‘The Days of Easy Secular Growth Are Behind Us,’ Warns a New Report

Payments revenue, which grew at a healthy clip through last year, is going to see a drastically slower growth rate over the next five years, argues the Boston Consulting Group in a report issued early Monday.

Worldwide payments revenues, which totaled $1.8 trillion last year, will increase at a compound annual rate of 5% over the five years through 2028, argues the report, entitled “Fortune Favors the Bold.” While that rate of growth will yield a $2.3 trillion market by then, it is down from the 9% CAGR the global industry generated in the five years through 2023, the report says.

The story in the North American market is a little different, with the industry tapping the brakes to the extent that growth in payments revenue will slow to little more than 3% in the next five years. That’s down from nearly 10% in the half decade through last year and represents one of the most dramatic drops among regions worldwide, the report warns.

Transaction revenue includes earnings from card and non-card payment instruments, according to the report. A spokesperson for BCG did not immediately respond to a request for comment on the report.

Part of the slowdown can be attributed to the near-complete conversion of cash to digital payments, the report notes. In markets like the United States, the United Kingdom, and the Nordic countries, less than 10% of transactions by value are now conducted in cash, BCG says.

“The payments industry is entering a new phase, and the days of easy secular growth are behind us,” warns Inderpreet Batra, managing director and senior partner at BCG and a coauthor of the report, in a statement released with the report. To re-energize growth, he says, banks and payments companies will have to install and use newer technologies, including generative artificial intelligence, and also stop bleeding from fraud by beefing up risk and compliance technology.

While BCG is predicting a significant slowdown in revenue growth, it also recommends that banks and other payments players pay close attention to developments in real-time payments, including central bank digital currencies. These trends, it says, offer new revenue opportunities but also new costs and other challenges. That means payments companies will be best positioned to benefit from the new technologies if they “act decisively now” in adopting them, notes Markus Ampenberg, a managing partner and partner at BCG, in a statement.