By 2027, new payment methods (instant payments, e-money, digital wallets, account-to-account, and QR code payments) will make up approximately 30% of total volume, with traditional non-cash payments (checks, direct debits, cards, and credit transfers) dropping to around 70% of overall non-cash transaction volumes, says a Capgemini report.
Non-cash transaction volumes will reach 1.3 trillion by 2023 globally and accelerate to 2.3 trillion by 2027 growing at a rate of 15% annually as consumers and businesses adopt new digital payment schemes, according to a report.
At a regional level, digital payments will grow by 19.8% across the Asia Pacific, 10.7% in Europe, and 6.5% in North
America by 2027, according to the Capgemini Research Institute’s 2023 World Payments Report.
The expanding digital payment infrastructure, regulations, and open banking are swiftly changing how customers and businesses pay for goods and services. According to the report, by 2027, new payment methods (instant payments, e-money, digital wallets, account-to-account, and QR code payments) will make up approximately 30% of total volume, with traditional non-cash payments (checks, direct debits, cards, and credit transfers) dropping to around 70% of overall non-cash transaction volumes.
The reasons
The report reveals over half of corporate treasurers believe the rising globalization of trade and ongoing supply chain disruptions have driven demand for effective and efficient cash management services (CMS).
Another third said evolving risks (geopolitics, and cybersecurity) made CMS critical, while nearly 30% call out rising inflation causing their growing need for better cash management.
As corporations navigate economic headwinds, current CMS offerings largely underwhelm multinational corporates, despite having more than 27 banking relationships on average to meet treasury needs.
Over 70% of enterprise executives said they face issues in dispute negligence, poor credit risk assessment, and delayed or duplicate payment processing. However, the solution is clear with around two in three (63%) payment executives citing legacy infrastructure barriers as the biggest hindrance to providing efficient CMS.
“The current model of tackling cash management services needs an overhaul. Corporate executives are feeling the pressure from mounting inefficiencies across lengthy cash conversion cycles,” said Jeroen Hölscher, Global Head of Payments Services at Capgemini. “What’s clear from our report is that a robust digital foundation is the path forward to optimize the value chain. By simplifying the inherent complexity of their own operating and IT models, banks and payment firms can boost productivity and performance to manage client treasury needs.”
What’s fuelling digital payments?
New payment solutions and key industry initiatives are fueling the growth of digital payments among enterprises. Expectations are also changing, with 63% of corporate clients are demanding a retail-like payment experience from their banks in 2023.
The payments sector has been at the forefront of digitization, however, it’s coming at a cost with compliance to local, regional and international regulations (including ISO20022 and SWIFT global payments initiatives) leaving limited room for investments in future innovation. Payment executives cite nearly 80% of traditional payment revenue sources are stressed and service providers must rebalance their focus between retail and commercial payments.
Globally, more than 50% of payment executives believe commercial payments offer a better profit potential than retail payments.
Structural reforms
End-to-end digital transformation in transaction banking requires top-down commitment, cohesive planning, and a unified purpose for structural reforms. Sixty-seven percent of bank executives acknowledged that strategically partnering with corporate clients reduces the threat of disintermediation by FinTechs and PayTechs; and 57% of payments executives said strategic banking partners enjoy increased cross- and upselling opportunities because of these relationships.
To nurture strategic cash management relationships with corporate clients, the report offers banks and payment firms a three-layered strategy: Simplify the back office to enable innovation and agility, perform with platforms to boost cash management efficiency and engage with corporate clients as strategic partners, not service providers.
