Top Trends in Consumer Finance and Payments
Euromonitor projects total card payment value will increase by $USD 18 trillion over the next five years with the growth split almost equally between credit and debit cards. Cash reached a record low rate of 22% of consumer payment value in 2022 as consumers turned to electronic and card alternatives. This high level of card conversion for consumer payments has not been seen with business to business (“B2B”) payments which heavily favour electronic direct and paper channels over financial cards offering an opportunity for card networks, issuers, and digital payment platforms.
Cash continues to decline across markets
Global consumer paper payment value dropped by $USD 3.8 trillion between 2017 and 2022. The decline was not confined to certain markets, with only 8 of the 47 researched by Euromonitor gaining in consumer paper payment absolute value over the previous five years. Singapore had the highest drop in consumer paper value over the same time frame with an 89% decline.
The migration of consumer payments to financial cards and electronic direct channels has been accelerated by government efforts to increase the transparency and security of consumer payments overall. Also driving the conversion is the access to financial services and efforts to make card acceptance universal. Fintech has played a leading role in making financial products and services easier to use whilst lowering the overall cost for consumers.
Ever-increasing share of mobile-commerce, benefiting from shifting retail format
The migration of retail expenditure online contributed to rising mobile-commerce (“m-commerce”) which has increased globally by $USD 3.5 trillion from 2017 to 2022. Together with the ease of access offered by mobile devices, this is expected to further drive adoption to reach USD10 trillion by 2027.
While a large portion of m-commerce growth will come through proximity m-commerce (such as making physical in person payments using mobile phones and point-of-sale terminals), it will grow slower than remote m-commerce and is expected to account for 35% of total by 2027, down from 39% in 2022. The single market that is driving m-commerce payment value has been China, which accounted for 55% of all m-commerce in 2022. However, with greater global adoption the country’s share is expected to fall to 47% by 2027.
Asia Pacific secures its position in payments
Since 2017 Asia Pacific has been responsible for at least half of all consumer payment transaction value. The region’s share of card payment value has consistently increased and is projected to account for 63% by 2027. While China accounted for 81% of the payment value in the region, the country’s share is expected to decline as other emerging markets in the region achieve higher rates of financial service adoption. Generating the most card payment value has created the world’s largest card issuers and network by processed transaction value and contributed to rapid innovation in acceptance and accessibility.
B2B payments represent biggest opportunity in terms of cash conversion
Euromonitor identified $USD 32 trillion in commercial paper payment value globally with the vast majority of other B2B transactions taking place electronically. This is a significant opportunity for card and electronic payment providers who have traditionally focused on capturing the $USD 15 trillion in consumer paper payment value. In 2022, commercial card value only accounted for 2% of global B2B payment value. Increasing cards share of total B2B will require developing compelling incentives and rewards to merchants, primarily small and medium businesses.
BNPL becoming established lending method
Total BNPL lending across the markets researched by Euromonitor increased 9% from 2021 to reach $USD 156 billion in 2022. The rapid rise of the lending channel has unlocked significant consumer spending and increased the products and services available to all income segments but is facing several challenges going forward. Regulations, rising interest rates and a potential economic recession could all upend the lending channel in the medium term. Additionally, the number of companies offering BNPL solutions continues to accelerate further driving down the potential profitability of the channel going forward.
This Featured Article has been produced by Euromonitor. Rize ETF Ltd make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability or suitability of the information contained in this article.
Euromonitor International, “Top Trends in Consumer Finance and Payments”. Available at: https://www.euromonitor.com/article/top-trends-in-consumer-finance-and-payments