LONDON (REUTERS) – Banks are set to miss out on as much as US$280 billion (S$385.17 billion) or 15 per cent of their global payments revenue by 2025, as new startups muscle in and more of the business of sending money to individuals and companies becomes instant and free, according to a new report.
The global payments business, which covers anything from card payments to wiring money overseas, is dominated by banks and this year was worth around US$1.5 trillion, professional services firm Accenture said in a report published on Monday (Sept 16).
That is expected to grow to US$2 trillion globally by 2025 but banks are likely to lose out on US$280 billion, or 15 per cent of this amount, Accenture estimates.
Banks face rising competition from tech startups like Silicon Valley payment providers Stripe and Square, as well as technology platform PayPal, and the likes of London-based TransferWise that offer foreign exchange payments to retail and small business customers with lower fees.
More payments are becoming instant – removing the need for credit cards that earn banks revenue – and they will increasingly be made directly to the end merchant using new technology, Accenture said. More competition also means a squeeze on margins and accelerates the trend towards free payments.
"Rather than being at the forefront of the new wave of the booming payments market, banks are feeling the heat from new competition and seeing their margins squeezed," said Gareth Wilson, head of Accenture's global payments team.
"We face an inevitable world of instant, invisible and free payments, which spells trouble for banks that don't want to be relegated to the plumbing of payments."
Accenture said it had examined trends in how consumers pay and projected changes in the future behaviour of payments providers, technology and regulation to arrive at its forecasts on the likely loss of revenue for banks.
It estimated that free payments would put 8 per cent of banks' p