Global Payments 2013: Getting Business Models and Execution Right

The payments and transaction-banking businesses represent an increasingly critical element of the banking industry and the global financial-services landscape. Their importance as key generators of stable revenue streams and as the linchpin of customer relationships—and therefore long-term customer loyalty—will only gain momentum throughout the rest of the decade. Institutions that are active in these businesses need to take stock of their capabilities and performance, sharpen their strategies, and lift their execution skills.

In our previous reports on the global payments industry, we have typically taken a regional approach, looking separately at the state of play in the Americas, Europe, and Asia-Pacific. Last year, in a departure from tradition, we published The Transaction Banking Advantage: The Path to Profitable Growth, a collection of four articles that addressed key transaction-banking topics: operating models in wholesale transaction banking; the rise of the Asia-Pacific region and global trade flows; mobile payments; and payments opportunities in emerging markets.

This year, in our eleventh Global Payments report, we return to our traditional format and present updated data on payments trends. As part of this update, we have worked with SWIFT, the global provider of secure financial-messaging services.

Rather than take a regional perspective as we have in the past, we first offer a global overview of the industry landscape, then concentrate on three high-stakes topics: key success factors in wholesale transaction banking, the impact of digital technology on acquirers and payment service providers, and the state of the global cards business.

We define payments revenues as direct and indirect revenues generated by a payment service. These include transaction-specific revenues, card and account maintenance fees, and spread income generated from current accounts, also known as checking or demand-deposit accounts (DDAs). Fees for overdrafts and nonsufficient funds are considered transaction-specific revenue. (See the Appendix for details.) Given this definition, payments make up approximately one-quarter of total global-banking revenues. We define transaction banking as products and services related to payments, such as cash management services for corporate clients.

Our aim in Global Payments 2013: Getting Business Models and Execution Right is to provide institutions that are active in the payments and transaction-banking businesses with provocative food for thought about where the industry is going. We also offer recommendations on which specific steps should be taken by different types of players in order to achieve or maintain leadership positions. In today’s hypercompetitive “new new normal” environment, five years after the depths of the global financial crisis, few institutions can afford to maintain the status quo. The payments industry is in flux, and its basic economics—notably the shift from account-based revenues to fee-based revenues—is changing the landscape. The winners throughout the remainder of the decade will be those institutions that effectively adapt their business models and sharpen their execution capabilities in the changing environment.