Banks Risk Losing US$280 Billion in Payments Revenue by 2025, According to Accenture Report
September 16 2019 - 3:59AM
Business Wire
Yet, as digital payments continue to grow,
banks can tap into US$500 billion opportunity in new payments
revenue if they adopt innovative business models
As much as 15% of banks’ global payments revenue, or US$280
billion, is likely be displaced by the growth of digital payments
and competition from non-banks, as payments become more instant,
invisible and free, according to a new report from Accenture (NYSE:
ACN).
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The report found that global payments revenue will likely grow
at an annual rate of 5.5%, from US$1.5 trillion in 2019 to more
than US$2 trillion by 2025. Only banks that change their business
models to adopt the latest technologies and focus on providing
value-added services to customers will capture a share of the
US$500 billion in incremental revenue growth.
Titled “Banking Pulse Survey: Two Ways To Win,” the report is
based on a revenue-risk analysis model that Accenture developed to
measure trends in how consumers pay and projected changes in
merchant behavior, technology and regulation. The research is
complemented by a survey of 240 payments executives at banks across
22 countries to determine how they plan to mitigate and capitalize
on the disruption in payments to grow customer loyalty, revenues
and profitability.
“Rather than being at the forefront of the new wave of the
booming payments market, banks are feeling the heat from new
competition and seeing their margins squeezed,” said Gareth Wilson,
Accenture’s global payments lead. “We face an inevitable world of
instant, invisible and free payments, which spells trouble for
banks that don’t want to be relegated to the plumbing of payments.
But it also presents an opportunity to tap into a new business
model based on this digital boom.”
The report notes that over the next six years, banks will face
further pressure on income from card transactions and fees, with
free payments putting 8% of payments revenue at risk. In addition,
competition from non-banks in invisible payments — where payments
are completed in a ‘virtual wallet’ on a mobile app or device —
will put 3.9% of bank revenues at risk. Card displacement by
instant payments, where funds are settled and transferred in
real-time and banks make little to no interest, is projected to put
an additional 2.7% of payment revenues at risk.
This builds on current declines in income from card transactions
and fees, with regulation triggering fee compression and technology
displacing the role of banks in payments. Already between 2015 and
2018, revenue from business customer credit card transactions
dropped 33%, revenue from consumer debit card transactions dropped
nearly 15%, and revenue from credit cards dropped almost 12%.
The research found that the industry is aware of the challenges
posed by new technologies in payments. More than two-thirds (71%)
of the banking executives surveyed agree that payments are becoming
free; nearly three-quarters (73%) believe that most payments are
already invisible or will become so over the next 12 months; and
even more (78%) said that payments are either already instant or
will become instant over the next 12 months.
“The digital boom will mean banks have to fundamentally change
the way they think about their revenue composition,” said Alan
McIntyre, who leads Accenture’s Banking practice globally.
“Channels that once made the banks billions of dollars will cease
to exist. To succeed in the future, banks will need to develop new
digital business models at scale, with ‘one-click’ payments the new
norm, and set their sights on delivering secure, convenient and
frictionless customer experiences.”
In response to these key market challenges, nearly four-in-five
(18%) respondents said the main priority for the bank is to build
security into retail payments transactions. Nearly one-quarter
(22%) cited artificial intelligence, robotics, machine learning and
innovative payments hubs as the key platform technology
capabilities they need to adapt their core systems to high-speed
and continuous payment flows.
About the Accenture 2019 Global Payments Survey
Accenture conducted an online survey of 240 retail and corporate
payments executives globally from the largest banks in the
following countries: Australia, Brazil, Canada, China (mainland and
Hong Kong), Denmark, Finland, France, Germany, India, Indonesia,
Italy, Japan, Malaysia, Mexico, Norway, Singapore, Spain, Sweden,
Thailand, United Arab Emirates, the United Kingdom and the United
States. The survey was conducted between Feb. 14 and March 10,
2019. The overall margin of error is +/- 1.55 percentage points at
the midpoint of the 95th percentile confidence level.
About Accenture
Accenture is a leading global professional services company,
providing a broad range of services and solutions in strategy,
consulting, digital, technology and operations. Combining unmatched
experience and specialized skills across more than 40 industries
and all business functions — underpinned by the world’s largest
delivery network — Accenture works at the intersection of business
and technology to help clients improve their performance and create
sustainable value for their stakeholders. With 482,000 people
serving clients in more than 120 countries, Accenture drives
innovation to improve the way the world works and lives. Visit us
at www.accenture.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20190916005157/en/
Natalie de Freitas Accenture +44 7380 799 196
natalie.de.freitas@accenture.com Melissa Volin Accenture +1 267 216
1815 melissa.volin@accenture.com
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