Home / Numbers / SWIFT commission a payments report from BCG

SWIFT commission a payments report from BCG

Just got a note from SWIFT today about a  new publication they’ve commissioned with BCG (Boston Consulting Group) into World Payments.

Seems a bit strange as McKinsey and CapGemini already product great reports in this space.

I don’t mind having another one though, especially as the results have been verified by the SWIFT network, so all numbers are deemed to be pretty accurate here.

Here’s the summary:

In the years following the 2008-2009 financial crisis, the payments and transaction banking businesses have been vital revenue generators for banks.

In 2012, these businesses generated $301 billion in transaction specific revenues (including monthly and annual card fees) as well as $223 billion in account related revenues (including account maintenance fees and spread revenues). 

The total represented roughly one-quarter of overall global banking revenues.  Banks handled $377 trillion in non-cash transactions in 2012, more than five times the amount of global GDP.

And business keeps growing steadily.  By 2022, payments and transaction banking revenues will reach an estimated $1.1 trillion, a compound annual growth rate (CAGR) of 8 percent.

Exhibit 1

The revenue mix is expected to shift toward account-related revenues as yield curves steepen and as pressure on transaction fees persists.   The value of non-cash transactions will reach an estimated $712 trillion by 2022, a CAGR of nearly 7 percent.

Overall, payments related businesses have continued to service as a relatively stable source of income for banks, providing a solid platform on which to build customer loyalty and increase share of wallet.  Moreover, with the exception of credit cards, payments businesses still possess structural advantages as consistent, predictable volumes and relatively low (non-capital intensive) risk factors.  These businesses have helped banks considerably by providing a low-cost source of funding and liquidity.

At the same time, payments related businesses continue to face challenges on multiple fronts.  Regulatory pressures stemming not only from the implementation of the Single Euro Payments Area (SEPA), but also from interchange fee legislation, along with intensifying competition and disruption by new entrant, are taking a toll.

In addition, the attributes of payments businesses have attracted non-bank providers in key areas such as mobile payments and related deals and offerings on the retail side, and in supply chain financing on the wholesale side.  The cumulative impact of these forces is evident. The average per-transaction fees earned by banks are broadly poised to decline, particularly in mature markets.

Exhibit 2

Given the size of the revenue pools at stake, banks will have to adapt to this “new new normal” climate and sharpen their business and operating models accordingly.  Particularly in mature markets, higher levels of customer-centricity and a greater emphasis on execution excellence will be key success factors in winning share from competitors.  Crisper pricing strategies, along with more efficient processes and systems, will become core capabilities for maintaining margins and, even more important, for cross-selling.

There’s a lot more, and you can find the full report here.

 

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

Check Also

Pay

The Card and Payments Awards 2016: Here are the Winners

The Cards & Payments Awards 2016 took place the other day, so I thought I’d …

4 comments

  1. Out of Cap, BCG and McKinsey which one projects the biggest market and highest profits? I only want to read that one.

  2. ‘the results have been verified by the SWIFT network, so all numbers are deemed to be pretty accurate here’. I remember doing a workshop with a major bank in which the bank presented their stats based only on SWIFT payments; the bank exec said ‘so where’s all the rest? Where’s the Hawala?’. According to the World Bank, ‘Global remittance flows, including those to high-income countries, are expected to be $550 billion in 2013’.
    BCG also say that alternative payments serve as entry and retention vehicle for the savings account, one of the most lucrative banking products.
    and that increasing demand for x-b is driven by rising trade flows w/w; and strong economic growth in rapidly developing economies
    and McKinsey describe a shift away from structured finance towards open account, particularly in the fast-growth economies
    which implies the no of lower value x-b trns is increasing faster than the average

  3. Perhaps it is time for a meta-report that takes each of these partial views into payments and aggregates them into a comprehensive view?

  4. Perhaps it is time for a meta-report that takes each of these partial views into payments and aggregates them into a comprehensive view?

Click on a tab to select how you'd like to leave your comment

Leave a Reply

Your email address will not be published. Required fields are marked *