As Disrupters Enter the Market and Vie for Position, Incumbents Must Deepen Their Customer Understanding, Foster Trust and Loyalty, and Improve Cross-Selling to Maintain Momentum, Says New Report by BCG
BOSTON—Although payments remains one of the brightest spots on the financial services landscape—propelled by positive macroeconomic tailwinds, continuing technological advances, and expanding digital (and other noncash) mechanisms and habits—banks and other payments providers must solve lingering customer pain points if they hope to capitalize on the opportunities at hand and achieve a positive trajectory for the future, according to a new report by Boston Consulting Group (BCG). The report, Global Payments 2018: Reimagining the Customer Experience, is being released today.
This 16th annual study by BCG outlines recent developments in the payments market globally and regionally, explores how retail providers must evolve the payments journey, and explains how wholesale banks must address the expectations gap between themselves and their customers. The report also offers action steps that payments providers can take to improve their competitive positions.
“In both the retail and wholesale payments business, customers are becoming impatient with clumsy interactions and inefficiencies,” says Mohammed Badi, a BCG senior partner, leader of the firm’s global payments and transaction banking segment, and a coauthor of the report. “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.”
According to analysis in the report—complemented by data from SWIFT, the world’s leading provider of secure financial messaging services—payments revenue has been growing at a CAGR of 6.8% globally since 2010, reaching $1.27 trillion in 2017. Projections for the next ten years look equally positive. BCG predicts that payments will become a $2.42 trillion market by 2027, with more than $1 trillion in new revenue generated over that period. Such growth would translate into a CAGR of 6.6%, outpacing global nominal GDP growth. The ongoing shift to noncash payments is driving that expansion and creating a windfall for payments providers, despite mounting pricing pressure in interchange rates.
Retail Payments: Evolving the Customer Journey
The report says that retail banks, merchant acquirers, and payments providers have the opportunity to increase revenue significantly over the coming years. BCG data shows that retail revenue is on track to outpace payments revenue from wholesale banks. Maintaining strong growth, however, requires that retail payments providers address crucial customer pain points. In a “click of a button” world, buying journeys that are riddled with manual processes and clicks feel especially jarring. As digital giants and fintechs vie for their share of the payments space, card issuers must address key irritants across the purchasing journey to retain existing customers and expand their base. The report describes five ways in which payments providers can improve the online buying experience: simplify and harmonize authentication, inject new value into the buying journey, reinforce leadership in card-on-file payments, embrace the move to online financing, and develop payments solutions that work globally. The report further explains three ways in which acquirers can improve the broader merchant experience: deliver integrated payments, adopt a new go-to-market approach, and invest in adjacent services.
Wholesale Payments: Addressing the Expectations Gap
The report says that corporate treasurers are being pulled in two directions. On one hand, they must manage core cash flow and liquidity operations with greater speed and efficiency. On the other, they must address a growing number of strategic business issues at the enterprise level. Wholesale banks have not kept up with these evolving demands. Not only have they been slow to innovate their product and service offerings, but they have been slow to address basic shortcomings in the customer experience. Those gaps have opened the door to nonbanks. While ERP providers, treasury management systems (TMSs), and fintechs lack the institutional expertise and full-service capabilities of wholesale banks, they are taking share in a number of areas. Wholesale banks must close the expectations gap or find themselves sidelined. According to BCG, wholesale banks can close the gap in three basic ways: embrace a clear digital strategy, get strategic with service delivery, and enrich the customer experience with data-driven insights.
Action Is Needed
“Consumers, treasurers, and merchants have made it clear that convenient, personalized service both online and offline is essential for doing business,” says BCG’s Badi. “And they are increasingly willing to take their business elsewhere if those needs are not met adequately. With the growing appetite for payments services expected to generate $1 trillion in new revenue over the coming decade, banks and payments providers have an extraordinary opportunity to expand their business. Success will rest on how willing and committed they are to making the needed business and operating-model changes.”
A copy of the report can be downloaded Global Payments 2018: Reimagining the Customer Experience.
To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or email@example.com.
SWIFT is a global member-owned cooperative and the world’s leading provider of secure financial messaging services. We provide our community with a platform for messaging and standards for communicating, and we offer products and services to facilitate access and integration, identification, analysis and regulatory compliance. Our messaging platform, products and services connect more than 11,000 banking and securities organizations, market infrastructures and corporate customers in more than 200 countries and territories. While SWIFT does not hold funds or manage accounts on behalf of customers, we enable our global community of users to communicate securely, exchanging standardized financial messages in a reliable way, thereby supporting global and local financial flows, as well as trade and commerce all around the world. As their trusted provider, we relentlessly pursue operational excellence, support our community in addressing cyber threats, and continually seek ways to lower costs, reduce risks and eliminate operational inefficiencies. Headquartered in Belgium, SWIFT’s international governance and oversight reinforces the neutral, global character of its cooperative structure. SWIFT’s global office network ensures an active presence in all the major financial centers. For more information, visit www.swift.com or follow us on Twitter: @swiftcommunity and LinkedIn: SWIFT.
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