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1、Global Payments Report 2023Investor Scrutiny Provokes a Moment of Truth September 2023 By Markus Ampenberger,Inderpreet Batra,Jean Clavel,Tijsbert Creemers,Tom Dye,Kunal Jhanji,Sumit Kumar,Ankit Mathur,Max Nitsche,Stanislas Nowicki,Alexander Paddington,Thomas Pfuhler,Yann Snant,and Alvaro VacaConten
2、ts01 Overview03 Market Outlook06 Four Topics Shaping the Leadership Agenda12 Survival of the Fittest in Merchant Services18 The New Fundamentals for Issuers23 Wholesale Transaction Banks Must Transform29 The Payments Infrastructure Revolution33 Conclusion35 For Further Reading36 About the AuthorsBOS
3、TON CONSULTING GROUP 1OverviewThese developments have propelled strong revenue growth and attracted more than 5,000 fintechs into the payments space.Looking ahead,however,the operating environment is likely to become more difficult,as valuations have dra-matically declined over the past two years an
4、d the macro-environment has become more turbulent.Revenue growth is expected to slow over the next five years.Payments leaders can fight this trend and resume their strong histori-cal growth by doing things differentlyinnovation avenues are numerous,and customer appetite for the industrys solutions
5、remains robustbut they will need to take deci-sive action now to do so.This is a moment of truth for the industry.Change is excit-ing,but its also disruptive.BCGs 21st annual Global Payments Report looks at the opportunities and challeng-es facing this diverse industry.We begin by offering a com-pre
6、hensive market outlook,and then we take deep dives into four subsectors:acquirers,issuers,wholesale transac-tion banks,and payments infrastructure providers.The throughline across our analysis is that institutions must put aside practices that no longer serve their stake-holders and instead must tho
7、roughly modernize their technologies,techniques,and tactics.Those that undertake this work now can turn disruption into a source of long-term advantage.The payments industry has come a long way over the past decadeand in myriad directions!Consumers and companies have shifted from cash to a burgeonin
8、g array of electronic payments.Journeys have expanded from transactions to an integrated array of solutions and value-added services.Payments have become more accessible,with innovations such as digital wallets,QR codes,and mobile mon-ey accelerating financial inclusion in developing economies.2 GLO
9、BAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHTen Key HighlightsTotal payments revenues grew at an annual rate of 8.3%from 2017 to 2022,taking the revenue pool to$1.6 trillion at the end of 2022.Revenue growth is likely to slow to 6.2%annually through 2027,with the revenue poo
10、l reaching$2.2 trillion by then.Of this amount,transaction revenue from card and account-to-account payments rails is on track to grow by 7.1%.But nontransaction revenue from interest-and fee-based sources is likely to expand by just 5.7%.Slowing revenue growth comes from an expected shift in the re
11、tail payments mix from cards to account-to-account transactions,along with compressed card margins in some markets.Contributing macroeconomic factors include cooling inflation and normalization in interest rates.Total shareholder returns have plummeted.The top 20 largest payments companies saw their
12、 TSR drop by an average of 20%over the past two years.Acquiring and payments processing witnessed the sharpest declines,with TSR falling by roughly 40%.Payments-focused fintechs now number more than 5,000 globally and account for about$100 billion of total industry revenues.By 2030,they could comman
13、d a revenue pool worth$520 billion,intensifying competitive pressure on incumbents.Digital currencies are moving from concept to reality,as more than 90%of central banks actively experiment with them as a complement to cash.At current rates of development,retail and wholesale central bank digital cu
14、rrencies could be operational in some countries in every region in five to ten years.Tech modernization is intensifying,and GenAI is exploding onto the payments scene.Both could transform payments.In product development alone,GenAI-enabled software coding could boost productivity by 20%.Regulatory a
15、uthorities are increasing their scrutiny of payments,expanding the rule set,and stepping up enforcement.This will put the risk management and compliance practices of both established and nontraditional players to the test.Although M&A continues to be an important lever,it is shifting from megadeals
16、to capability-led moves,with a particular emphasis on alternative payments methods,integrated software vendors,value-added services,and loyalty.With disruption likely to intensify,leaders must refresh their strategy,revisit their partnership structure,and modernize their tech infrastructure.Safeguar
17、ding shareholder value and cost excellence will be key to preserving and growing shareholder value.BOSTON CONSULTING GROUP 3The payments industry revenue pool expanded by 8.3%from 2017 to 2022 to reach$1.6 trillion.(See Exhibit 1.)Factors propelling this growth include the ongoing cash-to-noncash co
18、nversion,and a rise in nontransaction revenue such as deposit-related income.Adoption of digital com-merce continues to accelerate,and this along with the expanding implementation of modern payments infra-structure also drove growth.Around the world,alternative payments methods(APMs)are enabling bet
19、ter and cheap-er access to financial servicesa virtuous cycle that gener-ates more demand for payments solutions.Latin America and the Middle East and Africa saw the fastest rates of regional revenue growth,but Asia-Pacific and North America continue to lead the world in overall size.Tailwinds are t
20、urning,however,and the next few years are likely to be more challenging for payments industry participants.Slower Growth Is on the Way Our estimates suggest that overall revenue growth will decline from todays levels to a CAGR of 6.2%from now through 2027,increasing the global revenue pool to$2.2 tr
21、illion at the end of that period.Market Outlook4 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHGlobal Payments Revenues Reached$1.6 Trillion in 2022 and Are Expected to Grow to$2.2 Trillion by 2027EXHIBIT 1Source:BCG Global Payments Model 2023.Note:BCGs Global Payments Mode
22、l 2023 does not include closed-loop intrawallet transactions,cash withdrawals from ATMs,trade finance revenues,and mobile money transactions.All forecasting is done at a constant foreign exchange rate.Transaction-related revenues include revenues from transactions made with cards and noncard payment
23、 instruments.Nontransaction-related revenues include revenues from interest income related to deposits,overdrafts,and revolving credit cards,as well as fee income from card and current account maintenance,foreign exchange,and value-added services.Totals may not add up due to rounding.NORTH AMERICA36
24、27,0785581,0491,60620277881,3862,83986572027351432782GLOBALRevenue($billions)CAGR201720227.9%9.0%CAGR202220275.7%7.1%9.6%9.9%9.4%9.9%3.2%9.1%8.3%6.4%LATIN AMERICA2684080117911.4%13.2%6.8%11.3%EUROPE7.3%8.4%5220271102343447.
25、6%7.6%MIDDLE EAST AND AFRICAASIA-PACIFIC248235376202736843353567498.3%6.2%10.9%3.6%12.0%8.3%7.6%7.6%9.7%9.6%4.9%7.7%12.5%8.7%1.6%6.3%Transaction relatedNontransaction relatedTransaction relatedNontransaction relatedTransaction relatedNontransaction related
26、Transaction relatedNontransaction relatedTransaction relatedNontransaction relatedTransaction relatedNontransaction relatedBOSTON CONSULTING GROUP 5Transaction-related revenue is likely to grow by 7.1%through 2027,a drop of 1.9 percentage points compared to the five years from 2017 to 2022.One reaso
27、n for the de-cline is a shift in the payments mix,with the dollar value of transactions from retail account-to-account(A2A)pay-ments,which carry a lower yield,expected to outpace that of cards through 2027(with a CAGR of 11.7%versus 6.8%).Another is that intensifying competition and more strin-gent
28、regulations are compressing card margins in some markets.And a third reason is that inertial growth in cash-less payments is likely to taper as cash-to-noncash conver-sion reaches maturity in some advanced markets.Nontransaction-related revenues will see a steeper decline in growth.From 2022 to 2027
29、,they are likely to grow by 5.7%,well below the prior five-year CAGR of 7.9%.Card loan volumes are likely to feel the effects of rising interest rates,with lending-related income expected to fall to 3.4%over the next five years.Although deposit balances grew by 10.9%from 2017 to 2022,they will proba
30、bly grow by only about 3.5%from 2022 to 2027.Driving this likely slowdown is a shift in balances from demand deposit accounts to higher-yielding alterna-tives such as term deposits,saving deposits,and money market funds.As a result,total revenue growth from deposit-related activities will average on
31、ly about 7.1%over the next five years,significantly less than the prior five-year average of 10.2%.And with interest rates expected to peak in 2023,margin expansion will be limited.The Competitive Ground Is ShiftingCompanies across the payments industry face a host of disruptions that will challenge
32、 even the most experienced.Sources of disruption include the rapid growth of real-time payments(RTP)and value-added services(VAS)and the commoditization of pure payment processing.New entrants steady expansion into payments is another disruptor.Over the past few decades,fintechs have explod-ed onto
33、to the payments scene.More than 5,000 of them now operate in the payments space globallyaccounting for about$100 billion of total industry revenues.Our data projections suggest that these businesses will continue to take share from incumbents across the payments industry and command a revenue pool o
34、f up to$520 billion by 2030.Boundaries between different payments sectors continue to blur,and new business models such as payments-as-a-service are emerging.In addition,nonbank players are beginning to offer embedded finance(solutions that inte-grate financial services into customer journeys and wo
35、rk-flows),encroaching on territory that traditional financial institutions once dominated.This shift from transaction-related to nontransaction-related revenues gives specialists in RTP,VAS,and embed-ded finance considerable advantage.Payments providers that can support consumers,merchants,and corpo
36、rations with tailored services will be able to seize a large share of the future revenue pool.BCG research has found that platforms that include embedded finance are revolutioniz-ing small-business banking.Technology and Processes Are Under StrainA massive modernization of the global payments infra-
37、structure is underway.RTP systems,new data standards,central bank digital currencies,and new technologies such as generative AI(GenAI)will create massive opportunities.But they will also create upheaval.To stay competitive,banks and other traditional payments players must accel-erate their move to c
38、loud infrastructure and embrace modular,scalable payments platforms that can integrate into third-party software and systems.Attracting the right talentsoftware developers,designers,and data scientistsis essential,as is the ability to adopt modern engineering techniques such as DevOps and agile ways
39、 of working.Finally,but no less consequentially,the regulatory environ-ment is becoming more stringent.Many institutions face new or stepped-up requirements,and nonbanks in particu-lar must professionalize their risk and compliance func-tions to keep pace.This is the time to act.Leaders can continue
40、 to deliver strong operating growth and shareholder value despite the ongoing disruptions in the payments ecosystem.But as this report outlines,they cannot do so without committing to deep changes.6 GLOBAL PAYMENTS REPORT 2023:A MOMENT OF TRUTH The economic outlook may be uncertain,but winners can t
41、urn ambiguity into opportunity by identifying performance levers that enable them to punch above their weight.Our analyses indicate that four areas should top the leadership agenda:operational resilience,GenAI,risk management and compliance,and mergers and acquisitions.Safeguarding Shareholder Value
42、Payments providers have achieved generally solid operat-ing performance over the past 24 months.Average net revenues for a global sample of 20 top publicly listed large issuers,acquirers,payments processors,and card schemes rose by around 7.5%from 2021 to 2023.Nevertheless,BCG analysis shows that in
43、vestors have become more circumspect.After a decade of rising valua-tions,total shareholder returns(TSR)defined as capital gains plus dividendshave been on a downward trajectory,falling by 20%from 2021 to 2023.Subsectors such as acquiring and payments processing witnessed the sharpest declines,with
44、average TSR falling by roughly 40%over this period.Four Topics Shaping the Leadership AgendaBOSTON CONSULTING GROUP 7To shore up shareholder returns,payments companies need to understand what is driving value creation at a granular level and then create an integrated business,financial,and investor
45、strategy.From 2016 to 2021,for instance,revenue growth fueled 55%of the industrys TSR growth of 15%,followed by economic value/EBITDA at 31%.We expect revenue creation to remain an important investor criterion.In light of that,payments companies need to have a sharper strategy to ensure they can win
46、 with segments they care about,along with faster execution to capture those opportunities.Increasing TSR will also depend on achieving operational excellence and strong cost performance.Companies must redesign customer journeys to remove pain points,and they must automate,simplify,and modernize unde
47、rlying technologies as much as possible.Efficiency reviews should encompass vendor sourcing,contact and call center effi-ciency,and workforce management.Generative AIThe launch of ChatGPT and the press echo that it received catapulted GenAI to the forefront of nearly every major business conversatio
48、n.And OpenAI gained 100 million users in just two months.Although the technology is still nascent,the impact of GenAI on specific payments opera-tions could be profound.Our analysis suggests the use of GenAI in product development alone could boost produc-tivity in multiple stages by more than 20%.(
49、See Exhibit 2.)Some leaders are already starting to experiment.American Express is employing GenAI to speed product development time,and Visa and Mastercard are using it to augment the companys fraud detection capabilities.Klarna is working with OpenAI to launch a new personal shopping assistant,and
50、 Stripe is using it to create a support documentation guide on its developer portal.GenAI could become a major source of competitive differ-entiation in the years to come,but strong governance is essential.Leaders must establish an effective collaboration model to oversee initiatives throughout the
51、company,validate use cases,and manage pilots.Because demand for GenAI skillsets is likely to be sky high,companies must also be resourceful in acquiring critical talent.Payments leaders should not ignore traditional data analytics and AI applications either.Although many companies have begun to use
52、machine learning to enhance transaction monitor-ing and fraud management,most are still only at the cusp of doing so.Across the payments industry,leaders have multiple opportunities to use AI and real-time data man-agement to introduce new,data-driven VAS.Risk Management and Compliance In the wake o
53、f past misconduct and noncompliance by some payments institutions,regulatory authorities are taking a tougher standespecially in Europe.Supervisory bodies in the region are looking at a broader set of risk types,including financial crime,cybersecurity,data securi-ty,fraud,liquidity,and credit risk,a
54、nd they are intensifying and harmonizing regulations.Enforcement is accelerating,too.Supervisory authorities are conducting more audits,including on-site visits,to assess whether companies are adequately implementing regulatory requirements.Collaboration is increasing as well.For example,regulators
55、in Europe are exchanging information with other supervisors across the region,mak-ing weaknesses or noncompliance findings more readily accessible to national authorities.Globally,in cases of misconduct and noncompliance,regulators are imposing stricter penalties that can carry significant financial
56、 and reputational consequences for payment providers.In re-sponse,we recommend that payments players do the following:Make risk management and compliance a C-suite-level agenda item.Payments companies must ensure strong senior management engagement on risk and compliance.C-suite-level leaders should
57、 engage actively on the topic in their boardrooms and across the organization.Conduct a brutally honest self-assessment.Now is the time for leaders to perform a comprehensive health check to assess their current risk management and compliance capabilities.It is far better for institutions to discove
58、r and correct gaps in their risk and compliance processes now than to have regulators cite them later.Think two steps ahead.Leaders need to anticipate where the regulatory landscape is most likely to shift.This task entails reviewing legislative proposals and in-fluencing discussions among superviso
59、ry bodies,central banks,and other relevant authorities.Understand how risk management can enable business.Upgrading risk and compliance practices can reduce harmful exposures and generate business oppor-tunities.For example,approximately 15%of acquiring volume today is in new verticals.(See Exhibit
60、3.)Getting risk management practices right can help leaders gain share in these(often margin-attractive)segments.8 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHGenAI Could Bring Seismic Changes to Product DevelopmentEXHIBIT 2Source:BCG analysis.HumansGenAIImpact on product
61、ivityDefine requirements;write prompts to get epics and user stories;validate epics and user storiesGenerate first draft;refine epics and user storiesUser journeys1020%Faster ideation and product development(e.g.,payment value-added products)forplatform consolidation using GenAI tools,unlocking grea
62、ter speed of innovation and transformation for companiesProduct innovationDecreased implementation times through use of next-gen coding tools as well as standardization of payments(e.g.,APMs)and data access(e.g.,APIs)to enable greater connectivity across participantsImplementation andstandardization
63、Documentation and support for third-party developers(e.g.,developer portal bot);continuous product improvement throughcollection of performance data(e.g.,optimization of payment routes)Documentation andlearningGenerate and refineprototype;generate visuals and user interfaceWrite design prompts in na
64、tural language;validate the prototypeDesign/prototyping1020%Automate code generation;optimize performanceBuild architecture and complex code functions(e.g.,integrations);write prompts for code generationDevelopment 20%Generate test cases;execute automated testing;identify bugs and code vulnerabiliti
65、esWrite prompts for test cases;oversee and validate results before providing feedbackTestingDeployment 20%Establish workflow;automate and deploy releases;enhanceadoption through native-language user supportPush releases;validate 20%Generate analytics;identify and fix bugs;provide human-free user sup
66、portGather analytics withprompts;validate bugsMaintenance/support1020%Examples inpayments(nonexhaustive)BOSTON CONSULTING GROUP 9 Optimize the risk management and compliance operating model.To optimize their risk and compli-ance practices,organizations must future-proof their operating model.Doing t
67、his involves creating a global coordinating function to oversee risk management prac-tices across the business and all jurisdictions,since most payments players operate across multiple jurisdictions.Leaders must also possess a clear understanding of the organizations risk appetite and enable a 360-d
68、egree view of customers across all products.Other elements of future-proofing include establishing a fully scalable compliance management system to support electronic transaction volume growth,devising holistic end-to-end risk management and compliance processes that span all three lines of defense,
69、and adopting a modern tech and data architecture.Mergers and Acquisitions The payments M&A market and payments fintech funding are both under pressure.Aside from Stripes recent deal,equity funding in the payments fintech sector dropped to$1.5 billion as of the first quarter of 2023,and it fell to$1.
70、4 billion in the second quarter of 2023significantly lower than the$5 billion to$8 billion per quarter during 2021 and through the first half of 2022.(See Exhibit 4.)While most private equity investors are waiting on the sidelines to see whether valuations have bottomed out,strategic investors remai
71、n active.And those looking will find no shortage of promising investment opportunities.Across industry verticals,underlying growth drivers remain intact.These include the ongoing cash-to-noncash conver-sion,the rise of APMs,and the increasing integration of payments into software.Corporate,small-to-
72、midsize enter-prise(SME),and digital retail segments could all see at-tractive revenue growth of 10%or more annually over the next five years.Although M&A continues to be an important driver of value creation,activity is shifting from megadeals to capability-led moves,with a particular emphasis on A
73、PMs,integrated software vendors,VAS,and loyalty programs.Competition for the most desirable targets will be strong.Different payments segments have different risk profiles,and corporate and institutional investors will need to sharpen their deal sourcing and due diligence practices to account for th
74、ese.Integration speed is also essential.Leaders must design the target operating model of the combined entity from the start and must develop a joint business plan to deliver revenue and cost synergies.Set-ting up a rigorous postmerger integration program is im-portant,too.This program can help mana
75、ge the various layers of change globally,from organizational and cultural integration to stakeholder communication to key talent retention.10 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHAcquiring volumes($billions)AverageNon-exhaustive0200Take rate(basis points
76、)Compared to the acquiring industry average,new verticals aregrowing50%faster(by volume)generating 2X highertake ratesTogether,they account for approximately 15%of acquiring volumes todayAirlines andtransportation 800Hotels360Sportsbetting80Streamingand gaming300Onlinegambling55Digitalassets50Cruise
77、s20Vacation rentals and camping 350Source:BCG Global Payments Model 2023.Note:BCGs Global Payments Model 2023 does not include closed-loop intrawallet transactions,cash withdrawals from ATMs,trade finance revenues,and mobile money transactions.All forecasting is done at a constant foreign exchange r
78、ate.“Take rate”is defined as transaction margins for acquirers.“Acquiring volumes”are defined as consumer-to-merchant payments at offline/e-commerce,including all payment methods(e.g.,cards,alternative payments methods,and e-wallets).Data is for the year 2022.Bubble size is not to scale.New Vertical
79、s Can Be an Attractive Playing FieldEXHIBIT 3BOSTON CONSULTING GROUP 11Source:BCG FinTech Control Tower.Note:Funding data excludes Ant Financial,Du Xiaoman Financial,and JD Digit funding rounds.M&A and IPO funding are excluded.1Megadeals are individual funding rounds that equal or exceed$100 million
80、.Quarterly number of deals and equity funding raised($billions)1,049Number of dealsNumber of megadeals11,1131,4801,3771,4891,4531,66091,4303336AccountsFinancial infrastructureInsuranceLending and crowdfundingTrading and investmentsPaymentsQ3 202014.514.428.139.737.03
81、2.713.413.436.211.016.04Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022Q1 20238.41Q2 202337%Stripe deal accounted for$6.5 billion of the total$2.3B$3.3B$5.3B$7.8B$8.4B$7.2B$5.7B$5.8B$2.6B$2.0B$8.0B$1.4BDeal Volumes and Funding Have Slowed During the Past Four QuartersEXHIBIT 412 GLOB
82、AL PAYMENTS REPORT 2023:A MOMENT OF TRUTH Behind the curtain of an overall attractive market segment,the merchant acquiring business is being convulsed.Changes affect every layer of the mer-chant services stack.For incumbentsbanks and payment monolinersadapting to these realities is not just smart b
83、usiness.Its a matter of survival.Acquiring Could Soon Be a$100 Billion Market We expect revenue for the acquiring industry to rise by 6.9%annually over the next five years,taking the global revenue pool to$100 billion by the end of 2027.(See Ex-hibit 5.)SME merchants with fewer than 250 employees ma
84、ke up 70%of the revenue base today and that share could increase.Online salespayments initiated online or over mobile deviceshave been a major driver of revenue growth,and our outlook suggests continued growth of 9.9%annually through 2027.Digital natives(such as Adyen,C,and Stripe)and ISVs(such as T
85、oast and Square)are winning a growing share of the acquiring market.Three years ago,these players accounted for roughly 35%of acquiring market revenues in North America and Europe combined.Today that figure has increased to 40%.And momentum is in their favor.Augmenting their traditional strength in
86、the SME space,digital natives are now gaining share in the corporate segment globally.In Latin America,incumbents face challenges related to advances in real-time-payments.In Asia,widespread use of social commerce and greater integration of payments capabilities into social networks and digital medi
87、a pose disintermediation threats.In Africa,the rapid growth of mobile payments is drawing share away from traditional acquirers.Survival of the Fittest in Merchant ServicesBOSTON CONSULTING GROUP 13Global Merchant Acquiring Revenue Will Reach$100 Billion by 2027EXHIBIT 5Source:BCG Global Payments Mo
88、del 2023.Note:BCGs Global Payments Model 2023 does not include closed-loop intrawallet transactions,cash withdrawals from ATMs,trade finance revenues,and mobile money transactions.All forecasting is done at a constant foreign exchange rate.Merchant size definitions are based on OECD definitions(smal
89、l to midsize enterprise=0249 employees;large company=250+employees).Totals may not add up due to rounding.1Online comprises all payments initiated online or via mobile device(i.e.,all payments not made physically in-store).20222027Large companies:online1Large companies:offlineSmall to midsize enterp
90、rises:online1Small to midsize enterprises:offlineCAGR20222027$72$1009.1%9.1%8.7%4.4%10.4%5.5%7(10%)14(20%)18(25%)32(45%)11(11%)18(18%)29(29%)42(42%)6.9%Revenue($billions)14 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHDisruption Across the StackCompetitive pressures and te
91、chnological advances reveal where the future of acquiring is heading.Acquirer-merchant disintermediation is accelerating.In most developed countries,more than 50%of SMEs now use software platforms for their day-to-day operations.That penetration gives digital natives and ISVs a significant tailwind.
92、The integrated payments solutions that these challengers offer are likely to grow at twice the rate of incumbent acquirer revenues in the US.And a similar pattern is expected to develop in other regions.Disinter-mediation is occurring outside the SME segment,too,driven by a growing need for payments
93、 orchestration,especially among large,international merchants,which often rely on five or more payment services providers.Some merchants with complex payments flows,such as the online marketplace Backmarket,are taking on the orchestration task themselves,using a mix of in-house and externally source
94、d capabilities.For acquirers,payments orchestration represents both a new disintermediation risk and an opportunity to compete on objective performance criteria.The product universe is expanding beyond acquiring and payments.The rate of product development,espe-cially in embedded finance,is soaring.
95、BCG survey data shows that 64%of merchants want solutions that they can plug into their existing business operating systems.To answer that call,merchant services are expanding their product setand in the process,moving deeper into finan-cial services.This year,for example,both Adyen and Square annou
96、nced plans to release new embedded finance features.Other acquirers are likely to try to match these moves,and this competitive race will fuel continued portfolio growth.Merchants want simple front-to-back journeysand challengers are delivering.Time-consuming setup processes and unclear pricing rank
97、 high on the list of merchant pain points.(See Exhibit 6.)Spying an opportu-nity,some digital natives have made easy setup a differen-tiator.Stripes onboarding process,for instance,requires only four inputs from merchants.Its platform provides merchants with a single dashboard for reviewing and mana
98、ging customer disputes,and automated processes simplify chargeback handling for merchants.Enhance-ments like these put pressure on incumbents to improve the quality of their customer journeys.Fragmented tech is a growth killer.After years of M&A-driven growth,many established players juggle multi-pl
99、e platforms and databases.This complexity introduces risk and makes incumbents less competitive.In many cases,digital natives have a single harmonized payments platform that can grow with their business,whereas incum-bents may have to implement new product features across multiple platforms.As a sol
100、ution,GenAI could help incum-bents harmonize by refactoring coding for different plat-forms,synthesizing documentation,and supporting prod-uct and engineering teams.But such technologies are new,and these approaches will need time to deliver proof of concept.Incumbents Can Meet This Moment With the
101、right moves,incumbent acquirers can emerge stronger than ever and capture growth in a vibrant and fast-growing market.Here are four recommendations for ambitious players to consider.Lean into differentiating services.Many products once considered value-adding have become table stakes.These include s
102、elf-service-driven merchant onboarding,reliable payments acceptance across channels and devices,locally relevant payments methods,efficient dispute and charge-back handling,fraud prevention tools,and data analytics services.Meanwhile,differentiating VAS opportunities are emerging in digital marketin
103、g and loyalty management and in embedded finance.In digital marketing,merchants need to develop hyperpersonalized communications and loyalty offerings to increase customer frequency,shopping basket size,and wallet share.Incumbents can help merchants devise these offerings by providing platforms to m
104、anage customer and transaction data and by providing analytics that model behavior in these areas.Embedded finance solutions can also create attractive fee-and interest-based revenue streams by providing mer-chants with business accounts,(virtual)commercial cards,and working capital solutionsall of
105、which are convenient-ly integrated into ISV platforms.However,they require more sophisticated risk management practices,either internally or through partnerships,to evaluate credit risk and to control merchant default rates in the current chal-lenging business environment.BOSTON CONSULTING GROUP 15S
106、ource:BCG analysis based on merchant interviews.The Payments Setup Process Is Riddled with Pain PointsEXHIBIT 6RESEARCH AND SELECTIONLack of price transparency and tools to understand cost of acceptanceUnclear timelines and cost associated with switching acquirerLimited digital self-service capabili
107、tiesHard to migrate data and reintegrate with software platform if switching providersLack of training toolsLong application50%more fields than best-in-class processesMultiple touchpointsfor example,often requires visiting branch to complete applicationLack of fee transparency can create unpleasant
108、surprisesManual reconciliation is time-consuming and complexAPPLICATION AND APPROVALPAYMENTS SETUPSETTLEMENT AND RECONCILIATION!16 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHReimagine journeys from end to end.To compete with the experiences that digital natives offer,inc
109、umbents should redesign their merchant journeys front to backlinking customer experience improvements to back-end operations,automating essential processes,eliminating unnecessary ones,and making select technology upgrades that deliver tangible business and customer outcomes.BCG client experience su
110、ggests that a well-conceived front-to-back redesign can boost acquirer revenues by 2%to 3%,cut onboarding costs by 5%to 20%,and lift net promotor scores by 15 to 30 points.To start,we recommend focusing the redesign effort on four main areas:Accept paymentsthe steps merchants take when se-lecting a
111、payments provider and opening their account.Handle disputes and chargebacksthe steps mer-chants take to resolve customer issues.Service day-to-day operationsthe steps merchants take to mitigate fraud management,ensure compliance,and address failed payments.Grow the businessthe steps merchants take t
112、o gain scale,including invoicing and billing,payroll and labor,inventory,and loyalty management.Future-proof your technological platform.Established acquirers need to consolidate their platforms to achieve scale,speed time to market,and provide integrated sup-port to large digital-native merchants.T
113、his is a complex,multiyear,resource-intensive process.But incumbents can realize immediate benefits by modernizing their tech and data capabilities.(See the sidebar“JP Morgans Tech Trans-formation Is Paying Dividends.”)Examples include acceler-ating the move to the cloud to permit faster product de-
114、ployment and updating application programming interface(API)strategies to simplify integration of services into third-party software and digital ecosystems.AI and GenAI can help incumbents further modernize their tech stack.Tailored business reporting,enhanced fraud monitoring,and more responsive ca
115、ll center processes are among the use cases that incumbents should begin testing and scaling.Beat disintermediation through M&A and partner-ships.The recent pause in megadeals is no excuse for complacency.Given the expansion of merchant services,incumbents must step up their partnership and M&A stra
116、tegies.In addition to scale consolidation plays,strate-gies include combining product capabilities into an inte-grated value proposition.For example,Deutsche Bank and Fiserv built the joint venture Vert to make payments accep-tance and banking services available to SMEs in an inte-grated product off
117、ering.Another approach is to combine product and distribution capabilities.Worldlines partner-ship with Credit Agricole Group combines Worldlines strengths in in-store and online payment acceptance with Credit Agricoles distribution capabilities in the French market.Incumbents can also buy tuck-in c
118、apabilities.For instance,JP Morgan purchased WePay to gain online pay-fac(payments facilitator)enablement.Finally,incumbents can seek to become vertical payments champions.Nexis recent acquisition of Orderbird,a restaurant software company,is one such example.We recommend that a companys strategic l
119、eaders estab-lish a dedicated task force to manage the M&A and part-nership program.Coordination with technology and business teams is key.The task force can perform this steering function and work across the organization to map needed capabili-ties,identify potential partners and targets,and suppor
120、t technical and business integration once the deal is closed.BOSTON CONSULTING GROUP 17By overhauling its technology foundation,JP Morgan is meeting disruption head on.The improvements,which began about five years ago,are helping this payments industry veteran capture higher margin opportunities and
121、 compete more effectively across the value chain.The transformation covers four main areas:Modernizing the Core.To ensure greater resilience,JP Morgan fortified its payments rails,including card and noncard.It acquired the cloud platform Renovite Tech-nologies to help create a unified horizontal lay
122、er that can support use case deployment and faster product development.Meeting Clients Where They Are.Through acquisitions such as WePay and InstaMed,JP Morgan has invested in payments capabilities that provide the full stack solution or that can be integrated into vertical software,recognizing that
123、 an increasing number of clients are adopting platform solutions.Expanding the Product Offering.JP Morgan launched its Payments Partner Network to provide clients with a continually refreshed portfolio of offerings.Developed in partnership with Salesforce,the cloud-based network serves as a one-stop
124、 source for embedded finance solu-tions and includes offerings from JP Morgan and various third parties.Instilling a Product-Led Culture.Product man-agement is front and center of the transformation.JP Morgan appointed a senior product leader with an en-gineering background to head the effort.This t
125、eam took a targeted approach,focusing on solving customer pain points one by one and employing cross-functional teams to increase the velocity of product releases.JP Morgans Tech Transformation Is Paying Dividends18 GLOBAL PAYMENTS REPORT 2023:A MOMENT OF TRUTH The growth wave that issuers have long
126、 been riding is breaking,and catching the next one will require repositioning.However,companies that refine their practices can fend off disruption and secure their future footing.The Days of Easy Growth Are OverGlobally,from 2017 to 2022,revenues for issuers rose at a CAGR of 8.1%.Much of this grow
127、th came from the contin-ued embrace of cashless and card-based payments.Across major markets,steady economic growth and a low inter-est-rate environment helped drive high levels of employ-ment,contributing to a healthy credit picture and the lowest delinquency rates in 30 years.But the going is like
128、ly to get rougher over the next five years.Overall,we expect issuer revenues globally to grow by a CAGR of just 5.5%from now through 2027.On the one hand,macroeconomic uncertainty may reduce consumer spending.On the other,high interest rates will continue to slow demand for credit.Our projections su
129、ggest that several key revenue compo-nents will come under pressure.(See Exhibit 7.)Inter-change fees are likely to grow at a more modest rate of 7.0%,through 2027,down from 9.6%over the past five years.Net interest revenue growth on revolving balances is likely to plummet further,tumbling to 3.4%.O
130、n the plus side,foreign exchange fees seem poised to more than triple,jumping to 9.5%as travel recovers from pandemic lows.This income,however,accounts for only a small part of total revenues.The New Fundamentals for IssuersBOSTON CONSULTING GROUP 19Issuers Will See Slowing Revenue Growth in Key Are
131、asEXHIBIT 7Source:BCG Global Payments Model 2023.Note:BCGs Global Payments Model 2023 does not include closed-loop intrawallet transactions,cash withdrawals from ATMs,trade finance revenues,and mobile money transactions.All forecasting is done at a constant foreign exchange rate.1Other fees include
132、annual membership fees,penalty on late payment fees,etc.42262280275.5%8.1%4%3%4%16%38%42%45%48%33%15%37%15%CAGR201720222.8%9.5%7.4%5.2%7.1%3.4%9.6%7.0%CAGR20222027InterchangeNet interest margin on revolving balancesOther fees1Foreign exchangeRevenue($billions)20 GLOBAL PAYMENTS REPORT 202
133、3:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHRegulatory action on late fees could compress margins further.In the US,the Consumer Financial Protection Bureau has proposed a rule that would reduce the fees that payments companies can charge to consumers for missing payments on credit cards.And the C
134、redit Card Competition Act would require large banks to give mer-chants a choice of at least two different payments net-works to process credit card transactions.Change Is Coming from All SidesA more challenging macroeconomic environment,in com-bination with an accelerating industry transition,raise
135、s the stakes for issuers.Credit risk is escalating.A softening economy could weaken the quality of the lending pool,broadening default exposure.And a recessionary environment could create financial challenges for issuers,since BCG research shows that consumers typically deprioritize credit card paym
136、ents relative to other obligations when they are in financial distress.Software innovation is forcing new forms of collabo-ration.As ISV platforms gain market share,traditional payments players will have to partner with these business-es to access SMEs.ISVs are also beginning to offer a broad-er arr
137、ay of financial solutionsand business customers have responded enthusiastically.BCG survey data suggests that 60%to 70%of SMEs in major markets would consider a debit or credit card offer from their software provider.Toast already offers a restaurant debit card,and other ISVs are likely to develop t
138、heir own industry variants.Software innovation isnt solely a disintermediation lever,however.As the tech stack opens up,infrastructure specialists are emerging with capabilities that can help traditional issuers gain market advantage and manage parts of their business more cost effectively.This new
139、wave of service providers includes issuing processors,loyalty experts,debt collection enablers,and other niche players.Loyalty is up for grabs.As competition intensifies,issu-ers must work harder to engage and retain customers.Some large issuers are responding by expanding their commerce capabilitie
140、s.Capital One launched a free brows-er tool that allows consumers to see which stores offer the best prices for the products theyre searching for online.Others,such as Chase and Amex,are doubling down on travel and entertainment.For example,Chase recently acquired two travel management businesses,CX
141、loyalty and Frosch,to scale its rewards and partnership offerings and provide richer travel recommendations to both business customers and individual consumers.These investments have helped Chase become a major travel player,with$8 billion in bookings in 2022 and more than 2 million unique users.Its
142、 Time for Issuers to Prepare for the Next Wave of GrowthChange can be unsettling.But issuers have demonstrated their resilience during the crises of the past few years,and with the right focus they can emerge stronger than before.To thrive in years ahead,leaders must embrace the new fundamentals of
143、issuing.Become a tech-and data-led issuer.As the trends discussed above make clear,issuing has become a tech-and data-driven businessand theres no going back.But overhauling core processes is not a simple journey.Rather than rushing into a“change everything”agenda,issuers should focus on acquiring c
144、apabilities that can help them build competitive advantage quickly.These may include multichannel orchestration,embedded finance,and data-as-a-service.Each of these capabilities will require specific tech and data investments.For example,issuers pursuing a data-as-a-service business such as an audie
145、nce network offering will need to build data integration tools to handle comprehensive data ingestion,replication,and load man-agement,as well as processes to help product and market-ing teams create a single view of the customer.By starting in a focused manner and expanding tech and data capabil-it
146、ies from there,issuers can manageably accelerate their market innovation.BOSTON CONSULTING GROUP 21Boost marketing efficiency by embracing agile.De-ployed effectively,agile work practices can reduce cam-paign development times from months to weeks.In addi-tion to promoting superior marketing efficie
147、ncy,agile practices can optimize media spending,ensuring the deployment of resources in areas likely to generate the strongest returns.Strategic tech solutions can enable marketers to segment customers automatically in a self-serve fashion.They can also support cross-channel journey orchestration an
148、d permit simple,ongoing reporting.Done right,these improvements can help issuers speed cycle times by 60%to 80%and improve conversion rates of product offers by 20%to 30%.Leverage M&A and partnerships to retool loyalty.Our research indicates that leaders see personalization as a key lever for drivin
149、g revenue growth.But only 15%of finan-cial services firms that BCG surveyed view their capabilities in this area as more than basic.Partnering with infrastruc-ture specialists can be an effective way to gain precision marketing capabilities.Banyan,for instance,specializes in providing purchasing dat
150、a at the item level(commonly referred to as the SKU level),which issuers can use to design hyperpersonalized embedded rewards and card offers,thereby improving customer value and directing more traffic to co-brand partnersa win-win.Issuers that ramp up their deal-sourcing practices now will be able
151、to move quickly when opportunities arise,and competition for some of the most promising infrastructure partnerships is likely to be intense.Cultivate corporate payments solutions.B2B pay-ments is a large and growing marketand more nontradi-tional issuers are recognizing its potential.Recently,So-dex
152、o carved out its businesss benefits and rewards unit,rebranding it as Pluxee,and SEB Kort acquired AirPlus payments.Traditional issuers can participate in this growth,but they must expand their product portfolios in order to do so.Success will require robust offerings for buyer-and supplier-initiate
153、d flows,and those offerings will have to accommodate a variety of payments methods,including virtual cards,Automated Clearing House(ACH)payments,and data-enriched ACH+payments.Given the nature of corporate payments processes,integration into procure-ment and enterprise resource planning platforms is
154、 essen-tial.One effective way for issuers to accomplish this is through co-investment with procurement platforms.Issu-ers must also secure a dedicated marketing budget to create channel awareness and build their sales and techni-cal capacity to support product onboarding into platforms.Reduce delinq
155、uencies and their impacts.To prepare for a potential increase in delinquency volumes,issuers should take three steps.First,at the predelinquency stage,issuers should harness data that can identify troubling customer behaviors such as changes in autopay arrange-ments,dips in discretionary spending,an
156、d lower-than-average checking balances.They can then segment cus-tomers by risk,with the goal of flagging vulnerable custom-ers a month before they are likely to default.Second,issu-ers should ensure that they can offer digital self-service support.Our research suggests that most customers prefer a
157、digital-first approach and want to deal directly with their lenders rather than with debt consolidators and collection agencies.Efficient digital journeys can increase uptake of repayment enrollment plans by 20%and decrease attrition from these plans(breakage rates)by as much as 30%.Third,issuers sh
158、ould reinforce their recovery capabilities.A strong test-and-learn practice combined with an in-house recovery unit can increase recovery income by 15%to 25%.(See Exhibit 8.)22 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHBringing Recoveries In-House Yields Several Benefit
159、sEXHIBIT 8Source:BCG project experience.Increase indollarsrecovered1525%ImprovedclientsatisfactionDecreasedregulatoryriskImprovedchances ofgetting acustomerback to creditLoweroperationalcostsDecreasedreputationalriskBOSTON CONSULTING GROUP 23Transaction banking is a strategic beachhead because of th
160、e role it plays in developing long-term customer relationships with corporate clients and financial institutions.But many banks have been underinvesting in this business,and they now face a make-or-break moment.“Make”because this market is on track to grow by 6.6%annually over the next five years,an
161、d“break”because incumbent banks have been ceding advantage to digital natives and nonbank market entrants.There is no realistic path to success by staying the course.To remain relevant in this critical market,incumbents must reconfigure their transaction banking business from the inside out.A Massiv
162、e Revenue Pool The prize is hugeand growing.Transaction banking is a$536 billion market globally today and is expected to be a$738 billion market by 2027,growing at an annual rate of 6.6%.(See Exhibit 9.)The relative share of transaction-related revenues and nontransaction-related revenues(from depo
163、sit interest,foreign exchange fees,and interest income from short-term loans)remains more or less stable.Wholesale Transaction Banks Must Transform24 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHWholesale Transaction Banking Revenues Reached$536 Billion in 2022EXHIBIT 9Sou
164、rce:BCG Global Payments Model 2023.Note:BCGs Global Payments Model 2023 does not include closed-loop intrawallet transactions,cash withdrawals from ATMs,trade finance revenues,and mobile money transactions.All forecasting is done at a constant foreign exchange rate.Transaction-related revenues inclu
165、de revenues from transactions made with cards and noncard payment instruments.Nontransaction-related revenues include revenues from interest income related to deposits,overdrafts,and revolving credit cards,as well as fee income from card and current account maintenance,foreign exchange,and value-add
166、ed services.Totals may not add up due to rounding.Revenue($billions)Nontransaction related0.2%6.3%6.5%1.0%Transaction relatedNontransaction related28%72%29%71%29%71%3865367382027202220176.6%6.8%Transaction relatedCAGR20172022 CAGR202220276.8%7.9%BOSTON CONSULTING GROUP 25An Increasingly Complex Oper
167、ating EnvironmentWholesale transaction banks face multiple vectors of change.(See Exhibit 10.)Buying factors are changing.Chief financial officers and corporate treasurers seek reliability,transparency,and convenience.Competitors may offer a similar product set at comparable pricing,but business wil
168、l go to the player that is quicker to act on client requests,better at providing real-time payments transparency and reconciliation,and more efficient in conducting payments investigations and exception handling.Digital service delivery is another must.CFOs and treasurers have ramped up the pace of
169、digitization in their own functions,and they expect their transaction banking partners to have done the same.Tech investments should enable service integration with corpo-rate systems,account aggregation across multiple bank relationships,and reliable and secure service execution.Nonbanks are gainin
170、g share.An increasingly diverse and powerful cadre of competitors is challenging incum-bents for a slice of the$550 billion transaction banking market,especially in the midsize corporate segment.These competitors include fintechs,treasury management solutions,procurement platforms,and enterprise res
171、ource planning software providers.Some integrate payments with accounts payable and accounts receivable processes.Others allow CFOs and corporate treasurers to manage commodity,foreign exchange,and interest rate risks.Still others help optimize liquidity and offer modern working capital solutions.Pr
172、oduct growth is coming from new directions.As payments processing becomes more and more commod-itized,banks must create new avenues for growth.One promising area involves offering a request-to-pay(RtP)solution for SMEs.This solution combines instant pay-ments with an electronic invoice exchange to d
173、igitize order-to-cash processes.RtP could give merchants a noncard payment alternative at the point of sale,too.Rising inter-est rates create opportunities for banks to earn interest income from deposits with corporate and financial institu-tion clients.Finally,changing conditions in the global trad
174、e market have heightened demand for supply chain finance and working capital solutions.Although traditional docu-mentary trade finance is declining,open account instru-ments are becoming more popular,driven by the adoption of digital procurement platforms and ecosystems.Regulatory requirements are s
175、urging.Compliance teams have to respond to an array of regulatory guidance intended to make the payments business more resilient.Protection against cyberattacks and data security are key priorities.Global rules that aim to make the payments business more resilient include the Basel Committee on Bank
176、ing Sustainability Principles for Operational Resil-ience,which are applicable to banks in G20 countries.In Europe,pending or recently enacted regulations include Payment Services Directive 3(PSD 3),an EU Commission proposal on instant payments,and the EUs Digital Opera-tions Resilience Act.Geopolit
177、ical tensions have intensified the need for strong,efficient sanctions screening and processes to ensure compliance with measures to combat money laundering and terrorism financing.Although banks bear the heavier regulatory burden,nonbanks are not exempt,and all wholesale transaction banking players
178、 must ratchet up their risk management capabilities.More is expected of core tech.Large transaction banks often juggle dozens of payments applications across multi-ple jurisdictions.Many of these applications are nearing the end of their lifetime,and the IT staff trained to work with these systems a
179、nd programming languages is aging out of the workforce.Such legacy tech issues add complexi-ty at a time when incumbents can least afford it.GenAI is about to take the financial services industry by storm.Cyberattacks are increasing.And real-time payments,new ISO 20022 data formats,digital ledger te
180、chnology,and the rollout of central bank digital currencies are gathering steam.In an increasingly tech-driven transaction banking business,legacy tech is a liability from a customer,compet-itor,and financial standpoint.A Roadmap for ReinventionIncumbents can surmount the challenges they face.But th
181、ey cannot do so with their current operating model.Leaders must take a hard look at their existing capabilities;acknowledge the increasing spread between large,modern,multinational transaction banks and tier 2 and tier 3 banks;and commit to reworking their business.Although reinvention is hard,the r
182、ewards for those that make the effort are likely to be enormous.Heres how established players can jump on a new trajectory of growth.26 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHEvery Facet of Transaction Banking Is in FluxEXHIBIT 10Source:BCG analysis.Note:A2A=account
183、to account;AML/ATF=anti-money laundering and anti-terrorist financing.REGULATIONOperative resilienceAML/ATFSanctionsDigital currenciesCFO AND TREASURER NEEDSDigital/mobileBank agnosticReal timePersonalizedCOMPETITIONEcosystems extension into paymentsBig Tech payment/banking offeringFintech product o
184、fferingCard schemes entering A2A paymentsBanks with recent market entry into transactional bankingTECHNOLOGYReal-time paymentsISO 20022 data formatsCentral bank digital currenciesDigital ledger technology and programmable paymentsGenAI and data analytics Digitization/smart processingBOSTON CONSULTIN
185、G GROUP 27Create a dedicated strategy for transaction banking.Banks often lump transaction banking services into broad-er business strategies.But success in this technology-intensive space requires clear focus and investment at a change-the-bank level.Banks need to push their transac-tion banking am
186、bitions aggressively,setting bold but at-tainable objectives that reflect their current market posi-tion and the radically advantaged future they hope to create.The transaction banking strategy should focus on getting the basics right.Leaders must refine product cover-age and customer segmentation,a
187、nd shore up data securi-ty,cybersecurity,execution reliability,and pricing.With these fundamentals in place,banks can turn their atten-tion to acquiring differentiating capabilities.These may include industry-specific payments offerings like JP Mor-gans InstaMed solution and Flywires cross-border pa
188、y-ments solutions for universities.They may also include new functional solutions such as pay-per-use payment models.Turbocharge trade and supply chain finance.Transac-tion banks must update their trade and supply chain fi-nance offerings.Letters of credit,financing for accounts payable and receivab
189、le,and other classic products will remain important.But banks must augment this bundle with innovations such as purchase order financing and inventory financing.Incumbents must also commit to digitizing their trade and supply-chain finance services to enable API-based integration into third-party pr
190、ocurement platforms(such as SAP Ariba,Coupa,or Tradeshift)or even to co-creating platforms in a banking consortium(such as Trade Information Network).BCG research shows that participating in digital financial ecosystems can confer enormous value.Other avenues of growth include helping corporate cust
191、omers accelerate their green transitionfor example,by rewarding ESG-compliant buyers and suppli-ers with better financing conditions.And as more investors view trade and supply chain finance as an investable asset class,incumbents should make originate-to-distribute models open to institutional inve
192、stors as a complement to balance sheet funding.Use deposits as a customer-value driver.Todays rising interest-rate environment provides impetus for incumbents to pivot beyond credit and support their clients balance sheet needs.Banks should focus on cash-rich industry verticals that require more com
193、plex liquidity optimization and make it easy for customers to access their transaction banking services.Providing improved visibility into cash positions and offering VAS such as cash forecasting can help banks build a more compelling offering.Commit to tech modernization.For incumbents with legacy
194、technology,the question is not whether to modern-ize but how quickly to get the job done.Three main paths are available:build and manage everything in house(a route typically available only to very large banks with suffi-cient scale);blend customized vendor solutions with in-house operations;or outs
195、ource payments technology and operations to a specialized business payments processing provider such as FIS,Worldline,or Nexi.The result must enable an open and modular architecture that can accom-modate RTP,large data volumes,API and host-to-host connectivity,and cloud-based applications and infras
196、truc-ture.(See Exhibit 11.)It must also have the capability to apply transaction data analytics and GenAI to create new client offerings such as real-time liquidity projections,predictive payment scheduling,and transaction filtering.In many cases,designing the target architecture will re-quire banks
197、 to make tradeoff decisions along the different building blocks of the payments architecture,including balancing richness in future functional and technical re-quirements against development costs and timely imple-mentation.For this reason,determining the target tech landscape requires close collabo
198、ration among business(sales and product management),payment operations,and IT.Operationalize transformation.Strong governance is essential.Banks must appoint specific product owners with end-to-end responsibility for each transaction banking product.Together with these individuals,they must devel-op
199、 a target-state tech architecture and a multiyear road-map to implement it.Leaders need to push product inno-vation while also watching for regulatory changes and market infrastructure upgrades.Key business,operations,and technology stakeholders need to be engaged in the planning and aligned on the
200、roadmap.At the outset,we recommend prioritizing one or two high-value client use cases and sequencing the tech modernization on the basis of a clear business case logic.This focus can help planners prioritize investment and create momentum to support the broader transformation.Given the magnitude of
201、 change involved,banks must ensure continuous top man-agement attention,full stakeholder alignment,and rigor-ous program management.28 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHA Modern Payments Architecture Consists of Six Core ElementsEXHIBIT 11Source:BCG analysis.Mod
202、ularityScalabilityConnectivityDataEngineeringUnderpinned by key design principlesMultichannel front endEcosystem integrationExternal APIsProductmanagementProduct validationProduct rulesPAYMENTS EXECUTION(Payments engines and complex product systems)Loosely coupled architecture with multiple,modular
203、componentsCloud-native architecture able to cope with increase in payments volumesEasy,API-based or host-to-host-based connectivity in third-party platforms and corporate systemsUse of modern data model and tools in day-to-day operations and analyticsDeployment of modern engineering practices(agile,
204、DevOps)to accelerate time to market for new,future functional requirementsUSER EXPERIENCE ANDINTERFACETRANSACTIONMANAGEMENTCross-channel mechanismsSimplified,high-level view of the architectureParty journey management and orchestrationPayments engineBusiness components and servicesCLIENT EXPERIENCEM
205、ANAGEMENT ORDER ORCHESTRATION (Order management and product preprocessing)Order management and preprocessingProduct serviceFinancial gatewaysTransformationRoutingConnectivity(Bank back-end system)Core bankingINFRASTRUCTURETechnical infrastructureBOSTON CONSULTING GROUP 29The payments industry is und
206、er construction.From rails to regulation to currencies,nearly every element of the global payments ecosystem is undergoing a rebuild.This period gives infrastructure players and various other payments market stakeholders a unique opportunity to define the future of payments and their roles within it
207、.Five Trends Reshaping the Backbone of PaymentsSeveral overlapping developments have thrust payments infrastructure providers into the forefront.Infrastructure investment is reaching a tipping point.The payments industry faces heightened pressure to innovateand this pressure is driving greater inves
208、tment in payments infrastructure.For example,banks are updat-ing their core infrastructure and accelerating their move to the cloud to operate more efficiently and compete with digital challengers.Payments schemes are introducing richer data formats to enhance interoperability,expand data collection
209、,and enable richer remittance information.And more countries have adopted instant payments de-ployment.Before 2010,only a handful had RTP infrastruc-ture.Today,81 countries have it,and that number is growing.New payments rails are gaining momentum.In many parts of the world,APMs are taking share fro
210、m cards.We forecast that APMs will grow twice as fast as person-to-merchant payments from 2022 to 2027.(See Exhibit 12.)As interest in APMs grows,infrastructure providers are expanding use cases beyond consumer transactions.For example,since 2021,person-to-merchant and person-to-government transacti
211、ons on Brazils PIX rail have seen their share of the total payments mix grow from about 25%to roughly 40%.Globally,many merchants now consider the availability of APMs to be an important selection crite-rion when choosing a payments provider.The Payments Infrastructure Revolution30 GLOBAL PAYMENTS R
212、EPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHCards Will Remain the Dominant Payment Method,but APMs Will Grow About Two Times as Fast as the Market DoesEXHIBIT 12Source:Global Payments Model 2023.Note:BCGs Global Payments Model 2023 does not include closed-loop intrawallet transactions,cas
213、h withdrawals from ATMs,trade finance revenues,and mobile money transactions.All forecasting is done at a constant foreign exchange rate.Because of rounding,not all segment percentages add up to 100%.Excludes cash transactions,bill payments,investment payments,and real estate payments.Consumer-to-me
214、rchant noncash payments($trillions)Card not present(e-commerce)Card present(point of sale)Alternate payment methods(point of sale)Alternate paymentmethods(e-commerce)Others5840CAGR20222027202220275.4%11.5%11.7%15.1%5.9%11.6%9.7%64%8%20%5%3%57%9%24%6%4%Total forcardsTotal for alternatepayment methods
215、7.7%BOSTON CONSULTING GROUP 31Beyond person-to-merchant payments,APMs are expand-ing into cross-border payments as well.Various initiatives to create interoperability between different alternate pay-ment methods are underway.They include the Immediate Cross-Border Payments(IXB)pilot,Nexus,and the As
216、ian Payments Network(APN).In addition,the European Mo-bile Payments Systems Association is exploring intercon-nectivity between APMs.Central bank digital currencies are still a few years away.Over 90%of central banks are exploring central bank digital currencies(CBDCs),and there could be up to 15 re
217、tail and 9 wholesale CBDCs in circulation by 2030,according to the Bank for International Settlements.These currencies will have widespread impacts on the entire payments ecosystem,making the design choices that go into them exceedingly complex.Central banks and market participants must assess wheth
218、er to use digital ledgers or pure blockchain,and whether to revert to a traditional payments infrastructure or use a hybrid of these technolo-gy options.They also need to determine what limits to set on individual holdings,how best to protect data security,and how to ensure interoperability with dom
219、estic and global payments infrastructures.Getting the design right can unleash enormous benefits.In addition to permitting greater monetary autonomy and financial inclusion for central banks and governments,CBDCs will enable broad-er industry applications.Among the most exciting of these are program
220、mable payments and the ability to integrate CBDCs into smart contracts and other forms of decentral-ized finance.Engaging a broad spectrum of market partici-pants will be crucial to battle-testing the design phase of the rollout and minimizing any threats to the stability of financial market infrast
221、ructure.Open banking could finally deliver on its potential.Open banking adoption has fared better in places that had lower barriers of entry for fintechs,such as through a sup-portive regulatory framework,the presence or absence of an advanced payments infrastructure,and generally attrac-tive marke
222、t conditions.In the US,for example,ACH pro-cessing used to take several days,making account and balance validation a lengthy process,but open banking has streamlined these steps,helping fintechs onboard and validate customers in a more seamless way.In Europe,where open banking has had mixed success,
223、PSD 3 promis-es to broaden the scope of data included in open banking and enable greater standardization and access,removing barriers that have hindered the pace of adoption for many years.Expanded access to data and greater standardiza-tion will allow infrastructure providers to offer a rich assort
224、-ment of use cases,including real-time customer acquisi-tion and onboarding decisioning,and digital identity verification.The changes can also enable newer payments forms to operate on real-time payments rails such as recur-ring and push payments.Banks are also interested in participating in open ba
225、nking to ensure that they fulfill regulatory mandates and to fend off competition.Infra-structure providers can support banks with solutions that make compliance with regulatory mandates easier to review and allow banks to leverage open banking innova-tions for commercial applications.Open banking i
226、s not a product class of its own,however.The viability of various market solutions will depend on how participants leverage the infrastructure.Regulators are raising the bar.Governments are be-coming more active in regulating payments,and this activi-ty is affecting the operations of some payments i
227、nfrastruc-ture providers.The Reserve Bank of India,for example,temporarily banned some card networks from issuing new cards because of noncompliance with local data storage rules.And in Europe,the European Commission has pub-lished draft proposals for PSD 3,Payment Service Regula-tion,and Regulation
228、 for Financial Data Access to reduce fraud levels,improve consumer rights,and create a more level playing field between banks and nonbanks.In addi-tion,local rails,scheme issuance,and cobadging could cut into revenue growth for cards companies and impose new requirements for data security and operat
229、ions.32 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTHInfrastructure Providers Must Lead the Revolutionor Be Left BehindOver the next several years,industry participants will make major decisions that will impact the future of payments.Infrastructure providers must be part
230、of that conversation.Here are our recommendations.Pick a strategic focal point.The evolving payments infrastructure environment can create a dizzying number of opportunities and operational challenges.But players must choose a north star and anchor their strategy to that.Card schemes,for instance,ha
231、ve operated a strong net-work for many years,but they must now diversify in areas such as B2B payments,account-based payments,and open banking if they are to maintain growth.Banks and other large financial services institutions must ensure that their current infrastructure initiatives offer a clear
232、path to value creation.And technology players must prepare to deal with emerging trends on decentralized finance and related innovations.Be a modernization facilitator.Infrastructure providers have a deep understanding of what modernizing the pay-ments ecosystem will involve.They can use that knowle
233、dge to provide enabling solutions“as a service,”as embed-ded finance,or in a similar capacity.Infrastructure provid-ers can supply particular expertise in use case develop-ment.Leaders can tailor the data needed for open banking,CBDC,and other types of exploration to specific audiences.Partner with
234、policymakers.Industry participants and regulators must work closely together to shape infrastruc-ture developments and create policies that encourage adoption by end users.Banks,card schemes,and others can help educate policymakers on the risks and opportuni-ties associated with CBDCs,tokenized depo
235、sits,and other advances.For their part,regulators should be open to working with the industry to ensure that the policy frame-works they develop support rather than stifle innovation and facilitate adoption of new payments infrastructure across the entire payment ecosystem.Diversify value streams.Be
236、cause core infrastructure strategies can easily become commoditized,infrastructure providers should lean into orchestration-layer propositions and at-scale VAS.Card schemes have already shown the benefits of pivoting to VAS.And a more diverse solution set can act as a hedge against slowdowns in any
237、one product area.Creating these enhanced offerings will require players to move from a business-unit orientation to a more product-centric organization to enable always-on innova-tion and ensure continued delivery of value to customers.BOSTON CONSULTING GROUP 33The payments industry has proved itsel
238、f to be extraor-dinarily dynamic.The tumultuous crises over the past several years offer ample evidence of that.Despite a pandemic,supply chain shocks,and rising geo-political tensions,the payments sector has continued to lead other industries in its rate of innovation.But years of nonstop disruptio
239、n have begun to take a tollputting pressure on slow-to-modernize institutions.Now leaders must confront disruption head-onand they must do so quickly because not moving fast enough carries real risks.As innovations inspired by emerging technologies crop up in more solutions,as adoption of RTP and CB
240、DC grows,and as challengers continue to raise the bar for excellence,businesses cannot stand still.To navigate the challenges ahead,organizations must take decisive action.(See Exhibit 13.)Leaders that are willing to act can unlock new revenue sources and secure a more prosperous future for their bu
241、siness and stakeholders.Resilience has defined this industry,and,with adaptability,its strength will endure.Conclusion34 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTH Short term:Make safeguarding shareholder value and cost excellence a top priority for the next 6 to 12 mon
242、ths to improve operating results.Long term:Create an integrated business,finance,and investor strategy to increase TSR.Short term:Refresh partnership strategy to identify and realize current M&A opportunities at attractive valuations.Long term:Integrate M&A and partnerships to complement in-house bu
243、ilt capabilities.Short term:Size the opportunity,and identify two or three high-impact use cases to start.Build the tech architecture,governance,and skills to implement use cases.Long term:Scale GenAI(and more broadly data analytics)across the organization,focusing on the most important customer jou
244、rneys.Short term:Baseline current payments architecture,and translate regulatory requirements,infrastructure changes,and technology innovations into a multiyear roadmap.Long term:Execute the roadmap and manage the complex change projects to deliver implementation results on time,on budget,and with t
245、he right quality.Short term:Perform a brutally honest self-assessment on risk and compliance capabilities,and close the most important gaps.Long term:Define and implement a target operating model to enable long-term resilience and professionalize risk management and compliance practices.Short term:D
246、evelop differentiating value-added services around digital marketing and loyalty and embedded finance.Accelerate cloud migration,update API strategies,and pilot AI and GenAI use cases.Create a task force to manage M&A and partnerships.Long term:Reimagine core merchant journeys,linking customer exper
247、ience improvements to back-end operations.Future-proof the tech platform,consolidating platforms and adopting a modular,scalable architecture.Short term:Embrace agile work practices to improve marketing efficiency.Reduce delinquencies by implementing early indicators,digital self-service and stronge
248、r in-house recovery capabilities.Cultivate corporate payments solutions through co-investments with procurement platforms.Long term:Use M&A and partnerships to retool loyalty,ramping up deal sourcing capabilities and revising collaboration models.Become a tech-and data-led issuer,and prioritize real
249、-time processing,banking-as-a-service,and data-as-a-service capabilities.Short term:Create a dedicated strategy for transaction banking.Turbocharge trade and supply chain finance by launching innovative offerings such as ESG-compliant supply chain finance,and digitize services.Use deposits as a cust
250、omer-value driver by offering value-added services that focus on cash-rich industry verticals.Long term:Commit to a tech modernization path.Build in-house,use a vendor,or outsource.Operationalize transformation by appointing specific product owners and prioritizing one or two high-value client use c
251、ases.Short term:Pick a strategic focal point tied to the highest-value opportunities.Be a modernization facilitator,deploying subject matter expertise to create“as-a-service”solutions that guide ecosystem partners.Diversify value streams by creating orchestration layer propositions and at-scale valu
252、e-added services.Long term:Partner with policy makers to shape infrastructure developments and encourage end-user adoption.Move from business-unit orientation to a more product-centric organization to enable“always-on”innovation and ensure continued value delivery to customers.Cross-industry actions
253、Industry-specific actions ResilienceM&AGenAITechnologyRisk and complianceAcquirers/merchantservices providersIssuersWholesaletransaction banksPaymentsinfrastructureprovidersSource:BCG analysis.Payments Leaders Can Enable Sustainable Growth with These StepsEXHIBIT 13BOSTON CONSULTING GROUP 35For Furt
254、her ReadingBoston Consulting Group has published other reports and articles that may be of interest to senior financial execu-tives.Recent examples include those listed here.Managing Risk for the Next Wave of Digital Currencies A report by Boston Consulting Group,July 2023How Generative AI Is Alread
255、y Transforming Customer Service An article by Boston Consulting Group,July 2023Global Wealth Report 2023:Resetting the Course A report by Boston Consulting Group,June 2023How Banks CMOs Can Do More with Less An article by Boston Consulting Group,June 2023Banks Can Ensure an Equitable Climate Transit
256、ion An article by Boston Consulting Group,May 2023Global Asset Management 2023:The Tide Has Turned A report by Boston Consulting Group,May 2023Global Fintech Report 2023:Reimagining the Future of Finance A report by Boston Consulting Group,May 2023Impact of Distributed Ledger Technology in Global Ca
257、pital Markets A report by the Global Financial Markets Association and Boston Consulting Group,May 2023Financial Institutions Must Get Serious about Digital Ecosystems An article by Boston Consulting Group,March 2023Why Rising Interest Rates Arent a Cure-All for Banks An article by Boston Consulting
258、 Group,March 2023Banks Can Bet Big on Social Impact An article by Boston Consulting Group,December 2022Global Payments Report 2022:The New Growth Game A report by Boston Consulting Group,October 2022Winning Financial Institutions Build on Digital Strategy An article by Boston Consulting Group,Octobe
259、r 2022A New Era for Money A report by Project New Era and Boston Consulting Group,February 2022Global Payments 2021:All in for Growth A report by Boston Consulting Group,October 202136 GLOBAL PAYMENTS REPORT 2023:A MOMENT OF TRUTH About the AuthorsMarkus Ampenberger is a partner and associate direc-
260、tor in the Munich office of Boston Consulting Group.You may contact him by email at .Jean Clavel is a managing director and partner in BCGs Paris office and is the global topic co-leader for the issuing segment.You may contact him by email at .Tom Dye is a managing director and partner in BCGs New Y
261、ork office and is the global topic co-leader for the issuing segment.You may contact him by email at .Sumit Kumar is a managing director and partner in BCGs Singapore office and the leader for BCGs payments and transaction banking segment in Asia-Pacific.He can be contacted at .Max Nitsche is a part
262、ner in BCGs Frankfurt office and is the global topic leader for GenAI and M&A in payments.You may contact him by email at .Alexander Paddington is a partner in BCGs New York office and is the global topic leader for the wholesale trans-action banking segment.You may contact him by email at .Yann Sna
263、nt is a managing director and senior partner in the firms Paris office.He is the global leader of the firms payments and fintech practice.You may contact him by email at .Inderpreet Batra is a managing director and senior partner in the firms New York office and leads the pay-ments and transaction b
264、anking segment in North America.You may contact him by email at .Tijsbert Creemers is a managing director and senior partner in the firms Johannesburg office and is the global topic leader for the wholesale transaction banking seg-ment.You may contact him by email at .Kunal Jhanji is a managing dire
265、ctor and partner in the firms London office and is the global topic leader for the payments infrastructure segment.You may contact him by email at .Ankit Mathur is a senior director in the firms Toronto office and the global lead for the payments and fintech knowledge and research teams.You may cont
266、act him by email at .Stanislas Nowicki is a managing director and partner in the firms Paris office and is the global topic leader for the merchant acquiring segment.You may contact him by email at .Thomas Pfuhler is a managing director and partner in the firms Munich office and is the global topic
267、leader for risk management in payments.You may contact him by email at .Alvaro Vaca is a managing director and partner in the firms Madrid office and leads the payments and transac-tion banking segment in Europe,the Middle East,Africa,and South America.You may contact him by email at .BOSTON CONSULT
268、ING GROUP 37AcknowledgmentsThe authors would like to thank their BCG colleagues for their valuable contributions to the development of this report.In particular,they thank Tushar Agarwal,Vivek Batra,Frederic Brugere,Juliane Butters,Joao Paulo Curado,Albane de Vauplane,Jean Dobbeni,Matthias Egler,Rav
269、i Hanspal,Katharina Hefter,Mohammad Khan,Bingbing Liu,Vivek Mandhata,Emir Pandir,Max Pulido,Max Teichert,Alejandro Tfeli,Ricardo Tiezzi,and Zheng Wang for functional and local market insights;Thomas Lloyd and Ian Loh of the Fintech Control Tower team;Maria Arias,Carlos Bravo,Corey Magruder,Aditi Sha
270、nkar,Nathalie Sir,Kenny Stevens,Tim Superko,Kanchanat U-Chukanokkun,Yang Yu,and Davor Zilic from the Payments&Fintech Knowledge and Research team.In addition,the authors are extremely grateful to core members of the BCG Global Payments Model team:Si-mon Borgoltz,Nikhil Dangayach,Anuj Goel,and Jeewan
271、 Goula.Also,Ankit Gupta,Jens Muendler,and Michael Schickert provided helpful support,as did numerous local analysts from the Financial Institutions Knowledge Team and Data&Research Services.Finally,the authors are grateful to Marie Glenn for writing support,Kerri Holmes and Philippa Keir for marketi
272、ng and production support,and Steven Gray for editorial support.For Further ContactIf you would like to discuss this report,please contact the authors.Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunit
273、ies.BCG was the pioneer in business strategy when it was founded in 1963.Today,we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholdersempowering organizations to grow,build sustainable competitive advantage,and drive positive societal impact.Our diver
274、se,global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change.BCG delivers solutions through leading-edge management consulting,technology and de-sign,and corporate and digital ventures.We work in a uniquely collaborative model
275、 across the firm and throughout all levels of the client organization,fueled by the goal of helping our clients thrive and enabling them to make the world a better place.Boston Consulting Group 2023.All rights reserved.9/23For information or permission to reprint,please contact BCG at .To find the latest BCG content and register to receive e-alerts on this topic or others,please visit .Follow Boston Consulting Group on Facebook and X(formerly known as Twitter).38 GLOBAL PAYMENTS REPORT 2023:INVESTOR SCRUTINY PROVOKES A MOMENT OF TRUTH