After a tough 2020, payments industry revenues rebounded strongly in 2021, growing at an 11% rate and hitting $2.1 trillion globally, according to a report from McKinsey.
In the midst of the pandemic in 2020, the payments industry saw its first revenue decline since the 2008-09 financial crisis.
But the sector has quickly bounced back, with strong growth across all regions, with both Asia-Pacific and Europe, the Middle East, and Africa registering double-digit gains. Fee-based revenue continues to increase at a faster rate than net interest income and comprises more than half of the total.
Electronic payment transactions grew at a 19% rate in 2021, while global e-commerce saw a 17% increase, primarily driven by China, which now accounts for around half of all retail e-commerce sales.
The most dramatic Covid-19 impact can be seen in cash usage, which plummeted by 15% in 2020. As physical stores reopened in 2021, the cash rebound did not materialise, with just a one per cent uptick.
Meanwhile, A2A transaction revenues continued to increase their contribution in most geographies, in total accounting for roughly 29% of 2021’s rise in global revenue.
A2A mainly cannibalised cash, with debit and credit and transactions seeing strong growth, at 20% and 18%, respectively.
McKinsey now expects payments revenue to top $3 trillion by 2026, as a confluence of events reshapes the payments landscape.
Geopolitical factors, capital market resets, commerce expectations, technology advancements, and societal responsibilities are creating more pronounced sector and regional dynamics, says the report.
This rapidly evolving landscape will create new opportunities for incumbents and disruptors alike to win customers, develop new solutions, and claim market share, reshaping the competitive chessboard, predict the authors.
Read the full report