Emerging economies top growth in non-cash payments

Central Europe, the Middle East, Africa (CEMEA) and emerging Asia are leading the charge with growth in transaction volumes of more than 20 per cent, while Latin America recorded growth of 14.4 per cent.

Growth in these emerging economies outpaced that of the developed markets of North America, Europe and mature Asia (Australia, Japan, Singapore and South Korea), which recorded single-digit growth rates, though mature markets still account for more than two-thirds of global non-cash transaction volumes with a 76.9-per-cent share. 

Forecasts show, however, that for all the growth in the surging economies of Asia and Latin America, it will still take at least 10 years for emerging markets to overtake mature markets in transaction volumes.

“The unabated rise of non-cash payments is a sign of the interconnected lives we live today. With estimates showing 8.5-per-cent growth in 2012 non-cash payment transactions, that’s nearly 47 transactions per year for every man, woman and child on the planet. 

“In the developing markets, mobile payments are giving more people access to financial transactions, while customer-centric innovation has helped prepaid cards and virtual currency gain traction in the more developed markets,” Kevin Brown, managing director and global head of transaction services at RBS International Banking, said yesterday.

The World Payments Report is an annual report that examines the latest developments in the global payments landscape, including payments volume trends, payment instruments such as cards and checks, key regulatory initiatives and their impact on strategic considerations and options for banks.

Debit and credit cards continue to be the most popular non-cash payment instruments, ahead of e- and m-payments. Debit card use grew by 15.8 per cent to 124 billion transactions globally during 2011 and credit cards grew by 12.3 per cent to 57 billion transactions. Estimates for 2012 are based on data and events collected in 2011. 

 

On-line transactions 

Industry estimates suggest online and mobile payments will grow at 18.1 per cent and 58.5 per cent through next year. E-payments are expected to reach a total of 34.8 billion transactions by next year, alongside 28.9 billion mobile payment transactions in the same year. However, the World Payments Report raises some important questions about the veracity of these estimates.

Assessing non-cash instruments such as e- and m-payments, prepaid cards and virtual currency offered by banks and non-banks and growing transaction volumes in regions such as Africa, the World Payments Report has uncovered a significant statistical “black hole” due to inconsistent reporting of payments. 

This inconsistency is emerging as new regions become more active and non-banks take an increasing share of the market via instruments such as e- and m- payments. Analysis in the report suggests that industry estimates of the size of the mobile payments market could be optimistically inflated by a factor of up to 50 per cent, raising the question of whether reliable, centralised data collection is needed. 

The report calls for more statistical accountability in the industry and urges regulators to facilitate such a move. Improved statistical data collection would help payment services providers (PSPs) make more informed investment decisions as well as help combat future market risk.

“Reducing market risk and regulatory complexity continues to be a challenge for banks and other PSPs alike, particularly as regulations proliferate and the overlap between individual initiatives continues to increase,” said Jean Lassignardie, chief sales and marketing officer for Capgemini Global Financial Services. 

“PSPs can ‘cluster’ how they implement individual regulatory initiatives to take into account cascading effects across geographies, complementary reinforcement effects and competing effects.” 

In North America, most new regulation is focused on transparency and customer convenience. 

In Asia-Pacific, the regulatory focus is on standardisation and bringing new participants into the financial system.

While in Europe, the Single Euro Payments Area is an initiative of the European banking industry that will make all electronic payments across the euro area – such as by credit card, debit card, bank transfer or direct debit – as easy as domestic payments within one country are now. Regulations are dominating the landscape as regulators concentrate on increasing competition and improving transparency.

Payments acquisition has emerged as the area with greatest potential for customer-centric innovation. Drivers for innovation in payment acquisition for PSPs include desire for proximity to customers, need to meet new and changing demands and the fragmentation of the value chain. 

“Payments acquisition” refers to enabling sales/commerce by bringing, buying and selling entities together in both customer-to-business and business-to-business contexts, allowing the acceptance of any payment instrument based on customer choice, and facilitating sales agnostic to location, channel or currency.

Through payments acquisition innovation, PSPs can offer both retail and corporate customers choices among instruments, locations, channels and currencies, which is increasingly being demanded.