In an era marked by technological advancements, the financial landscape is undergoing a significant transformation. Non-cash transactions are on the rise as consumers and businesses worldwide embrace digital payment systems. According to the recently released World Payments Report 2023 by Capgemini, this trend is only set to accelerate.
The report projects that non-cash transactions will continue their growth, reaching 3 trillion by 2023. This represents a substantial year-on-year growth rate of 16.6%. Looking ahead to 2027, the figure is expected to reach 2.3 trillion. On a regional level, the Asia Pacific region is expected to lead the charge with a growth rate of 19.8% in digital payments by 2027. Europe follows closely behind with a growth rate of 10.7%, while North America is projected to see a 6.5% increase in digital payments during the same period.
This growth can be attributed to several key factors. The improving macroeconomic conditions are bolstering the appeal of non-cash transactions. Additionally, the rapid expansion of digital payment infrastructure and the proliferation of innovative payment instruments are contributing to this surge in digital transactions.
By 2027, new payment methods, such as instant payments, e-money, digital wallets, account-to-account transfers, and QR code payments, will constitute around 30% of total transaction volume. Traditional non-cash payments, like cheques, direct debits, cards, and credit transfers, will comprise the remaining 70%.
Corporate treasurers demand an efficient cash management system
The report highlights that more than half of corporate treasurers are urgently seeking effective and efficient cash management systems (CMS). This demand stems from ongoing trade globalization, supply chain disruptions, evolving geopolitical risks, cybersecurity concerns, and rising inflation.
Despite having an average of more than 27 banking relationships to meet their treasury needs, corporate executives express dissatisfaction with current CMS offerings. Issues such as dispute negligence, poor credit risk assessment, and delayed or duplicate payment processing persist. Legacy infrastructure is identified as the primary obstacle to efficient CMS.
The demand for a retail-like payment experience from banks is also on the rise. In 2023, 63% of corporate clients expect a seamless and user-friendly payment experience from their financial institutions.
The balancing act for banks and payment service providers
To fully capitalize on this changing landscape, banks and payment services firms need to rethink their approach. A one-size-fits-all strategy for servicing corporate clients will not suffice. Instead, a more refined approach is necessary to maximize value.
While the payments sector is undergoing digitization, compliance with local, regional, and international regulations, including ISO20022 and SWIFT global payments initiatives, limits opportunities for investments in innovation. Approximately 80% of traditional payment revenue sources are stressed. Consequently, service providers must find a balance between retail and commercial payments, with over 50% of payment executives believing that commercial payments offer greater profit potential.
To navigate this shifting landscape successfully, banks and payment firms must adopt a three-layered strategy:
- Simplify the back office to foster innovation and agility.
- Leverage platforms to enhance cash management efficiency.
- Engage with corporate clients as strategic partners rather than mere service providers.
In conclusion, as non-cash transactions continue to gain momentum, financial institutions face the challenge of adapting to this evolving landscape. Meeting the demands of corporate clients, embracing new payment methods, and nurturing strategic relationships will be key to their success in the digital age.