Payments revenue to hit $2.4 trillion by 2027 but banks have to innovate in order to stay relevant. Personalisation will be a central area of competition in retail payments.

The payments industry remains one of the brightest spots on the financial services landscape, according to a report from the Boston Consulting Group (BCG) and Swift, which predicts global revenue to grow by more than $1 trillion by 2027, writes finextra.com.

Payments revenue grew at a CAGR of 6.8% globally between 2010 and 2017, when it reached $1.27 trillion, says the report. BCG predicts the trend will continue over the next decade, with CAGR of 6.6%, outpacing global nominal GDP growth, to create a $2.42 trillion market in 2027.

More than 70% of industry revenue growth over next 10 years will come from rapidly developing economies, with China alone accounting for 26%. However, mature markets will continue to account for more than half of global revenue.

The report argues that this strong growth will be propelled by positive macroeconomic tailwinds, technological advances, and expanding digital and non-cash mechanisms, all of which means a huge opportunity for retail and wholesale payment institutions.

However, if they want to capitalise on this, banks and payments providers need to address lingering pain points, says the report, adding that the quality of the payments experience matters not only because of the strong projected growth but also because payments as an outsized influence on the banking relationship overall.

BCG expects personalisation to be a central area of competition in retail payments, with digitally-savvy first movers taking share from more conservative rivals.

Meanwhile, online payments providers will expand into offline acquiring and the online acquiring space will concentrate, driven by the growing dominance of Amazon-like marketplaces and Netflix-like digital content providers.

The report predicts that card payments will continue to prosper despite threats from real-time payments as seen in Europe with PSD2 and India with the UPI.

BCG warns that wholesale banks have not kept up with evolving demands and have been slow to innovate their product and service offerings, as well as to address basic shortcomings in customer experiences, opening the door to nonbanks.

Sukand Ramachandran, partner, BCG London office, says: „Consumers, treasurers, and merchants are looking for automated, integrated buying journeys and tailored service. They are being conditioned by their buying experiences in other industries.

„Banks, in order to stay relevant, must respond faster and more strategically to the altered payments environment by focusing on the pain points that matter most across the overall customer journey.”