Global transaction banking set to be a key battleground in evolving landscape

Global transaction banking set to be a key battleground in evolving landscape

Global transaction banking revenues are set to nearly double over the next ten years, reaching $2 trillion by 2024, according to a report by the Boston Consulting Group in conjunction with financial messaging network Swift.

According to the report, global transaction banking revenues in 2014 were nearly $1.1 trillion, or about 27% of total global-banking revenues.

Although retail payments accounted for a small fraction of global transaction values in 2014 (11%), they generated 78% of total payments revenues and will account for a projected 73% of total revenue growth through 2024.

The consultancy says wholesale transaction banking generated close to $330 billion in revenues globally in 2014. Account and payment revenues were $243 billion and are expected to nearly double to about $480 billion by 2024, a CAGR of seven percent.

While merging economies are set for the fastest growth, North America remains the largest payments and transaction banking market globally, generating $238 billion in total retail-payments revenues in 2014 (28% of the worldwide total), with a projected CAGR of four percent through 2024.

The threats to to this sizeable banking franchise are well-documented, from the emergence of multibank platforms and nimble new entrants, digitisation and a toughening regulatory climate. Yet, despite the multitude of pressures on the business, banks can still prevail over rivals by using their own vast infrastructure and customer knowledge, says the BCG.

"There will be both significant disruption and immense opportunity over the next decade in payments," says Stefan Dab, a coauthor of the report and the global leader of BCG's transaction banking segment. "While banks face intensifying competition, they actually have the assets to play a critical role in how markets evolve. To continue to extract value from their payments businesses, they must take decisive action along multiple dimensions: improving the richness of their digital interfaces, broadening their range of services, raising the effectiveness of their operations, and forming partnerships in the larger payments ecosystem. Banks also need to recognise that the value of payments will increasingly be realised by deepening customer relationships, not just by direct revenue generation."

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