Capgemini predicts 10% growth for global digital payment transactions

Global digital payment volumes are expected to exceed 10% growth for the first time, according to a report by Capgemini.

The World Payments Report 2016 (WPR) suggested that annual growth will reach 426.3 billion transactions, an increase from the record-setting 8.9% in 2014.

The growth in digital payment transactions is largely being driven by strong economic growth in key developing countries, improved security measures such as EMV and biometrics, and government initiatives designed to encourage electronic payments in developing markets where the cost of cash continues to rise.

However, the growth comes as banks face increasing demand for seamless, secure digital transaction services, particularly from corporate customers. Banking revenue is under pressure from a multitude of internal and external challenges such as lower fee income, lower interest income, pressure on foreign exchange service fees and the emergence of financial technology firms (FinTechs). This has encouraged transaction banks to accelerate investment and collaboration amongst banks and/or with FinTechs, to reduce time to market in delivering differentiating digital transaction experiences.

Growth in digital payments occurred across all regions, with developing markets experiencing the highest rate at 16.7%. Mature markets are growing at 6%, but they still account for 70.9% of total global volumes.

For the first time, China surpassed the UK and South Korea in digital transaction volumes, taking fourth position among the top 10 markets globally — behind the US, the Eurozone and Brazil. Cards remain the fastest growing digital payments instrument since 2010, while cheque usage continues to decline. Immediate payments have the potential to drive growth in digital transactions as an alternative to cash and cheques, but efforts are needed to educate stakeholders, provide more value-added services and upgrade infrastructure at merchants and corporates.

“Australia is poised to enter a period of ‘digital wallet’ transformation as seamless payments begin to change the way we pay. The 2016 Capgemini World Payments Report reconfirms Australia’s position in the top 10 global non-cash payments markets, both in terms of the $8.7 billion absolute volume of non-cash transactions, together with Australia’s top five placement globally in terms of non-cash payments per capita,” said Phil Gomm, banking practice lead at Capgemini Australia.

A number of banks have already started to adopt a ‘digital first’ mindset. According to the WPR, 79% of bank executives now view FinTechs as partners. Banks could have additional opportunities to further drive innovation in transaction banking by opening up their internal systems through open application programming interfaces (APIs) and leveraging the requirements of the Payment Services Directive II (PSD II).

Gomm said, “With deep smartphone penetration across Australia, we expect collaboration between FinTechs and banks, bringing increasingly seamless payment processing solutions to consumers. There will be the shift from the concept of ‘card present’ transactions, where the card is presented physically at point of sale, to the new idea of ‘cardholder present’, confirmed through the use of smart device access verification via biometric and PIN options.”

Capgemini, in a new collaboration with BNPP, provides the WPR to banks and corporate customers. It is the leading source for data, trends and insights on global and regional non-cash payments and the key regulatory and industry initiatives that govern them. The report explores how digital innovation is infusing the corporate world and its implication for banks and corporates.

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