrace the elements of Payments 4.X, including data, shared infrastructure, platform capabilities, and Integrated finance to deliver a superior customer experience. Regarding profitability plans, the majority of the payment services companies surveyed opted for operating model measures such as investing in third parties to develop innovative proposals (52%), organizing an API-based ecosystem and moving to a business model based on platforms (45%). The most successful payment services companies will collaborate with PayTech and ecosystem partners to create solutions based on customer experience rather than products. API maturity, data prowess, and increased processing capabilities, coupled with cloud-based agility, will be the catalysts for 4.X Payments to move beyond the traditional transaction mindset toward new approaches to monetization.