Instant Payments and PSD2 will have a detrimental impact on traditional credit and debit card payments with online card volumes declining by 37% by the end of 2027, according to a study conducted by consulting firm Ovum.
The research, conducted by Ovum and commissioned by Icon Solutions, predicts that without PSD2, card volumes are forecast to have reached €411bn, representing a 37% decrease in expected volumes.
Instant Payments will account for roughly €338bn of direct online expenditure, while e-commerce card usage will stagnate at current levels of around €260bn annually and by 2025.
The research indicates that single-transaction ecommerce card payments will drop from the top spot declining to just 11% market share by 2027 from 40% currently, leaving Instant Payments and digital wallets as the two dominant payment methods across Europe as early as 2024.
Ovum head of industries Kieran Hines said: “PSD2 and other open banking initiatives are a golden opportunity for retail banks to re-imagine their products and services, and ensure they are fit for purpose in tomorrow’s digital ecosystem.
“In particular, those banks that combine early adoption of Instant Payments infrastructure with a proactive approach to PSD2 compliance and a focus on the payment needs of both merchants and consumers will be the ones that enjoy the most rapid growth over the coming years.”
Icon Solutions head of payments Tom Hay said: “PSD2 and Instant Payments together offer a better and safer customer experience than cards for online shopping. The whole idea of a “plastic card” is irrelevant in the digital world.
“Instead of adding cost and complexity by digitising and tokenising it as the card schemes are doing, the right approach is to simplify things by eliminating it completely as Instant Payments does. A simpler, more secure buying experience drives cost savings for all participants. No wonder PSD2 and Instant Payments are set to dominate online payments in the coming decade.”