‘Slow adoption of next gen payment to impact banks’
IRISH-AMERICAN professional services company Accenture Plc (NYSE: ACN) said that up to $89 billion (4.6 percent) of global payment revenues could be at risk in the next three years for banks that are slow to offer next-generation payments options.
A new report by ACN identified that $34 billion of payment revenues is at stake in North America, more than $25 billion is under threat in Latin America and more than $24 billion in Asia-pacific. In Europe, where more than 55 percent of consumers do not make use credit cards regularly, more than $4 billion of payment revenue is at risk.
The report, “Payments Gets Personal,” 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 capitalize on future payment innovations.
ACN said that “although traditional payment methods still dominate the consumer payments landscape, next-generation offerings are rapidly gaining traction.”
The Dublin, Ireland-headquartered firm said its survey identified high usage of traditional payments methods such as cash (used by 66 percent of survey respondents), debit cards (64 percent) and credit cards (48 percent). However, more than half (56 percent) of consumers surveyed said use digital wallets and 10 percent use account-to-account (A2A) payment apps.
Disruption expected
ACN said to expect “more disruption” from biometrics payments (authentication of physical characteristics such as retinas, palm/fingerprints and faces.
It added that more than four in 10 respondents (42 percent) believe that biometrics are likely to be widely used by 2025. About 9 percent of respondents said they would be willing to use it as their in-person primary method of payment, if available, by 2025.
The research also found that external macroeconomic factors including inf lation and rising interest rates are shaping consumers’ payment choices as they look to reduce debt interest. Almost one third (31 percent) of credit card users said they are considering switching to other payment instruments for inperson shopping, with slightly more than half (54 percent) of these planning to use non-interest-charging payment methods including debit cards, cash and buy now, pay later financing.
“As consumers re-evaluate how they pay and move their money, traditional payments providers are rapidly losing their hold over the customer payments experience to newer market entrants,” ACN Managing Director Sulabh Agarwal was quoted in a statement as saying. “This significant threat to core banking revenue is compounded by the current economic volatility, accelerating digitization and consumer demand for seamless payments.”
Recommended strategies
THE report recommends several strategies for banks seeking to deliver seamless payments experiences.
The report suggests that banks need to embrace partnerships to scale. “Collaboration with other banks and fintechs can help defend core payments revenue and lock out new entrants.”
Simplicity and speed should also be offered. “Apps and digital wallets can replace physical branch interactions and digitize payments while offering deeper insights into customers’ behaviors and needs.”
The report also recommends that banks move beyond payments as “online marketplaces and ‘super-apps’ can position banks at the center of consumers’ digital lives.”
“Now is the time for banks to put a stake in the ground and implement a strategy to defend their core payments revenue,” Agarwal said. “Banks that make bold moves to embrace next-generation payment methods offering people more choice and control could unlock higher levels of customer engagement and drive growth in a rising-interest-rate environment.”