According to a McKinsey on global payments, the pandemic had a negative impact. Payments across the globe contracted, the report indicated. Global payment revenues totaled US$1.9 trillion in 2020, a 5% decline from 2019 compared to the 7% growth rate a year between 2014 and 2019, the report states.
The overall 5% in payment revenues comprises of a 6% decline in Asia-Pacific, 8% in Europe, the Middle East and Africa (EMA), and a 3% to 5% contraction in North America. Breaking this up, the decline in EMEA was driven by falling net interest margins (NII), while in North America, the decline was led by contracting credit card balances.
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The global contribution of NII to payments revenue fell from 51% in 2010 to 46% in 2020. McKinsey blames a 31-basis-point contraction in global interest margins which caused payments revenue to fall by US$66 billion in 2020.
“Looking forward, we see a handful of primary drivers influencing the payments revenue trajectory. On the one hand, continued cash displacement and a return to global economic growth will accelerate existing upward trends in the share and number of electronic transactions. On the other, interest margins will likely remain muted. Sustained softness in this key topline contributor will create greater incentive for payments players to pursue new fee-driven revenue sources and to expand beyond their traditional focus to adjacent areas such as commerce facilitation and identity services,” McKinsey says.
McKinsey estimates that global payments revenues are likely to quickly return to their long term 6% to 7% growth, recouping 2020’s declines in 2021 and reaching roughly US$2.5 trillion by 2025.
On the non-interest income front, McKinseay says “We expect pressure on both fee and processing margins to continue in many regions, while recovery in interest margins is expected to be slow and moderate at best.”
