Global payments in 2024: Simpler interfaces, complex reality

Industry Overview - The global payments industry handled 3.4 trillion transactions in 2023, accounting for $1.8 quadrillion in value and generating$ 2.4 trillion in revenue [6] - Payments revenue grew 7% annually from 2018 to 2023, driven by transaction digitization and higher interest rates, but growth is expected to slow to 5% annually through 2028 [6] - Net interest income contributes 47% of total payments revenue, up 3 percentage points from 2021 [8] - Asia-Pacific accounts for nearly half of global payments revenue, with commercial revenues increasing from 60% to 62% of total payments revenue from 2018 to 2023 [11][12] Key Trends Shaping the Industry 1. Decline of Cash: Global cash usage is at 80% of 2019 levels and declining 4% annually, with $26 trillion still transacted in cash [16] - Instant payments are rapidly replacing cash in developing markets like India, Malaysia, and Indonesia [18] - In card-dominated markets like the US, cash transactions represent just 5% of consumer payment value [18] 2. **Rise of Instant Payments**: Instant payments are displacing other methods, with two types of markets emerging - card-entrenched (e.g., US, UK) and cash-heavy (e.g., Brazil, India) [19][20] - In the EU, instant payment transactions are expected to grow from 3 billion to 30 billion by 2028, a 50% annual growth rate [21] 3. **Digital Public Infrastructure (DPI)**: DPI initiatives in markets like Brazil, Estonia, and India are catalyzing digital payments through digital ID systems and interoperability [22][23] - India's UPI has been successfully launched in 10 countries, including Singapore and the UAE [25] 4. **Platform Aggregation**: Commerce is aggregating onto platforms like Shopify and Amazon, which process 30% of global consumer purchases [26] - Vertical-specific software solutions captured over 50% of SME spending in the US in 2023 [27] 5. **Transaction Banking Evolution**: Transaction banking is becoming a differentiator for leading institutions, with banks like Citi and HSBC emphasizing these units [31] - Commercial customers are demanding intuitive interfaces and faster integration of bank and corporate systems [31] 6. **Central Bank Digital Currencies (CBDCs)**: Over 90% of central banks are pursuing CBDC projects, with more than 30 pilots launched [33] - CBDCs are expected to set the baseline for digital currency functionality and cost [33] Growth Opportunities - **Cross-Border Payments**: Initiatives like Project Nexus are connecting domestic instant-payment schemes across countries, with 23% of UK SMEs using nonbank providers for cross-border payments [36][38] - **Treasury Management**: The digitization of CFO offices is accelerating, with fintechs like Taulia and C2FO scaling their offerings [39] - **Payouts and Payroll**: Instant payments are enhancing gig economy worker satisfaction and customer loyalty through immediate compensation and refunds [42][43] Challenges and Investments - **Fraud Prevention**: Fraud in online commerce is rising twice as fast as transaction volume growth, with global losses from payment card fraud projected to reach$ 400 billion over the next decade [44][45] - Infrastructure Modernization: Payments players must invest in real-time infrastructure and technology to remain compliant and competitive, with instant payments requiring 24/7/365 availability and enhanced fraud prevention [48][49] - Regulatory Pressure: Regulators are intensifying demands for faster, more efficient payment processes while maintaining low costs and increasing consumer protections [51][54]