In a period of ongoing macroeconomic and geopolitical upheaval, the global payments ecosystem is once again demonstrating resilience. In the previous McKinsey Global Payments Report, we described an annual decline in revenues for 2020, the first since 2009.1 That decline, coming during the early stages of the pandemic, was less pronounced than anticipated.
At that time, we foresaw a nominal but geographically uneven rebound on the near-term horizon. As we describe in the lead chapter of this year’s report, actual results proved more robust: revenue growth in 2021 was 11 percent, the highest since 2017, leading to a record $2.1 trillion globally, and growth was healthy across all regions. Our five-year revenue outlook now exceeds prepandemic expectations, topping $3 trillion by 2026.
As they often do, the drivers of growth are shifting, distributing gains in new ways and potentially to new and nontraditional participants. Inflation and interest rates are both reaching levels not seen for decades in many countries, altering consumer and business behavior and, consequently, payments dynamics. At the same time, capital market assessments of many fintech firms are undergoing recalibration—in some cases prompting companies to shift focus from pure growth to a profitability model.
The changes in the global landscape are creating new opportunities for incumbents and disruptors alike to win customers, develop new solutions, and claim market share. In short, the payments chessboard is being rearranged.
The McKinsey 2022 Global Payments Report presents a detailed analysis of the 2021 results and the insights they reveal, including regional and country-level nuances. The report’s later chapters offer perspectives on areas where payments leaders’ actions will help determine market share shifts and the role of payments in the broader financial ecosystem.
First, we examine a rapidly growing payments service: embedded finance, which involves the integration of a financial product into a broader customer journey. Brick-and-mortar versions have existed for decades in the form of auto loans at dealerships, sales financing at appliance retailers, and private-label credit cards at retail chains. Software companies are now partnering with banks and technology (or banking-as-a-service) providers to create similar seamless and convenient digital experiences. Leaders are already emerging in the race to provide banking infrastructure for embedded finance, and this chapter describes how incumbents and new entrants still have time to claim a share of this market.
We then turn to sustainability, which has become a topic of crucial importance for many corporations, including financial institutions. Sustainable global transaction banking remains in its early stages, but its potential for growth is estimated at 15 to 20 percent annually for sustainable trade finance and cash management products. Research indicates that demand for such products far exceeds supply, with only 10 percent of demand currently being met. Few banks currently embed sustainability into their transaction banking offerings, so there is a clear chance for leaders to capture a disproportionate share of the market. This chapter builds a case that banks should act now to create a sustainable payments value proposition.
In the next chapter, we take a fresh look at the early-stage development of central-bank digital currencies (CBDCs), which is occurring around the globe. Along with summarizing the various models under consideration, this chapter outlines the risks, opportunities, and potential paths forward for stakeholders and explains why we believe that the most promising scenarios involve public-private partnerships in which commercial banks play a material role.
In the final chapter, we examine how some of the fastest growth in digital payments over the past two years has been in emerging markets in Africa, Latin America, and Southeast Asia. In these areas, the pandemic accelerated shifts to contactless payments and e-commerce, and low banking penetration affords opportunities for payments providers to capture untapped potential and reach underserved populations. Competition among banks, fintechs, telecom companies, and retailers has intensified as e-wallets proliferate, instant bank transfers take off, and industry players form partnerships to access capabilities and broaden their customer base. We explore which digital payments models are best placed to gain momentum in emerging markets, which monetization paths payments providers are likely to pursue, and what innovations may lie on the horizon.
As always, we welcome the opportunity to discuss these essential payments topics with you in greater detail.
1 “The 2021 McKinsey Global Payments Report,” October 2021, McKinsey.com.
Alessio Botta, Senior partner, Milan
Marie-Claude Nadeau, Senior partner, San Francisco
