Upwardly mobile: the payments landscape is changing fast
As worldwide consumption of mobile data and e-commerce services continues to grow exponentially, the payments landscape is being transformed by electronic and mobile payments. In particular, mobile offers huge opportunities. Understanding of this fast-moving market is critical, but it is being hampered by a lack of accurate market data.
Teresa Connors, Head of Client Engagement, RBS Transaction Services
A potential black hole between industry estimates and actual number of transactions conducted through internet and mobile technologies has been identified by research for the World Payments Report 2013 from RBS and Capgemini. It is apparent that the absence of clear and consistent definitions for e- and m-payments is blurring the view of these markets, making it difficult to size them accurately, to identify trends and recognise opportunities.
This is vital information for businesses. If they get the customer experience wrong, they risk losing goodwill as well as the transaction itself. Currently, up to 60 per cent of online e-commerce transactions are not completed by purchasers, the WPR 2013 has found.
Consumer-facing companies, banks, Payment Service Providers, payments software providers and other organisations could waste money through misplaced investment because of a failure to fully understand the market. Market risk could even be heightened.
Research for the WPR compared the 2012 industry estimates against the volumes reported by some of the largest players globally revealed some disturbing discrepancies.
The combined total numbers of m-payments represented by the leading players appeared to be some 50 per cent lower than estimates of 11.1 billion.
In e-payments, actual transactions were about 16 per cent less than the 25.4 billion predicted by the industry.
It is difficult to collect reliable statistics for smaller players in local markets and this may account for some of the shortfall. But it does appear some analysts’ estimates turned out to be over-optimistic last year.
The possible consequences are serious, especially given the bullish predictions for growth. M- and e-payments are increasingly important to businesses across the board. Industry analysts expect the m-payments market to grow by 58.5 per cent a year to 28.9 billion transactions worldwide by 2014, while e-payments are predicted to rise by 18.1 per cent a year to 34.8 billion, according to the WPR 2013.
The Bank for International Settlements has reported a clouding of product categories in retail payments and called on central banks to step up their efforts to collect and analyse data in this area.
A clear view of market activity based on a standard set of definitions, tracked by a central body, would help to foster investment and encourage innovation. (See Figure 1).
These are not the only issues facing businesses attempting to make the most of the opportunities offered by m-payments.
Markets and client needs vary. Peer-to-peer services, which are used either for domestic money transfers or international remittances, are the main driver of m-payment growth in developing markets. Africa, for example, has relatively high mobile phone ownership and low penetration of formal financial services, making m-payment services attractive. More than 60 per cent of the Kenyan population already subscribes to the M-Pesa (1) mobile payments scheme. Across the Middle East and Africa, the user base for mobile payments is expected to rise from 53.3 million in 2009 to 154.3 million by 2015(2).
In developed markets, consumer-to-business m-payments will drive growth. Again the growth potential is considerable: In five EU countries (Germany, France, Spain, UK, Italy) smartphones now account for 60 per cent of usage and one fifth of all internet traffic is driven by non-pc devices(3).
Another payments innovation, real-time account-to-account payments services, may well provide an added catalyst here. The UK has led the market with its Faster Payments service, introduced in 2008, and a number of other countries are now introducing or planning for similar services. Next year, UK banks will begin to offer an m-payments service will be available to some 90 per cent of UK current accounts4. The service links mobile phone numbers to account details in a secure database, and uses the Faster Payments service to make the transfers.
Businesses want to be ready to use the most appropriate and cost-effective payment mechanisms in their markets, whether they are collecting from retail or business customers, or paying suppliers and employees.
Understanding how the payments landscape is changing is the first step to making decisions that are right for clients and their businesses.
Source: (1) Citibank (2) IE Market Research (3) ComScore (4) Payments Council
For more information, view the WPR 2013 infographic here.
No representation, warranty, or assurance of any kind, express or implied, is made as to the accuracy or completeness of the information contained in this document and no member of the RBS Group accepts any obligation to any recipient to update or correct anyinformation contained herein. This document is published for information purposes only and does not constitute an analysis of all potentially material issues. Views expressed herein are not intended to be and should not be viewed as advice or as a recommendation. You should take independent advice in respect of issues that are of concern to you.
This document does not constitute an offer to buy or sell, nor a solicitation of an offer to buy or sell any investment, nor does it constitute an offer to provide any products or services that is capable of acceptance to form a contract. The products and services described in this document may be provided by any member of the RBS Group, subject to signing appropriate contractual documentation. No member of the RBS Group shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this communication.
The Royal Bank of Scotland plc (RBS plc) is registered in Scotland No. 90312 with its Registered Office at 36 St Andrew Square, Edinburgh EH2 2YB. It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The Royal Bank of Scotland N.V. (RBS NV) is registered with the Chamber of Commerce and Industries for Amsterdam, The Netherlands, with No. 33002587; its registered head office is Gustav Mahlerlaan 350, 1082 ME Amsterdam, The Netherlands. It is authorised by De Nederlandsche Bank and is regulated by the Autoriteit Financiele Markten for the conduct of business in The Netherlands. RBS plc is in certain jurisdictions an authorised agent of RBS NV and RBS NV is in certain jurisdictions an authorised agent of RBS plc.
RBS plc or RBS NV is authorised and regulated in Hong Kong by the Hong Kong Monetary Authority, in Singapore by the Monetary Authority of Singapore, in Japan by the Financial Services Agency of Japan, in Australia by the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority ABN 30 101 464 528 (AFS Licence No. 241114) and in the US by the New York Department of Financial Services, the State of Connecticut Department of Banking, the Federal Reserve Bank of Boston and the Board of Governors of the Federal Reserve System. In the United States, securities activities are undertaken by RBS Securities Inc., which is a FINRA/SIPC member and a subsidiary of The Royal Bank of Scotland Group plc.
Copyright 2013 RBS plc. All rights reserved. The daisy device logo, RBS, and The Royal Bank of Scotland are trade marks of RBS plc and the RBS Group Members. This communication is for the use of intended recipients only and the contents may not be reproduced, redistributed, or copied in whole or in part for any purpose without RBS’ prior express consent. Deposits at RBS plc and RBS NV are not insured by the Federal Deposit Insurance Corporation (FDIC) nor by any other governmental agency or body, nor by any other entity, public or private.