Although the next ten years should bring substantial growth in the payments and transaction-banking businesses, banks will grapple with a host of forces that will require them to sharpen their capabilities, according to BCG's 12th annual global payments report.

Compiled in conjunction with banking co-operative Swift, the study finds that in 2013, payments businesses generated $425 billion in transaction revenues, $336 billion in account-related revenues, and $248 billion in net interest income and fees related to credit cards. The total represented roughly one-quarter of all banking revenues globally.

Banks handled $410 trillion in noncash transactions in 2013, more than five times the amount of global GDP. The consultant contends that the value of noncash transactions will reach an estimated $780 trillion by 2023, a compound annual growth rate (CAGR) of seven percent.

Overall, payments revenues will reach an estimated $2.1 trillion, a CAGR of eight percent.

For retail payments in Europe, the cap on interchange rates will have a significant negative impact on issuer economics in Europe, says the report. "The revenue challenges facing issuing banks will require them to sharpen their pricing models on both current accounts and payments transactions as part of a broader effort to reshape their strategic priorities," says BCG. "They will also need to review their operating models."

In North America, where regulatory intervention has battered the payments industry in recent years, BCG says the business is beginning to get back on track, with revenues rebounding to $222 billion in 2013, up four percent from 2012. Transaction revenues accounted for $104 billion, credit-card net interest income and fees accounted for $93 billion, and demand-deposit products represented $25 billion.

Retail payments revenues in North America are expected to reach $323 billion in 2023, with account revenues showing the strongest growth (six percent annually), followed by transaction revenues (five percent). The report says that the principal opportunities for banks lie in two areas: "leveraging new digital technologies to deepen customer relationships by way of the checking or demand deposit account (DDA), and forging new and innovative strategies in credit cards".

Once again, wholesale transaction banking is expected to outperform retail payments over the next ten years across all markets, at nine percent compound annual revenue growth (compared with seven percent in retail), including small-business credit and debit cards. Of the projected $345 billion in revenue growth, emerging markets will account for about 72% (a CAGR of 11%, compared with six percent for mature markets).

"Never in the history of the payments industry has there been a time of such disruption and opportunity across regions," says Stefan Dab, a co-author of the report and the global leader of BCG's transaction-banking segment. "Payments players, depending upon their strategic decisions over the next ten years, will have much to lose or gain."