1、Deutsche Bank Research Part II. Moving to Digital Wallets and the Extinction of Plastic Cards #PositiveImpact P o w e r e d B y D e u t s c h e B a n k D a t a I n n o v a t i o n G r o u p P o w e r e d B y D e u t s c h e B a n k D a t a I n n o v a t i o n G r o u p dbDIdbDIG G Part I. Cash: the

2、Dinosaur Will Survive For Now The Future of Payments Part II. Moving to Digital Wallets and the Extinction of Plastic Cards Part III. Digital Currencies: the Ultimate Hard Power Tool Corporate Bank Research January 2020 Deutsche Bank Research / The Future of Payments: Part II. Moving to Digital Wall

3、ets and the Extinction of Plastic Cards2 Summary on a Page When people discuss the future of payments they tend to predict the end of cash. Our view is different. Not only do we think cash will be around for a long time, we see the transition to digital payments as having the potential to do no less

4、 than rebalance global economic power. This piece is the second in a series of three pieces that examines the past, present, and future of the payments industry. We analyse the unexpected results of our proprietary survey of 3,600 customers across the US, UK, China, Germany, France and Italy and for

5、ecast trends in cash, online, mobile, crypto, and blockchain. The implications for customers and business are important; the potential macro and geopolitical consequences are profound. We start by using the lessons of history to predict that cash will be a part of the economy for decades to come. Ov

6、er centuries, people have developed a deep-rooted trust in paper and coins during uncertain times. Today is no different. For example, the trade war between the US and China has led notable investors to increase their cash holdings. Our survey shows that people also like cash because it allows them

7、to more easily track their spending. While cash will stay, the coming decade will see digital payments grow at light speed. That will lead to the death of the plastic card. Over the next five years, we expect mobile payments to comprise two-fifths of in-store purchases in the US, quadruple the curre

8、nt level. Similar growth is expected in other developed countries, however, different countries will see different levels of shrinkage in cash and plastic cards. In emerging markets, the effect could arrive even sooner. Many customers in these countries are transitioning directly from cash to mobile

9、 payments without ever owning a plastic card. Digitalisation will give businesses extra incentive to smooth the payments transition. For starters, when customers are comfortable with a payment technology, they tend to think less about how much they spend. Furthermore, as the data gleaned from paymen

10、ts becomes increasingly valuable, payment fees will approach zero. Business-to-business transactions will also benefit. Currently, corporates wait almost 70 days for payment from business customers. The number one reason for this is inefficient internal processes which lead to payment delays, someth

11、ing digitalisation can fix. We can deduce much about the future of payments from developments in China where the country is developing world-leading digital payments infrastructure. There, the value of online payments is equivalent to three-quarters of GDP, almost double the proportion in 2012. Toda

12、y, just under half of in-store purchases in China are made via a digital wallet, way above the levels in developed markets. As China (and India) develop electronic, crypto, and peer-to-peer strategies, the epicentre of global economic power could shift. China is working on a digital currency backed

13、by its central bank that could be used as a soft- or hard-power tool. In fact, if companies doing business in China are forced to adopt a digital yuan, it will certainly erode the dollars primacy in the global financial market. Many are sceptical about digital currencies citing the large energy need

14、s and point out that currencies such as bitcoin and Facebooks libra have encountered significant regulatory hurdles. Yet, if the growth in blockchain wallet users continues to mirror that of internet users, then by the end of the decade, they will number 200 million, quadruple the current level. Thi

15、s will be encouraged by governments, banks, corporates, and payment providers who all stand to benefit from the digitalisation of payments. And when countries and companies eventually look back at the way they transitioned to digital payments, it may become very apparent how they achieved their stan

16、ding in the world economy. Authors Marion Laboure, Ph.D. | Jim Reid | Deutsche Bank Research / The Future of Payments: Part II. Moving to Digital Wallets and the Extinction of Plastic Cards3 Fintech companies and smartphones have facilitated banking innovations that could inaugurate a new integrated

17、 and dematerialised ecosystem for payments. On the business-to-consumer side, smartphones are making plastic cards obsolete (see our previous piece The end of cash plastic cards). People in advanced countries are gradually adopting smartphone-based payments in the context of each countrys infrastruc

18、ture. Eager adoption by millennials and increased digitisation of country infrastructures could diminish the use of plastic cards over the next decadeeven as people continue to use humble notes and coins. Most people we surveyed are not ready to abandon their beautiful leather wallets, but most of t

19、hem also believe that digital wallets are more than a fad. Most plan to use a smartphone wallet more in the next six months, and most believe that digital wallets will replace traditional wallets within the next five years. This trend opens outstanding opportunities for brands, retailers, and, on a

20、broader scale, any business selling directly to consumers. Digital wallets can allow businesses to better know, interact with, and personalise products for their customers. Personalisation enables companies to stand out in the field and gain market share. This is particularly the case with millennia

21、ls who surveys show see smaller, custom brands as offering better quality products. Looking forward to 2025, we expect e-Wallets to be the second- most preferred method of payments after cards and the most preferred method among millennials. Introduction Weekly in-store purchases per country in 2019

22、 and 2025 Source: Deutsche Bank dbDIG. Note: We expect purchases with cheques to be lower than 1 percent and nearly all cards to be contactless in 2025 in the US, UK, Germany, France, and Italy. 100% 10% 0% 20% 30% 40% 50% 60% 70% 80% 90% At one level it is strange that B2B customer satisfaction ind

23、ices rank lower than 50 percent. This is systematically lower than B2C companies, which typically score at 65 to 85 percent. Some of the biggest B2B problems are late payments, collection, and recovery. In fact, payment time has increased by 10 percent over the last decade and the average time to pa

24、yment is now nearly 70 days. One reason for this long average delay relates to business clients who deliberately extend payment terms to maximise their working capital. But the primary reason for long delays is inefficient internal processes and methods for tracking receivables. This factor is frequ

25、ently overlooked because the focus has been on shifting companies away from cheques to electronic payments. This change requires businesses to gather and manage all the data, including that required to make timely payments and track deliveries. In this section, we will focus on the key global fintec

26、h transitions related to paymentsfor both B2B and B2C. Understanding these changes will provide a framework for better understanding possible outcomes the topic of the third piece in this series. 2025 MobileCardsCashCheque 2019 US 2025 UK 20192025 France 2019 Italy 20192025 Germany 20192025 Deutsche

27、 Bank Research / The Future of Payments: Part II. Moving to Digital Wallets and the Extinction of Plastic Cards4 Payments and Smartphones As we explain in Part I. Cash: the Dinosaur Will Survive For Now, the question of whether we will see the end of cash in the 2020s is a distraction. The right que

28、stions are: Which new means of payment will emerge and which existing ones will disappear the soonest? What if plastic cards, a relatively recent invention, disappear first? The digital payment revolution is rooted in the 2008 global financial crisis. At that time, liquidity in the financial system

29、was low, people struggled to borrow money, and distrust in the banking system grew. Since then, regulation over traditional banks has strengthened. Meanwhile, most fintech players have operated below the radar and have not been subject to the full array of banking regulations. The number of deals an

30、d the amount of capital raised for payments innovation have strongly accelerated in recent years. Today, about a third of fintech deals and capital raised relates to the payments industry. The growth in the sector has been phenomenal. Global payments revenues have nearly doubled in the last ten year

31、s to almost $2 trillion. Unsurprisingly, the Asia-Pacific region, due to its market size and mass adoption of new technologies, represents nearly half of worldwide payments revenues. Global payment revenues ($ trillion) Source: McKinsey Global Payments Map. 2.0 0.2 0.0 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.

32、8 20062001220162018 Latin AmericaEMEANorth AmericaAsia-Pacific When Apple released its first-generation iPhone in 2007, few predicted that smartphones would be so successful. Today in the US, individuals spend on average three hours per day on their phones and check incoming messages near

33、ly eighty times per day. Millennials, especially, are attracted by smartphone convenience and are addicted to the flow of information (messages, email, social networks, app alerts, news, etc.). The centralisation of all these functions into a “one size fits all” device has, of course, greatly expand

34、ed the use of phones for making financial transactions. That, in turn, has spawned a plethora of payment services, such as Apple Pay and Google Pay (to name just two). These services have strengthened the retail payment value chain in which there is an interdependence of smartphones and payment serv

35、ices essential for todays major fintech transitions. The payment value chain is complex and highly intermediated. Simplistically, it can be split into two successive phases: the “consumer front office” and the “operation back office.” Payment revenues ($ trillion) +7% p.a. Deutsche Bank Research / T

36、he Future of Payments: Part II. Moving to Digital Wallets and the Extinction of Plastic Cards5 The retail payment value chain CONSUMER FRONT OFFICEOPERATIONS BACK OFFICE Step 1 Payment devices (consumer/sending side) e.g. Apple Pay, Google Pay, Samsung Pay Step 2 Payment receptors (merchant side) e.

37、g. Starbucks app, Amazon Go, Tesco Pay +, Walmart Pay Step 3 Payment processing (data exchange) Step 4 Payment settlement (fund transfer) Within the consumer front office framework, the consumer (or the sending side, broadly speaking) first initiates a payment using a device. The payment moves throu

38、gh different channels (e.g. Internet, mobile payment platform, bank branch storefront, etc.). Then the data are transferred to the payment receptors of the merchants bank (the acquirer/processor). This first phase involves the highest distribution of sensitive data and might involve tens or even hun

39、dreds of millions of consumers and merchants in short amounts of time. That data is subject to many points of vulnerability. Security measures to protect data vary greatly and are still in the early stages of development. Consumer Front Office: Three Types of Mobile Payments Players New players such

40、 as Apple Pay, Google Pay, and Samsung Pay have recently offered more convenience and speed to users. They enable users to store electronically, on a mobile phone, the personal and financial information that has traditionally been stored on plastic cards. Thus, the mobile phone replaces the traditio

41、nal wallet and serves as a contactless payment tool. Importantly, this emerging system does not disintermediate the value chain; it creates, at least so far, an additional intermediary, which means increased fees for the merchant, but more convenience for customers. The second type relates to retail

42、ers that set up payments through their own apps. This approach also doesnt remove (or add) intermediaries. But customers can avoid copying and pasting their card details into Apple Pay or Google Pay because they enter their cards details into the app. The most popular and well-known app of this sort

43、 is the Starbucks Rewards app with about 17 million US memberships in 2019. Thirty percent of payments at Starbucks stores occur with the companys points program. More recently, grocery stores have started offering mobile payments. For example, the British multinational grocery chain Tesco introduce

44、d Tesco Pay + and the American behemoth Walmart launched a Walmart Pay app. Both the Tesco and Walmart apps mimic the system Starbucks introduced in 2011. The Starbucks mobile payment app initially allowed customers to make payments and to store their Starbucks gift cards within the app. Now custome

45、rs can also store their credit card information in the Starbucks app, enabling them to scan their smartphones at the register when they pay for their coffee. Amazon Go stores implemented a system by which customers check-in to the physical store, select the items they want from the shelves, and then

46、 walk out of the store without going through a checkout line with a cashier. Payment occurs automatically by the power of sophisticated in-store technology that includes overhead cameras, weight sensors, smartphone payments, and other innovations. The third type of payment app provides features such

47、 as credit card payments, bank account management, P2P transfers, prepay mobile phone payments, bus and train ticket purchases, food orders, ride hailing services, insurance selections, and digital identification document storage. Examples of this type are the Chinese mobile players Alipay and WeCha

48、t. e.g. Alipay and WeChat Pay transfer funds to the merchants Deutsche Bank Research / The Future of Payments: Part II. Moving to Digital Wallets and the Extinction of Plastic Cards6 Back Office Operations: Authenticating and Transferring Payments The second step relates to the “operation back offic

49、e.” First, the merchant bank contacts the payment bank. Then the payment is processed though data exchange via the card platform (e.g. Visa, Mastercard). Finally, the payment is authenticated and the funds are transferred between the two accounts. This second stage involves the highest concentration of organisations that gather sensitive data. Fewer than twenty organizations in the world process billions of transactions with few points of vulnerability. The strongest security measures are found in countries with mature government infrastructur