Choose your location to get a site experience tailored for you.

Remember my region and language settings

Power Struggle in Payments as Banks Spar with Fintechs and Digital Giants

Incumbent Banks Need Clear Strategy to Fend Off Incursions by Nonbanks, Deliver a Compelling Customer Experience, and Seize Control of the Digital Future in Payments, Says New Report by The Boston Consulting Group

BOSTON—Facing tough challenges both from small fintech startups and from global digital giants, incumbent transaction-banking leaders must improve customer journeys, maximize security, minimize complexity, and add value beyond pure payments if they hope to survive and thrive, according to a new report by The Boston Consulting Group (BCG). The report, Global Payments 2016: Competing in Open Seas, is being released today.

The report, BCG’s fourteenth annual study of the global payments business, offers a comprehensive overview of the industry, including detailed looks at revenue trends, retail payments by region, and shifting dynamics in wholesale transaction banking. In conjunction with the report, BCG is launching the third edition of its Global Payments Model Interactive, which explores how regions and segments of the payments market will shift from year-end 2015 through 2025. This feature provides interactive charts on the volume and value of noncash transactions worldwide.

For five consecutive years, BCG has collaborated with SWIFT, the global provider of secure financial-messaging services, in preparing the report.

“It critical for incumbent banks to map out diverse scenarios with some key questions in mind,” said Stefan Dab, a coauthor of the report and the global leader of BCG’s transaction-banking segment. “How will payments behavior change over the next decade? How will control of customer engagement and brand image diminish as the Internet of Things evolves, as so-called open banking grows, and as commercial clients interface with more third-party providers? Banks must also foster a culture of innovation and resolve tough dilemmas such as whether or not to collaborate with fintechs that can become competitors.”

Industry Overview. According to the report, payments industry revenues hit $1.1 trillion in 2015, representing 29% of global banking revenues. By 2025, they are projected to reach nearly $2 trillion, a compound annual growth rate of 6.0%. The growth engines will be transaction-related revenues (an estimated 40% of the total) and account revenues (34%). The report also says that a confluence of forces is reshaping the payments industry and that three forces in particular will continue to influence the pace and path of transformation: technological advances, shifting customer expectations and behavior, and regulatory initiatives. Further, current pain points and poor user experiences with many types of transactions have made payments businesses ripe for ongoing disruption by fintechs and digital giants, as well as for the emergence of new industry dynamics. However, disrupters will not necessarily triumph over banking incumbents, BCG says.

Retail Payments Trends. According to the report, retail payments trends differ significantly by region.

Europe. Although European payments providers are still digesting the interchange regulation that came into force in 2015, they are already bracing for the next regulatory initiative, PSD2, which is likely to have an even more profound impact—not only on payments but also on overall daily banking services. PSD2 will cause the retail banking landscape to be more open and competitive by enabling new value propositions and business models. 

North America. With a retail-payments revenue pool of $242 billion (nearly 30% of the global retail total), it’s no surprise that North America was home to 60% of payments-related investment in fintechs from 2010 through 2015. The largest source of revenue (63%) is being generated by the credit-card value chain, providing a strong rationale for banks to focus on this particular area. BCG also believes that incumbents should dedicate attention and resources to faster-payments initiatives, which are in various stages of development but are likely to be mainstream within five to ten years in the US and Canada.

Rapidly Developing Economies. RDEs are showing robust overall expansion in payments-related businesses despite the slowdown in GDP growth in some countries. Growth has been driven by generally stronger macroeconomics (compared with mature markets), government initiatives that are expanding the banked population, private-sector investment that is fueling card penetration and the growth of point-of-sale (POS) terminals, and a mobilization of consumers that is broadening browser-based and in-app commerce. These drivers, in turn, are continuing to propel the migration from cash to noncash payment types. Indeed, the estimated annual growth in the value of bank-card payments in emerging markets from 2015 through 2025 is estimated to be almost double the rate in mature markets (11% versus 6%).

Wholesale Transaction Banking. Wholesale transaction banking—which includes payments, cash management, and trade finance—generated about $370 billion in revenues globally in 2015. Account and payment revenues (included in BCG’s Global Payments Model) generated $290 billion and are expected to reach $548 billion by 2025, a CAGR of nearly 7%. Although shortcomings in banking services—along with the wish of some corporations to be “bank agnostic”—have opened the revenue doors to fintechs and digital giants, banks can combine their financial expertise with their tech acumen to fulfill the trusted advisor role, simplify treasurer’s lives, and fuel growth through what BCG calls “smart selling.”

“Ultimately,” said BCG’s Stefan Dab, “the payments industry is being transformed in ways that can play to the strengths of not only fintechs and digital giants but also bank incumbents themselves. Although ongoing change and disruption in the industry are here to stay, the exact types of players that will emerge as true long-term winners is not yet clear. One fact remains certain: Inaction is not an option for players that wish to achieve or maintain market-leading positions. In order to prevail, institutions must find a smart way to compete in today’s wide-open payments seas.”

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or


Headquartered in Belgium, 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 financial crime 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, enabling them to communicate securely and exchange standardized financial messages in a reliable way. As their trusted provider, we facilitate global and local financial flows and support trade and commerce all around the world; we relentlessly pursue operational excellence and continually seek ways to lower costs, reduce risks, and eliminate operational inefficiencies. SWIFT’s international governance and oversight reinforces the neutral, global character of its cooperative structure, and our global office network ensures an active presence in all the major financial centers. For more information, please visit

About Boston Consulting Group

Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we help clients with total transformation—inspiring complex change, enabling organizations to grow, building competitive advantage, and driving bottom-line impact.

To succeed, organizations must blend digital and human capabilities. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives to spark change. BCG delivers solutions through leading-edge management consulting along with technology and design, corporate and digital ventures—and business purpose. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, generating results that allow our clients to thrive.

Press Release
Previous Page