Transaction Trends

Global digital payments revenue will increase over $1 trillion over the next decade, a new report on the payments industry from the Boston Consulting Group (BCG) and Swift has found.

According to the report, payments revenue will hit $2.42 trillion by 2027, up from $1.27 trillion in 2017. The trillion-dollar increase follows a seven-year period of accelerated growth for payments technology companies, the report said. Payments revenue grew at a 6.8 percent compound annual growth rate (CAGR) from 2010 to 2017. BCG predicts revenue will grow at 6.6 percent CAGR through 2027, outpacing global nominal GDP growth over the same amount of time.

The continued growth is fueled largely by the global shift to non-cash payments products. In rapidly-developing economies (RDE) – particularly in Asia – digital payments revenue will grow twice as fast and make up more than 70 percent of global revenue growth over the next ten years. Mature markets in Europe and North America will continue to generate over half of global revenue despite the growth in RDEs, the report said.

The report noted that in developing and mature markets, the proliferation of contactless payment solutions like contactless cards and mobile payments largely drives the consumer shift away from cash usage.

The shift to mobile commerce in the US has been particularly robust, according to BCG. The report predicts that global ecommerce revenue – which currently comprises 12 percent of retail revenue – will increase to 20 percent by 2022 as the number of digital channels and buying platforms increase. With card abandonment costing an estimated $236 billion in Q1 2018 alone, the report notes, payments companies can capitalize on growing opportunity in ecommerce by improving the online payments experience.

The report suggests making improvements such as “injecting new value” into the buying journey by adopting mobile payments acceptance like Apple Pay. The report notes that merchants who accept Apple Pay experienced sales conversion rates five times higher than those that did not. Further, the report recommended simplifying and harmonizing authentication in ecommerce environments, noting that the Secure Remote Commerce standard – which was announced by Mastercard, Visa, American Express and Discover at TRANSACT 2018 – is a “particularly promising” initiative.

Noting that integrated software vendors (ISVs) handle 5-10 percent of total card transaction volume in the US, BCG recommended in the report that payments companies invest in delivering integrated payment solutions, “adjacent services” like loans and payroll servicing, and adopting new go-to market strategies vis-à-vis sales forces and pricing.

Click here to read the full report.