Friday , November 27, 2020

Without a Digital Business Model, Banks May Lose $280 Billion in Payments Revenue

Digital payments, combined with competition from nonbanks in payments, may cost banks as much as 15% of their global payments revenue, or $280 billion, says Accenture in its “2019 Global Payments Survey.”

Released Monday, the survey of 240 retail and corporate payments executives across multiple countries suggests that global-payments revenue likely will have a 5.5% compound annual growth rate, resulting in $1 trillion in revenue by 2025. Currently, consumer payments account for 58% of the revenue and commercial payments 42%, Accenture says. By 2025 the split is forecast to be 56% consumer and 44% commercial, which includes corporate payments.

At issue is that payments are “inevitably becoming instant, invisible, and free,” the report says. Overall, 71% agree that payments are becoming free. In North America, the percentage is 61% because of a more diverse revenue pool than in other parts of the world, Accenture says. 

Digital payments services such as Venmo may garner may garner more payments revenue at the expense of bank-based services, Accenture suggests.

Accenture research found that debit card revenue-per-transaction was 29 cents in 2018, a 14.6% decrease from 34 cents in 2015. For credit cards, revenue per transaction was $1.07 in 2018, down 11.6% from $1.21. 

“The impact of [instant, invisible, and free] payments will be significant. Based on our analysis, it is likely to decrease the payments revenue pool by 15 percent by 2025 and may cost complacent banks up to $280 billion in revenue opportunity loss, globally,” the report says.

Addressing what banks can do to remain competitive, Accenture suggests they need to reimagine how their core payments are done and they need to differentiate by adding value in a low-margin, high-volume business.

Other survey data found that 38% of respondents said payments will become more instant over the next 12 months. Seventy-seven percent agree that payments are becoming more invisible as they are progressively incorporated into third-party apps or devices. 

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