RESEARCH REPORT

In brief

In brief

  • The coronavirus outbreak has sped the transition to a new, more digital payments world.
  • As consumer behavior continues to shift due to the pandemic, the scale of disruption is likely to grow dramatically in the months to come.
  • The appetite of merchants and consumers for radically new alternatives to traditional payment options is growing.
  • Big tech companies, fintechs and challenger banks are driving market disruption by offering consumers better user experiences and lower prices.


Disruption in payments is here to stay

As consumer behavior shifts due to COVID-19, the scale of disruption is likely to grow dramatically, and the speed of change will continue to rise in the months to come.

The appetite of both merchants and consumers for new alternatives to traditional payment options is top of mind and big tech companies, fintechs, challenger banks and other non-bank entrants are driving market disruption by offering customers better user experiences and lower prices.

The continued displacement of cash and checks over the next three years, helped along by customers’ adoption of digital shopping and their desire to avoid contact with physical infrastructure and objects, will create even more opportunities for disruption in payments.

Nearly 2.7 trillion transactions, worth US$48 trillion, are expected to shift from cash to cards and digital payments in the next decade.

The Payments Disruptability Index

Our Payments Disruptability Index analyzes the payments industry holistically, surfacing future threats and opportunities to help banks decide where they should maintain or expand their positions as payments leaders.

To construct the Index, Accenture collected and analyzed data within five pillars:

  • The presence and penetration of disruptors
  • The performance of traditional players
  • Customer readiness
  • The innovation ecosystem
  • Regulation and infrastructure

Based on these inputs, we calculated scores for each product type and country, indicating both the current levels of disruption they are experiencing as well as their susceptibility to future disruption. Using these scores, we then grouped the respective markets into four distinct stages of disruption: Durability, Vulnerability, Volatility, and Viability.

Viability

Markets have already been disrupted, but due to a lack of competition and incentives for innovation, there is little support for future disruption.

Volatility

Markets are highly disrupted with more disruption to come in the future.

Durability

Traditional markets with strong incumbent players, low innovation and weak competition. These markets will not experience any major disruption.

Vulnerability

Markets with little disruption currently, but a young customer base and a supportive environment for innovation can drive disruption in the future.

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Dimensions of disruption in payments

The Payments Disruptability Index reveals that disruptors have already had an impact on several segments of the payments market, with the credit card segment showing the highest susceptibility to future disruption.

Current level of payments disruption by segment and susceptibility to future disruption

This diagram plots the current level of payments disruption by segment and susceptibility to future disruption.

Circle size indicates the relative value of transactions handled by each payments product

The Index also provides a quantified view of the level of disruption by country. It finds that current disruption and susceptibility to future disruption are highest in the US, closely followed by the UK.

Current level of payments disruption by market and susceptibility to future disruption

This diagram plots the current level of payments disruption by market and susceptibility to future disruption

Circle size indicates the relative value of transactions in each country

Three plays for the future

Leading banks will need to adapt their innovation strategies across product segments and markets to defend and expand their payments market share. Three approaches could help ensure long-term growth and profitability:

  1. Defend the core and reach scale — In markets where margins are low and barriers to entry are high, it may make sense for banks to work together, such as through open industry consortiums, to defend their positions.
  2. Augment core products — Banks can differentiate established products by innovating the customer experience.
  3. Partner with fintechs — This can enable banks to upgrade their core offerings with innovative products.


Define your role in the payments space

If the recent history of payments disruption teaches us anything, it is that the winners are the banks that are proactive about deciding where and how they want to win. Now is the time for banks to define what role they want to play in the future payments ecosystem—before someone else decides it for them.

We welcome your feedback on our report, “Flashpoints in Digital Payments”. If you would like to discuss the findings and recommendations please request a meeting  and one of our subject-matter experts will contact you to discuss your payments strategy.

To learn more about Accenture’s payments capabilities, visit our payments page.

Tomorrow’s payments leaders understand that the unique conditions of the pandemic could pave the way for accelerated adoption of innovative payments propositions.


Sulabh Agarwal

Managing Director – Global Payments Lead


Dominika Bosek-Rak

Research Specialist – Accenture Research, Banking

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