As payments and transaction-banking businesses evolve at a dizzying pace, banks can prevail over rivals by using their own vast infrastructure and customer knowledge, according to a new report by The Boston Consulting Group (BCG).
The report, Global Payments 2015: Listening to the Customer’s Voice, says that global transaction-banking revenues in 2014 were about $1.1 trillion, or nearly 27% of total global-banking revenues.
The figures are expected to reach about $2trn by 2024, owing to 40% growth in account revenues, 34% in transaction revenues, and 26% growth in non-transaction card revenues.
Also, retail payments, which generated 78% of total payments revenues, are expected to account for a 73% of total revenue growth through 2024, the report added.
North America is the largest payments and transaction-banking market across the globe, generating $238bn in total retail-payments revenues in 2014 with an anticipated CAGR of 4% through 2024.
The study pointed out that the main reasons for the slow uptake of digital payment methods include a lack of compelling value propositions that outperform traditional payment methods and reward structures, persistent security and privacy concerns, as well as inadequate merchant acceptance and consumer comfort.
The report suggested that banks should to form smart partnerships, improve consumer engagement linked to payments, optimise the overall consumer-banking experience, and experiment with next-generation technology in order to stand out.
Wholesale transaction banking generated about $330bn in revenues globally in 2014. Account and payment revenues stood at $243bn and are projected to reach around $480bn by 2024, a CAGR of 7%, the report revealed.
Trade finance added $45bn, while value-added services added another $40bn, with trade finance revenues projected to reach about $100bn by 2024, a CAGR of 8%.
Growth will be driven by increasing volumes and deposit balances, and improving spreads, authors of the report opined.
The report also says that deficiencies in bank services and the rise of multibank platforms have facilitated nonbank competitors, while rise in regulatory constraints has adversely affected client relationships, bank operations, product development, and international expansion.
Challenges of transaction banking can be overcome by focusing on the true needs of treasurers and CFOs, excelling in the basics, differentiating along key dimensions, and outperforming in go-to-market strategies, adds the report.
Coauthor of the report and the global leader of BCG transaction-banking segment Stefan Dab said: "There will be both significant disruption and immense opportunity over the next decade in payments. While banks face intensifying competition, they actually have the assets to play a critical role in how markets evolve.
"To continue to extract value from their payments businesses, they must take decisive action along multiple dimensions: improving the richness of their digital interfaces, broadening their range of services, raising the effectiveness of their operations, and forming partnerships in the larger payments ecosystem. Banks also need to recognize that the value of payments will increasingly be realized by deepening customer relationships, not just by direct revenue generation."