- Banks could lose as much as 15%, or $280 billion, of their global payments revenue to digital payment companies and nonbanks by 2025, as competition in the payments space grows, according to a report by Accenture.
- Global payments revenue is expected to grow 5.5% annually, from $1.5 trillion in 2019 to more than $2 trillion by 2025, the study found.
- Banks will face further pressure on income from card transactions and fees in the next six years, with fee-free payments expected to threaten 8% of payments revenue, the report also found.
The study paints a grim picture for banks that are not making strategic investments in the digital payments space.
"Only banks that change their business models to adopt the latest technologies and focus on providing value-added services to customers will capture a share of the US$500 billion in incremental revenue growth," the study said.
Payment fintechs such as Stripe, Square, PayPal and Venmo are gaining market share as they continue to provide fast and cheap money transfer services outside the traditional banking realm.
"Rather than being at the forefront of the new wave of the booming payments market, banks are feeling the heat from new competition and seeing their margins squeezed," Gareth Wilson, Accenture's global payments lead, said in a statement. "We face an inevitable world of instant, invisible and free payments, which spells trouble for banks that don't want to be relegated to the plumbing of payments. But it also presents an opportunity to tap into a new business model based on this digital boom."
But banks are not oblivious to the disruption. According to the study, 71% of the banking executives surveyed agree that payments are becoming free, and nearly 73% believe that most payments are already invisible or will become so over the next 12 months.
Additionally, 78% of bank executives said payments are either already instant or will become instant over the next 12 months.
"The digital boom will mean banks have to fundamentally change the way they think about their revenue composition," said Alan McIntyre, Accenture's senior managing director for banking. "Channels that once made the banks billions of dollars will cease to exist. To succeed in the future, banks will need to develop new digital business models at scale, with 'one-click' payments the new norm, and set their sights on delivering secure, convenient and frictionless customer experiences."
Accenture surveyed 240 retail and corporate payments executives from banks in more than 20 countries, it said.