McKinsey published its annual global payments report this month. Conclusion? The industry should continue to see healthy growth after “an extraordinary year in 2014” when payments revenues rose 9 percent to $1.7 trillion.
Notably, global payments increased their share of total bank revenue to 40 percent. McKinsey expects payments revenues to continue growing at 6 percent annually.
Source: McKinsey Global Payments Map
So the numbers are looking good. But it’s no time to get complacent, McKinsey explains, as the industry is also in the midst of a sea change. The report highlights four “potential disruptions that will alter the payments landscape in the coming years”:
Nonbank digital entrants will transform the customer experience, reshaping the payments and broader financial services landscape.
Startups haven’t traditionally been able to make much of a dent in the banking industry, but McKinsey believes “things will be different this time.” Competition is heating up.
Modernization of domestic payments infrastructures is underway.
More than 15 countries have modernized their core payments infrastructure. In the US, the Fed launched the Faster Payments Task Force earlier this year to engage stakeholders in payments and advance the vision outlined in its January report, Strategies for Improving the U.S. Payment System. (Ripple was elected to the task force’s steering committee in June.)
Cross-border payments inefficiencies are opening doors for new players.
Cross-border payments are slow, expensive and uncertain. These pain points are an opportunity, say McKinsey.
Digitization in retail banking has important implications for transaction bankers.
Simply put, people have different expectations today in a post-iPhone world. Today, they demand faster and more convenient payments services.
Read the full report here.