Key findings of World Payments Report 2018

Key findings of World Payments Report 2018

15 November 18

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* The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council.

Capgemini, in conjunction with BNP Paribas recently published the “World Payments Report 2018” (WPR) which provides insightful analysis of the development of the new payment landscape based on executive interviews and online surveys.  We interviewed Christophe Vergne, Payment and World Payments Report leader at Capgemini Financial services to know more about the trends in the new payments environment.

To begin with, can you summarise the key findings of the WPR 2018?

Key findings from the World Payments Report 2018 include:

I.    Global digital payments volume growth is predicted to accelerate up to an average of 12.7% until 2021, with developing markets, led by emerging Asia, projected to grow at 21.6% compound annual growth rate (CAGR) and overtake mature markets in non-cash transactions by 2021. In 2016, BigTechs and Google, Apple, Facebook, and Amazon (GAFA) reported a 71% share of the e-wallets market, providing some challenge but also an opportunity for collaboration with incumbents.

II.    Key Regulatory and Industry Initiatives (KRIIs) continue to foster innovation while improving security for consumers. Interpretation and alignment efforts across the industry are slowing down the benefits from new payments ecosystems.

III.    Creating new payments ecosystems is the way to combine the needs for scale and for innovation. It will take more than bank-led initiatives to grow the new payments’ landscape. The financial services (FS) community ― including public-sector organisations, regulators, and third parties― must determine their new roles and work together and with large users to ensure a smooth, balanced and robust ecosystem development.

What are the main trends in the European payments market in particular as compared to the rest of the world?

Some of the key trends of European payments markets are:

I.    Overall, Europe remains a fragmented market, both from the demand (comparing non-cash instrument usage in volume and by type of instrument across countries) and from the supply side. Since the Single Euro Payments Area () efforts to harmonise the standards have been in use, instant payments and the revised Payment Services Directive () create other opportunities for heterogeneity of policies, timelines, and finally market fragmentation. 

II.    In terms of volumes, Europe is expected to grow faster than the United States in the coming years as regulatory authorities foster innovation and encourage interoperability. An important factor in Europe is the move towards cashless economies, reflected in the numbers of non-cash transactions per inhabitant in Sweden, Finland, and Denmark paving the way for a European cashless society. Growth remains lower than in emerging markets where payment solutions to a sizeable unbanked population are fuelling double digit growth.

III.    Europe’s has emerged as a benchmark for regulators globally to introduce open Application Programming Interface () banking initiatives. Instant Payments were also driven by regulators while countries are at different levels of maturity regarding open banking. 

In this edition of WPR, you have introduced the Payments Open Banking Assessment. What are in brief the state and likely main implications of open banking from the payment perspective across the 16 countries you have studied? 

State of the Market:

We have analysed countries under more than 20 criteria grouped in 4 clusters illustrating openness in payments. When mapping the open banking readiness versus open-banking potential of these markets, we observed three categories: pioneers (fostering open banking and with higher per-capita non-cash transactions) followers, and conservatives (taking a wait-and-see approach and ranking low in per-capita, non-cash transactions.

PIC

 

Implications:

i.    Countries with the right market dynamics, enabling infrastructure, governance, and demographics have a mature open banking regime.

ii.    The right mix of competition and collaboration drive the market dynamics through factors including data sharing agreements, and collective implementation such as Quick Response (QR)-based payments in Singapore.

iii.    Enabling infrastructure such as payments acceptance infrastructure and standards implementation authorities such as Open Banking Implementation Entity (OBIE) in the UK can successfully drive open banking.

iv.    While governance will come from regulatory initiatives such as data protection standards, demographic features including digital literacy and smartphone penetration levels can also play a critical role. 

What is your expectation regarding the evolution of real time credit transfers (e.g. Inst) in Europe?

Before the launch of the European Payment Council’s (’s) Instant Credit Transfer ( Inst) scheme in November 2017, diverse Instant Payment (IP) systems had been developed in some European countries outside of the Eurozone. Inst gives freedom for implementation of IP schemes at a pan-European level, bringing harmonisation to the fragmented marketplace. 

To date, 2042 payment service providers () adhere to the Inst rulebook, representing 49% of the region’s . The European Central Bank (ECB) is extending its TARGET2 settlement system with TARGET Instant Payment Settlement system (TIPS). The journey to instant payments has just begun. 

From a user perspective the retail market is a push market where banks are promoting solutions at their pace (and sometimes slow, to protect card revenues) but the Corporate market is currently very active. Multiple use cases are emerging, not only in the cash and liquidity sphere but also to support new businesses or new business models. As more and more join the scheme, it should gain full momentum and mass adoption very soon, and become the standard for cashless payments in the future.



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