The global payments industry demonstrated its resilience in 2021, bouncing back from the pandemic. It was the first decline for the sector since the 2008-2009 financial crisis. According to McKinsey, the global five-year revenue outlook now exceeds pre-pandemic expectations topping $3 trillion by 2026.
After a decade of low inflation and interest rates, many European central banks are shifting their policies, leading to rapidly increasing interest rates. Geopolitical factors, expectations in commerce, capital market resets, advancements in technology, and social responsibility are all creating new opportunities in the payments industry. We can expect rapid new developments and payment solutions to disrupt the sector and reshape the competitive landscape.
Long Covid
It’s not only the effect of the virus on the human body that lingers long after the symptoms have gone. The world economy, remote work, payments, buying patterns and human behaviour have forever changed.
Cash stores reopened in 2021, and the payments industry expected physical currencies to bounce back to pre-pandemic levels. It did not materialise. Countries like Greece and the Czech Republic in the EU have shown the sharpest decline in cash usage between 2019 and 2021.
According to McKinsey, Account-to-account transactions (A2A) continued to increase their contribution to revenue in most countries across the globe. Applications built on instant-payment use cases – like bill payments, point of sale (POS), and ecommerce fuelled this increase. Shoppers have shifted their buying habits from cash to contactless or digital payments and online stores. McKinsey reports that global non-cash transactions grew by 6% between 2019 and 2020.
In another report commissioned by the European Parliament, customers and retailers have shifted their behaviour to reduce unnecessary contact. It has accelerated the growth of digital wallets and payments. Apple Pay and Google Pay are the biggest benefactors, and both solutions promise to constantly deliver growth long after the effects of the pandemic have abated.
Digital in demand
According to the World Bank, two-thirds of adults worldwide make or receive digital payments. ““The digital revolution has catalysed increases in the access and use of financial services across the world, transforming ways in which people make and receive payments, borrow, and save,” says David Malpass, President of the World Bank. The greatest benefactors of broadening services are the poor and women.
According to a report published by the European Parliament, remote sales have shown a remarkable increase since the pandemic. The variety of goods and services exchanged, including personal services – traditionally unsuitable for ecommerce, has increased. There has been a shift in traditional Internet-provided services like software, products and services that provide a seamless buyer experience.Product selection, customer identification, payments and online service delivery are as smooth as humanly possible.
The big shift
Various political, economic and humanitarian factors have forced people to work and live across borders. It has caused a tremendous increase in cross-border financial activity as businesses pay their remote workers and families send money home. Cometh the rise in movement across borders, cometh the challenges to do it securely. Add the persistent challenges in supply chain management and companies moving their manufacturing factories to different locations, and you potentially have the perfect storm. In response to this, big business are changing suppliers and simplifying shipping requirements. It affects the payment industry to ensure relevance in complex trade finance environments.
According to the European Parliament report, cybercrime and attacks against the financial sector’s IT structures allegedly surged by 238% in the early weeks of Covid19. It has led to increased costs in damages, insurance premiums, compliance, software investment and the quest for new professional talent specialising in cybersecurity. It might influence current mergers and acquisitions in the industry because these expenses are fixed.
No matter which trends are here to stay or which ones go, Truevo will always stay on top of them. If you’re not a merchant working with us yet, drop us a line. We offer flexible payment solutions, for multiple channels, in over 150 currencies. Truevo solutions are easy to set up and completely secure. We can’t wait to do the future with you.
