Digital payments are headed to a healthy future as global non-cash transactions are expected to grow from $433 billion in 2015 to $725 billion in 2020, according to a new study released by CapGemini and BNP Paribas. Fueled by technology innovation in IoT, blockchain, and the growth of e-commerce platforms around the world, mobile payment services are expected to be the key drivers in the growth of non-cash transactions around the world.
Emerging economies in Asia are expected to lead the charge, with an estimated growth of 30.9% during the 2015-2020 period, while developed economies in Europe and North America are expected to grow in mid single digits.
The Current Landscape
Debit cards accounted for 46.7% of non-cash transactions in 2015, followed by credit cards at 19.5%. The growth of digital payments and card-based transactions caused a sharp 13.4 decline in check volumes during the period, and it is extremely likely for the slump to continue further as more and more countries start to embrace digital transactions.
China and India will form the crux of future growth in digital payments, comprising the two largest fast-growing markets for digital payments. China is expected to witness a stable growth of 36% CAGR during the 2016-2020 period, with users directly moving from cash payments to digital payments, thanks to growth of e-commerce and the availability of multiple mobile payment service providers.
India, on the other hand, is not expected to grow as fast as China in this area, but the Indian government is already trying hard to increase the volume of digital transactions. In India, the digital payments market is expected to grow at 26.2% CAGR during the 2016-2020 period, assisted by subsidies, micro payments and mobile payment service providers.
Key Findings from the Study
Technological innovations such as Internet of Things and Blockchain are expected to transform the payments market landscape
The proliferation and adoption of alternate payment channels such as contactless, wearables, and augmented reality products, coupled with modern authentication and authorization techniques, are expected to further catalyze growth of mobile payments by changing user experience
E-and m-payments are expected to take a significant share of 32% of the total global non-cash transaction volumes, which are expected to record a CAGR of 10.5% during 2015-2020, and this growth will likely be challenged by new propositions based on biometrics data and artificial intelligence
The growth and adoption of next generation payments, mostly through technology innovation, is likely to be driven by retail customers, with central authorities expected to play a key role in enabling a level playing field through key initiatives
The most interesting part about this transition is that people in developing economies are directly jumping to digital payment modes from cash mode, circumventing card-based transactions. Credit/Debit card penetration in China and India are much lower than what we see in countries in like the United States and the United Kingdom.
If digital transactions are going to grow at strong double-digit rates, there won’t be significant value addition for users to opt for credit cards and debit cards, especially for middle to low income earners, who form the bulk of the population in any market.
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