Confirmed by the European Central Bank’s recent announcement of four percent growth in the EU, global payments volumes continued to grow in 2009, despite economic pressure from the financial crisis according to findings from the World Payments Report 2010, announced today by Capgemini, RBS and Efma. This followed a period of overall growth in non cash-payments which accelerated to nine percent in 2008 from seven percent in 2007. The rate of growth in non-cash payments volumes in 2008 was far faster in developing economies, such as China (29 percent), South Africa (25 percent) and Russia (66 percent), than in mature markets, such as North America which had a growth rate of four percent.
The World Payments Report 2010 examines the latest trends in the global payments landscape including payments volumes and instruments usage as well as key payments-related regulatory initiatives and the consequent strategic challenges and options for banks. The report reveals that globally, cards remain the preferred non-cash payment instrument, accounting for more than 40 percent of payments in most markets and 58 percent globally. In the Eurozone, cash-in-circulation has continued to maintain a steady growth of around 11 percent per year since 2002, representing significant cost for society. Alternative, or non-bank providers, have made significant strides in m-payments, particularly in emerging markets, and e-payments – although both still account for only a small percentage of total worldwide transaction volumes.
Progress towards SEPA continues but challenges remain
The report highlights several key developments that have taken place in the last year around the Single Euro Payments Area (SEPA) and Payment Services Directive (PSD), revealing nearly all European Economic Area (EEA) Member States have now transposed PSD into national law . The report also reveals that while SEPA Direct Debits (SDD) were launched in November 2009 for both consumers and corporates, usage at this stage remains very low. At the same time, usage of SEPA Credit Transfers (SCTs) has continued to grow but is still behind expectations. Nearly all stakeholders, including government and industry, now agree that full SEPA migration will continue to lag unless supported by regulation and in June 2010, the European Commission (EC) announced that it was intending to draft binding legislation on migration end-dates.
Additional regulatory pressures continue to affect the global payments industry.In response to the crisis, regulators are taking further steps that will have significant consequences for key elements of the payments industry. Implementing the Basel III framework, in particular, will require management attention and investment which, along with more stringent liquidity requirements, will increase costs and could require a deeper strategic repositioning for banks. Additional pressures come from Anti-Money Laundering (AML) and Anti-Terrorist Financing (ATF) requirements, which are likely to increase the costs of processing payments orders, reducing efficiency and slowing the rate of Straight-Through Processing (STP).
“While further progress has been made with SEPA this year, the process of turning this ambitious initiative into reality is still slow,” said Bertrand Lavayssière, Managing Director, Global Financial Services, Capgemini. “Global economic challenges and crisis after-effects have distracted progress, causing some banks and end-users to be more hesitant in making the needed investments to speed SEPA migration. However, in light of recent regulatory activity around liquidity many banks are focusing their attention on their payments businesses with heightened interest.”
Global payments industry continues to evolve
Together with post-crisis regulatory initiatives, new technologies and added competition are making the payments landscape increasingly complex. Banking leaders interviewed for the report commented that the payments industry has seen many new entrants to the market, such as e-payments providers, and these changes mean traditional players need to adapt to the new landscape.
Brian Stevenson, Chief Executive, RBS Global Transaction Services, said : “Banks are currently facing a variety of challenges from the rapidly changing payments landscape. These challenges also present significant opportunities for banks that are able to adjust their strategies and move quickly to take full advantage of new ways of working in the global payment industry.”
Banks will increasingly need to decide to what extent payments are core to their business strategies, putting in place a well balanced combination of revenue and cost focused initiatives that may require defining clear sourcing strategies as well as building up cost-effective payments processes and architectures. In particular, the client-facing and processing elements of payments services are likely to be impacted. Partnerships and sourcing strategies are likely to play an increasing role in banks’ payments strategies here. Cooperation with third parties for revenue-focused initiatives could help banks speed time-to-market, spread investment expenses, reduce operating costs of new payments initiatives and help extend their payments footprint. Insourcing and outsourcing have also become integral to cost-focused initiatives, helping banks to achieve reduced costs and improved scale and efficiency.
The report also reveals a new trend whereby many banks are reassessing their payments operating models and architectures, integrating operations to create centralized Payments Hubs focused on cost optimization and revenue growth. This can enable banks to better understand performance and profitability related to each payment instrument, offer customized value-added services to clients and tailor pricing and billing as required while taking an open, flexible and scalable approach, essentially enabling them to achieve more with less.
About the World Payments Report 2010
The World Payments Report 2010 produced by Capgemini, The Royal Bank of Scotland and Efma explores the global payments market and the key challenges presented by the evolving payments landscape. The report focuses on:
• The latest payment trends in Europe, North America and Asia together in addition to discussing regulatory developments such as SEPA/PSD, Basel III, Liquidity, Anti-Money Laundering (AML) and Anti-Terrorism Financing (ATF).
• The accelerating transformation of the payments value chain: Insights and strategic considerations regarding competitive and cooperative responses to the market environment from outsourcing to partnership strategies and payments hubs.
Sources used in the World Payments Report’s analysis include:
• Figures for the U.S., Canada, Hong Kong, Japan and Singapore were taken from the latest Bank for International Settlements payment statistics (Red Book, March 2009). The source of figures for the Eurozone was the ECB’s payment statistics (ECB Statistical Data Warehouse, 2009). For the remaining countries, figures were taken from central bank publications and websites.
• Several public sources were used to analyse and document partnerships, collaborations, sourcing and Hub initiatives involving PSPs and non-PSPs with a global and regional reach.
• The methodology for this report also incorporates 11 executive interviews with major global and regional banks and PSPs.
The World Payments Report 2010 is available for download at www.capgemini.com/wpr10 or www.wpr10.com.
Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, enables its clients to transform and perform through technologies. Capgemini provides its clients with insights and capabilities that boost their freedom to achieve superior results through a unique way of working, the Collaborative Business ExperienceTM. The Group relies on its global delivery model called Rightshore®, which aims to get the right balance of the best talent from multiple locations, working as one team to create and deliver the optimum solution for clients. Present in more than 35 countries, Capgemini reported 2009 global revenues of EUR 8.4 billion and employs over 100,000 people worldwide. More information is available at www.capgemini.com.
Capgemini Financial Services brings deep industry experience, innovative service offerings and next generation global delivery to serve the financial services industry. With a network of 15,000 professionals serving over 900 clients worldwide, Capgemini collaborates with leading banks, insurers and capital market companies to create tangible value. Leveraging its Global Payments Centre of Excellence, Capgemini consistently delivers leading payments services for strategic value. Capgemini’s Centres of Excellence capture industry insights, best practices and the latest trends in techniques, tools and technology to continually upgrade solutions, help service new and existing clients, and provide visionary yet practical thought leadership. Visit www.capgemini.com/financialservices.
Rightshore® is a trademark belonging to Capgemini
About The Royal Bank of Scotland
The RBS Group is a large international banking and financial services company. Headquartered in Edinburgh, the Group operates in the United Kingdom, Europe, the Middle East and Africa, the Americas and Asia, serving over 30 million customers. The Group provides a wide range of products and services to personal, commercial and large corporate and institutional customers through its two principal subsidiaries, The Royal Bank of Scotland and NatWest, as well as through a number of other well-known brands including, Citizens, Charter One, Ulster Bank, Coutts, Direct Line and Churchill.
Global Transaction Services (GTS) at RBS is a leading business for international payments. The business provides a combination of global cash and liquidity management, global trade services and commercial cards. GTS is established globally with on ground presence in over 38 countries and partner bank agreements worldwide. Visit: www.rbs.com.
About the European Financial Management & Marketing Association
The European Financial Marketing Association has been an unfailing observer of the numerous transformations that the retail financial services sector has experienced over the years and has demonstrated its ongoing commitment to providing a forum for professionals from the sector. Formed in 1971 by bankers and insurers to encourage their colleagues to share experiences, promote the best practices of their institution and collaborate through alliances and partnerships, today the non-profit association’s members include over 80 per cent of Europe’s largest retail financial institutions.
Through regular events, publications, and its comprehensive website, the association provides retail financial service professionals with answers to their questions about the main issues at stake in their business: multi-distribution strategies, customer approaches, product and service marketing, risk management or operational excellence, to name a few.
Efma is above all a dynamic association, providing a great opportunity for discussion and exchanges without any commercial constraints. For the past 40 years, the loyalty of its members as well as their permanent financial support are the best proof of its efficiency. Visit: www.efma.com.