Slow adoption of next-generation payment solutions could put up to $89 billion in bank revenue at risk by 2025, according to Accenture research
In the midst of consumer behavior and economic turbulence, payment methods that provide more choice and control are quickly gaining ground
NEW YORK & LONDON & HONG KONG, 13 December 2022–(BUSINESS WIRE)–Up to $89 billion (4.6%) of global payments revenue could be at risk over the next three years for banks that are slow to offer next-generation payment options, according to a new report from Accenture (NYSE:ACN).
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While cash remains the dominant payment method, next-generation payment solutions – including digital wallets, A2A apps and buy now pay later – are becoming more popular. (Photo: Business Wire)
The Payments Gets Personal report is based on a survey of more than 16,000 consumers in 13 countries across Asia, Europe, Latin America and North America. It explores how leading banks and payments players can increase their relevance in the consumer transaction journey and leverage future payment innovations.
Breaking down payment revenue risk by geographic region, the report identified that $34 billion of payment revenue is at stake in North America, more than $25 billion is at risk in Latin America and more than $24 billion in Asia Pacific. In Europe, where more than 55% of consumers do not use credit cards regularly, more than $4 billion in payment revenue is at risk.
Although traditional payment methods still dominate the consumer payment landscape, next-generation offerings are rapidly gaining traction. The survey identified high use of traditional payment methods such as cash (used by 66% of respondents), debit cards (64%) and credit cards (48%). However, more than half (56%) of consumers surveyed use digital wallets and 10% use account-to-account (A2A) payment apps.
More disruption is expected from biometric payments (authentication of physical characteristics such as retina, palm/fingerprint and faces). More than four in 10 respondents (42%) believe biometrics are likely to be widely used by 2025, and 9% said they would be willing to use it as their personal primary payment method, if available, by 2025.
The research also found that external macroeconomic factors, including inflation and rising interest rates, shape consumers’ payment choices when trying to reduce debt interest. Almost a third (31%) of credit card users said they are considering switching to other payment instruments for personal shopping, with slightly more than half (54%) of these planning to use non-interest-bearing payment methods, including debit cards, cash and buy now, pay later financing.
Sulabh Agarwal, Global Payments Leader at Accenture, said: “As consumers rethink how they pay and move their money, traditional payment providers are rapidly losing their grip on the customer payment experience to newer market entrants. This significant threat to core banking revenues is exacerbated by the current economic volatility, accelerating digitization and consumer demand for seamless payments.”
The report recommends several strategies for banks looking to deliver seamless payment experiences, including:
“Now is the time for banks to put a stake in the ground and implement a strategy to defend their core payment revenues,” Agarwal said. “Banks that take bold steps to embrace next-generation payment methods that give people more choice and control can unlock higher levels of customer engagement and drive growth in a rising interest rate environment.”
Read the full report “Payments become personal” to understand how banks and payment providers can ensure their future growth and relevance in payments.
The report draws on insights from the Accenture 2022 Global Consumer Payments study, based on a survey of 16,000 customers in 13 countries across Asia, Europe, Latin America and North America. Fieldwork took place in August and September 2022. To calculate the amount of bank payment revenue at risk, Accenture Research examined data provided by GlobalData and UK Finance and the survey responses to estimate the payment revenue pools for personal card payments and total online payments. Accenture included interchange fees from all card transactions, interest income from credit cards and fees attributable to banks from alternative online payments. Using the survey results and the examination of recent payment trends, Accenture used scenario analysis to estimate future payment methods used by consumers of each of the 13 countries (representing 83% of bank payment revenues globally) and extrapolated the results globally. The baseline as-is scenario, which is built on the proprietary Accenture Payments Revenue Model, was adjusted accordingly, including inflation and country-specific dynamics and input from Accenture’s global payments experts.
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