Just finished reading a McKinsey Insights article titled How the payments industry is being disrupted. The summary article and the downloadable full report paint a fascinating picture of the disruption confronting the global payments industry, which weighed in at a healthy $1.7 trillion in 2014, and is expected to grow at a CAGR of 6% over the next five years. Highly recommended for anyone involved in enterprise digital transformation.
The article identifies four major disruptions: that non-bank digital entrants are transforming the customer experience; that payments infrastructure modernization is already under way; that cross-border payments inefficiencies are an open door for new players; and that the transition to digital in retail banking has important implications for transaction banking. Not surprisingly, these are being fueled by the increasing rise of smartphones as an important new channel for global e-commerce.
Banks are reacting to the disruption in various ways: building their own responses, acquisitions, partnering, investment, and incubation / in-house innovation. Fintech is the hot buzzword. As the banking and non-banking heavyweights battle it out, the next few years will be interesting. May the consumers win!
Image Credits: Business Times