COVID-19 payments revenue growth scenarios modelled

Payments players are used to operating in an instant and real-time world, but few could have anticipated the crushing speed of the pandemic or its devastating toll.

With economic life still disrupted by social distancing and lockdowns, most payments businesses will see revenue growth dip in the near term—although the impacts will vary according to the value proposition, portfolio composition, and market position of individual players – says the Global Payments Report 2020 from Boston Consulting Group.

The payments revenue growth scenario modelling in the report suggests that from 2019 to 2024 global payments revenues will likely increase by about 1{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} to 4{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, depending on the speed of the economic recovery. Under a quick-rebound scenario, that growth range would be roughly half the rate of the prior five years. Once the recovery is underway, however, prospects in the medium term and beyond remain buoyant.

In the short term, most players in the payments industry are likely to see payments revenue growth contract. But favourable trends such as the shift to contactless payments, the growing adoption of digital wallets, and the more widespread use of business-to-business (B2B) payments automation will lift the industry’s prospects longer term.

Given the uncertainty surrounding the still unfolding pandemic and questions about subsequent waves of infection, our payments forecast includes three revenue growth scenarios based on global GDP development (see above).

Under a quick-rebound scenario, the outlook suggests that the global payments revenue pool will expand from $1.5 trillion in 2019 to $1.8 trillion in 2024, a compound annual growth rate (CAGR) of 4.4{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, lifted by the continued transition away from cash, sustained strong growth in e-commerce and electronic transactions, and greater innovation.

Incumbents will need to work harder to capture this growth, however. The payments space is becoming more crowded, with an expanding array of non-traditional players jostling with banks and payments service providers to become the issuer, provider, processor, or partner of choice.

Shifts that were already happening before the pandemic will force established institutions to pick up the pace of digitization, gain economies of scale, and manage risk in new ways—all while continuing to innovate. The growth winners in the post crisis period will be those that use this time before the recovery to reset and rebalance.

Although solid, this CAGR is much lower than the 7.3{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} annual growth the industry enjoyed from 2014 to 2019. In a slow-recovery scenario, the global revenue pool would reach $1.7 trillion by 2024, a CAGR of 2.7{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}.

Under a deeper-impact scenario, the revenue pool would grow to only $1.5 trillion, a moderate CAGR of 1.1{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}.

The second half of the decade, however, looks considerably brighter, driven by economic expansion, advancements in payments infrastructure, e-commerce growth, and greater financial inclusion.

From 2024 to 2029, payments revenues globally should rise by 4.4{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} to 5.6{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} annually (depending on the scenario)—roughly 1.5 times faster than the growth of banking revenues overall. By 2029, the revenue pool could swell to between $1.9 trillion and $2.4 trillion, depending on the extent of the economic recovery.

These are among the findings of BCG’s 18th annual analysis of payments businesses worldwide. First, the report outlines recent developments in the payments market around the world and on a regional basis. The next chapters then explore how retail and wholesale payments providers can best respond to the disruptions caused by the pandemic and fast-forward to growth. Finally, in the concluding chapter, it notes key challenges impacting the industry and five imperatives to win in the future.