However, the innovation landscape in payments is uncertain as BigTech entrants make their presence felt, and incumbents face technical and regulatory complexity in the development of new collaborative payments ecosystems between themselves and FinTechs. The report finds that it will take more than bank-led initiatives to grow the new payments landscape. The broader financial services community - including public-sector organizations, regulators and third parties - must determine their new roles and work together with large payment users to ensure a smooth, balanced, and robust payments ecosystem development.

Developing markets are driving non-cash growth
The report forecasts that non-cash transactions will post a compound annual growth rate (CAGR) of 12.7 percent through to 2021, following growth of 10.1 percent in 2015-16, which saw the total volume of non-cash transactions reach 482.6billion.

This non-cash boom is being driven by developing markets, with Russia (CAGR of 36.5 percent), India (33.2 percent) and China (25.8 percent) as notable movers during 2015-16. Mature markets maintained steady growth of more than 7 percent.

Developing markets are set to show a 21.6 percent CAGR, led by emerging Asia at 28.8 percent over the next five years. By 2021, developing markets are expected to account for around half of all non-cash transactions worldwide, overtaking the mature markets for the first time, whose current share stands at 66.3 percent.

BigTechs are opening their e-wallets
Disruption of the payments market is accelerating as new technologies take hold and BigTechs and FinTechs make their presence felt. In particular, e-wallets are on the rise and present a major market opportunity for non-traditional payments providers. In 2016, e-wallets accounted for 8.6 percent of non-cash transactions (a volume of 41.8 billion), of which 71 percent were facilitated by BigTech providers. 

Innovation faces complexities
Although disruption is accelerating, and market entrants are proliferating, there are regulatory and technical complexity challenges to the development of innovative new payments ecosystems, along with the expectation of the current level of security. Only 38 percent of bank executives surveyed for the report said they were ‘planning an anchor role’ in new payments ecosystems.

“As demand for digital payments is strong, especially in developing markets, some banks may want to revisit their choice to not seek an anchor role in the new emerging payments ecosystem,” said Anirban Bose, CEO of Capgemini’s Financial Services and member of the Group Executive Board. “With their significant market share in the payments industry and implementation of new technologies, banks are in a unique position to shape the marketplace. They can also create new revenue streams through innovative, collaborative relationships with FinTechs and active participation by the broader financial services community.”

Like banks, corporate treasurers should also consider their role in the new ecosystem as they expect value-added services that are safe, efficient, reliable and global and could co-design these services with banks. 

“Large payments users are also a key constituency in the evolution of innovation in the payments industry. Without their participation, payments services providers are missing a vital opportunity to shape new offerings in transaction banking such as in cash aggregation, cash forecasting and automated treasury,” said Bruno Mellado, Head of International Payments and Receivables at BNP Paribas. “These offerings could equip corporate treasurers with the means to move beyond a tactical or operational role and towards a more strategic one for their companies.”

Indicative of the complexities that surround innovation in the payments marketplace, many respondents said that adoption of a real-time payments infrastructure was being inhibited by lack of interoperability between schemes[2] (identified by 74.1 percent of executives) and weak data and authorization standardization (59.3 percent). 

On Distributed Ledger Technology (DLT), 85.9 percent highlighted lack of interoperability, 83.1 percent lack of regulatory clarity, and 77.1 percent ability to scale, as factors limiting adoption. 

The report also shows how key regulatory and industry initiatives (KRIIs) are threatening to create conflicts as they spread from a regional to a global level. Conflicting KRIIs pose implementation and operational challenges that could hinder the transition to new payments ecosystems. Examples include the Fifth Anti-Money Laundering Directive (5AMLD) and PSD2 conflict, as well as GDPR and PSD2. 

Report methodology
The World Payments Report 2018 is comprised of primary research based on executive interviews and an online survey. This edition also includes the introduction of the Payments Open Banking Assessment, which demonstrates the state of open banking in 16 countries from a payments perspective.