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Global payments revenues bounce back

Global payments revenues bounce back

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

Comments: (1)

Jeremy Light
Jeremy Light - Fourdotzero - London 10 October, 2022, 17:52Be the first to give this comment the thumbs up 0 likes

Mckinsey's annual global payments report is always a good read but I find it hard to believe this headline figure of $2.1 trillion revenue. Global GDP is about $85trn, so payments industry revenue on this estimate is 2.5% of global GDP which seems very high.

Even if the figure is accurate, surely the payments industry is on the wrong track if this figure is expected to rise  40%+ in five years to $3trn. It would increase the payments industry revenue to over 3% of global GDP.

Payments is a cost of doing business, for selling and transacting - it's a friction and I would expect with innovation and technology this cost should be reduced and competed much lower for the benefit of everyone. Instead, an increase suggests a rent-seeking industry becoming more adept at building moats and erecting barriers.

My bet and passion is for next generation payments infrastructures to emerge with a step reduction in compute costs and a step up in capability. There is  plenty of opportunity to run these infrastructures and services over them profitability with the right business models.

The next five years in payments is going to be very different to the past - and it is going to be fun.