By John Reynolds on Tuesday 17 September 2019
Capgemini World Payments Report highlights concern that incumbent banks have about digital disruption
Developing markets are driving stellar growth in non-cash payment transactions but incumbent banks remain reluctant to embrace data sharing activities and are concerned about big tech companies like Facebook, Apple moving into their territory, a new report has found.
The latest edition of Capgemini's World Payments Report offers an analysis of the new payments landscape based on executive interviews and an online survey carried out by banking and corporate executives.
The 2019 report underscores the rise in digital banking but highlights the concern caused within traditional banks by digital disruption while citing that a lack of regulatory cohesion could stifle innovation.
"The rise of alternative payment methods is catalysing the growth of digital payments globally, reflecting the accelerated expansion of non-cash transaction volumes, with double-digit growth expected through 2022," said Anirban Bose, CEO of Capgemini's Financial Services Strategic Business unit.
"The global payments landscape is undergoing significant evolution, but not all participants are comfortable with the pace and direction of change."
"We encourage incumbent banks to consider quick-win solutions that position them for the future market, such as implementing a microrservices architecture to circumvent the limitations of legacy infrastructure."
The report says that developing markets are leading the growth in the non-cash payment sector.
Growth is being driven by the growing adoption of mobile payments, uptake in contactless technology, and digital innovations from technology players and card giants.
Asia is leading the charge, projected to rise by a compound annual growth rate (CAGR) of 32%, ahead of Central Europe, Middle East and Africa (19%).
Emerging markets will soon dictate and shape the global payments landscape in terms of innovation, transaction capacity handling, and industry trends, the report says.
The report says there are likely to be over one billion non-cash transactions globally by 2022.
But it adds that in a market defined by innovation, many incumbents are more fearful than optimistic about the pace and direction of change.
Existing banks cite the looming threat of big tech challengers along with a reluctance to embrace open banking and data sharing practices.
For example, less than half (48%) of those surveyed in the report said they are planning to use open APIs beyond regulatory compliance requirements.
"Where banks are not being mandated to share more data, they are generally choosing not do so," said Capgemini.
Regulation is forcing change, but the pace of change is slow, the report added.
Capgemini said existing banks are reluctant to share information in areas like conditional payments and branch and ATM locations.
More than six out of ten (63%) identified big tech competitors leveraging their payments infrastructure as a leading threat.
Facebook is one of a number of big tech companies looking to grab market share in the non-cash payments industry with the expected launch of cryptocurrency Libra in 2020.
The report found that amid an increasing fragmented landscape, regulatory oversight was crucial.
But the report warned the existence of differing standards and systems -as well as the divergent scope of regulators-could stifle competition and undermine customer safeguards.