How can cashless transactions help an economy
Pandemic promotes cashless payments
- Significantly more electronic transactions in Germany
- Income from payment service providers is growing only marginally
- Competition among providers is intensifying
Düsseldorf, October 8, 2020 - More and more people are paying cashless and the Covid-19 pandemic has accelerated this development. Electronic transactions are also increasing in Germany - from 227 transactions per capita per year in 2019 to 278 payment transactions in 2024 with a rapid recovery from the crisis. But even with this development, Germany would be in the middle of the European comparison for the number of cashless payments and below the average of 264 transactions. For comparison: Norway is the front runner with 563 cashless transactions per capita and year. These are the results of the report Global Payments 2020 - Fast Forward into the Future, for which the strategy consultancy Boston Consulting Group (BCG) annually analyzes the worldwide payment flows and income of the payment service providers.
“The corona crisis has promoted cashless payment in Germany. We observe that people are increasingly open to contactless card payments and new payment methods - also for reasons of hygiene. In the long term, however, it must be taken into account that some consumers will return to their old payment habits after the pandemic, ”says Dr. Markus Ampenberger, BCG expert for payments and co-author of the study. "Compared to other European countries, there is still great potential for growth in Germany," continues Ampenberger.
Income growth low for the time being
The forecasts for the earnings of banks and payment service providers are much more moderate: depending on whether and how quickly the economy recovers from the consequences of the pandemic, earnings will only rise by one to four percent a year worldwide by 2024 to a maximum of 1.8 trillion U.S. dollar. For comparison: between 2014 and 2019, the industry recorded record growth of an average of 7.3 percent to currently 1.5 trillion US dollars. For Germany the prognoses are in the best case an annual growth of one percent, in the worst case the yields even shrink by 1.7 percent per year, driven by the falling interest income.
Due to the economic uncertainty, BCG used three economic scenarios as a basis for the forecasts in the study: a fast or slow recovery of the economy and, as a third option, a profound impact of the crisis. In the long term, transaction income will increase more significantly again in all scenarios between 2025 and 2029. Payment service providers can expect revenues between $ 1.9 trillion and $ 2.4 trillion by 2029, an annual growth rate of 4.4 to 5.6 percent. “The Covid-19 pandemic depresses earnings in the short term because less is being bought overall. In the medium term, however, we expect strong growth not only in the number of transactions, but also in terms of earnings. The providers now have to prepare for this, ”says Dr. Markus Ampenberger.
The market for payment service providers is in upheaval
With a share of two thirds, the private customer business is still the largest source of income in payment transactions. The driver is online trading, which has received a strong boost in some segments as a result of Corona. At the same time, however, in sectors such as the travel and events industry, the risk of payment arrears or chargebacks for card providers and merchant banks is increasing. "Many customers and companies are struggling with the financial consequences of the pandemic," says Markus Ampenberger. A major challenge for payment service providers. "You now have to adjust your customer portfolio at short notice and improve your risk management."
Around a third of payment transaction income comes from the B2B area. Providers of ERP and treasury management software, global purchasing platforms and FinTechs have been pushing this market for a long time, Corona is also intensifying competition. "Established financial service providers who want to secure market share have to move closer to their customers," says co-author of the study, Dr. Michael Strauss, BCG partner and responsible for payments in Europe. "Customers need solutions, for example, for cash flow forecasts in real time, for optimizing liquidity or ensuring short-term financing on adequate terms."
The market for payment service providers is highly dynamic and in upheaval. There are attractive growth opportunities, but the pressure to act is increasing. “Now is the time to prepare for the future,” says Strauss. “The providers have to adapt their product portfolio to the changed customer behavior, consistently change their organization in a data-driven manner and, above all, drive digitalization forward. Mergers, strategic collaborations and the development of ecosystems help. "
About the study
The annual Global Payments Report analyzes the developments in the market for payment processing and is published this year in its 18th edition. It is based, among other things, on data from SWIFT and evaluations from the BCG Global Payment Model. This year's study can be downloaded here:
Global Payments 2020 - Fast Forward into the Future
About Boston Consulting Group
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders — empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.
Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.
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