For retail and wholesale banking institutions alike, the payments business is a crucial source of revenue and data and a critical anchor for broader customer relationships. As a result, the quality of the customer experience and the speed at which services can be accessed and decisions rendered have a disproportionate impact on bank profitability. This is good news and bad news for established banks worldwide.
The good news is that banks bring formidable strengths to the payments arena. Among them are well-established expertise, deep balance sheet resources, and stability. Even the highly regulated nature of banking activities has a silver lining: it provides banking customers with the assurance that their assets, data, and needs are being protected. These traditional strengths mean that banks remain the most trusted financial partners for both individuals and corporate clients.
The bad news, of course, is that banks’ primacy in the payments arena is under attack. Digital tools, technologies, and capabilities have opened the vertically integrated value chain that gave banks their dominance. Competitors inside and outside the banking sphere no longer need the same physical footprint or scale to engage customers. Nor do rivals need to provide the same variety of products. Attackers can now pick off a formerly interlocked part of the traditional payments value chain—be it the interface, the product portfolio, or the underlying infrastructure—and go after it aggressively. That’s threatening the traditional relationship that banks have had with customers and changing the stakes considerably.
Overall, payments industry revenues will reach nearly $2 trillion in 2025.
BCG was a strategic partner with the International Chamber of Commerce (ICC) in the development of the 2016 ICC Trade Register Report. Data from the Report, which is now in its sixth year, illustrates the low-risk nature of trade finance when viewed alongside comparable asset classes such as corporate and small- to medium-sized enterprise (SME) lending. Covering more than 17 million transactions and an exposure in excess of $9.1 trillion, the data continues to demonstrate that trade finance presents banks with little credit risk across major products and regions.