The 2010 edition of the
World Payments Report from Capgemini, RBS and EFMA shows
that electronic payment methods are increasingly displacing cash
worldwide, with payment cards the clear winners. As Victoria Conroy
reports, payment volumes overall appeared resilient despite the
recent economic crisis.
The latest edition of the
World Payments Report, published by Capgemini, RBS and
EFMA, will make encouraging reading for those engaged in the war on
cash. The global use of non-cash payment instruments continued to
grow in 2008, despite the financial crisis.
The overall growth in volumes
accelerated to 9% in 2008 from 7% in 2007, and preliminary data
suggests payments continued to grow in 2009. Volumes in 2008 grew
only modestly in developed markets and registered the largest
increase in certain developing economies such as China (up 29%),
South Africa (up 25%) and Russia (up 66%).
Behind the aggregate increase
in 2008 non-cash payments volumes, there were notable trends in the
mix, and use of individual instruments, including cards (credit and
debit) remaining the preferred means of non-cash payments globally,
accounting for more than 40% of non-cash volumes in most markets
and above 58% globally.
Globally, card transaction
volumes were up 15% from 2007, and their value was up 6.6%. Both
debit and credit card volumes rose at a similar pace although
regional differences were apparent.
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Credit transfer volumes rose
7%, while direct debits, which also showed a 7% volume increase,
are especially gaining popularity in Europe and the US.
Encouragingly, cheque volumes
continued to decline (by 6%), largely reflecting the increasing
popularity of online bill payment and efforts by banks and
governments to reduce usage.
The growth in global non-cash
payments volumes accelerated to 9% in 2008 from seven% in 2007,
despite the continued financial crisis. Volumes totalled 269bn in
2008, after sustained growth of 8.4% a year since 2001 – growth
that has far outpaced the expansion in global GDP.
The outright volume of
non-cash payments remained heavily concentrated in developed
markets. In fact, while volumes grew only modestly (5 to 6%) in
North America and the mature economies of Europe and Asia-Pacific,
those segments still accounted for a combined 77% of non-cash
payments volumes in 2008. The top 10 payments markets
accounted for 91% of all global volumes in 2008.
Still, the rate of growth in
non-cash payments volumes was faster in developing economies,
especially the BRIC (Brazil, Russia, India, China) nations, in
which economic activity remained robust, relative to more developed
nations. For example, the year-on-year growth in transaction
volumes was particularly strong (29%) in China in 2008.
Emerging markets also have
far more limited banking infrastructures than developed markets,
and these constraints are spawning a significant number of payments
innovations, which should be an important source of growth in
payments volumes in the years ahead.
While overall payments
volumes are rising, there are clearly ongoing shifts in usage
patterns. In the US, for example, non-cash payments volumes rose 4%
in 2008 to 102.5bn, leaving the US to account for more than 38% of
the world’s volumes.
In Europe, non-cash payments
are certainly increasing steadily enough to warrant investment by
banks in new payment technologies, especially as regulation is
likely to drive or restructure non-payments usage, either through
far-reaching payments initiatives, such as SEPA, or the efforts of
individual countries to replace outmoded instruments. For example,
the UK Payments Council National Plan has set a strategy to phase
out cheque usage by 2018.
At present, the largest
non-cash payments markets in Europe are still Germany, France and
the UK, while Poland and Sweden showed the highest year-on-year
growth rates in 2008. However, the maturity of non-cash usage still
varies considerably by country. Finland and Sweden lead Europe in
terms of usage per inhabitant. In fact, the Finnish people are the
heaviest users of non-cash payment instruments, even ahead of the
Americans. The usage in Nordic countries has been driven by the
concerted effort of governments and banks, and the willingness of
residents to adopt new electronic payment technologies.
Germans still like to use
cash; cards are used less frequently than in other countries,
mainly for cost reasons. Overall, though, the country has
sophisticated payment technologies, and the aggregate volume of
non-cash transactions is second only to France in the eurozone,
amid heavy use of direct debits and credit transfers.
In Greece, Italy and Poland,
non-cash usage per inhabitant is still minimal (less than 60
transactions per year). The Polish government is actively trying to
encourage non-cash transactions, starting with legislative
amendments that will remove some of the barriers to developing
non-cash payments. This will fuel the uptrend in transaction
volumes that has already become evident.
Different non-cash payment
instruments are still favoured more in some countries than in
others. In Europe overall, the average value per card transaction
dropped slightly in 2008, to €56 ($76) from €59 in 2007. This
decline is in line with trends reported in the 2009 report,
suggesting many individuals are increasingly using non-cash means
even for low-value transactions.
In North America, the average
value of card transactions also dropped in 2008, to $56 from $61.
US consumers transacted less on credit cards in 2008 as they sought
to reduce spending and borrowing amid the economic slowdown. At the
same time, though, debit card usage rose – with US volumes up 13% –
at least in part because consumers were trying to use more “pay
now” strategies, especially seeking to shift everyday purchases
from credit cards.
Residents of mature
Asia-Pacific markets continued to have the highest average value
per card transaction in 2008 – little changed at $97. In much of
Asia, cash remains the preferred means of payment for lower-value
payments. Direct debits are used more often in Europe than in other
markets, and the average value per direct debit transaction rose
there in 2008, to €785 from €722. Direct debits are increasing in
popularity, with more corporates and small- and medium-sized
enterprises starting to use them. Direct debits are more effective
for the payees, as the reconciliation process is easier, and fewer
balances go unpaid.
Direct debits will never
totally replace credit transfers, which are more useful for
“one-off” payments, for example, and which tend to be preferred for
higher-value automated payments. Credit transfers are especially
popular in certain countries, such as the UK and Germany. The
average value per credit transfer in Europe in 2008 was €11,069,
though that was down from €13,376 in 2007. Direct debits are,
however, likely to take an increasing share of the payments once
made via cheques.
Cheque usage has declined as
a percentage of total non-cash transactions in Europe, from 11% in
2005 to 8% in 2008. Concerted action from regulators and banks has
helped reduce cheque usage in countries like the Netherlands and
Belgium, but cheques are still a mainstay in both France and the
The UK Payments Council
National Plan, meanwhile, is seeking to close cheque clearing in
2018, an ambitious plan that requires a comprehensive understanding
of cheque usage, and subsequent action to migrate users to
In the US, the volume of
cheques used dropped another 6% in 2008 as banks continued to
encourage alternative non-cash means. In mature Asia-Pacific
markets, the average value of cheque payments is far higher ($3,376
in 2008) than in either Europe or North America, but that is
largely because cheques there are used mainly for legal and
government-related transactions, which tend to be of a higher
Euro cash in
circulation still expanding
Euro cash in circulation has
sustained average growth of about 11% per year, almost doubling
since the euro was introduced in 2002, even when excluding the €500
and €200 notes that are the most hoarded (in the eurozone and in
neighbouring Eastern European countries).
In 2008, the year-on-year
expansion in cash in circulation was much higher than the increase
in non-cash transactions per inhabitant (11% against
According to estimates from
the European Payments Council (EPC), cash payments cost the EU
economies between €50bn and €75bn per year, expenses that should
motivate all stakeholders to take more determined action to
discourage cash payments.
Within the eurozone,
different countries are at different stages of the cash
substitution process. In general, cards have yet to replace cash
largely because consumers favour cash for low-value transactions,
and merchants see card processing as slower and more costly than
cash for smaller amounts. As a result, even though the number of
non-cash transactions per inhabitant is likely to keep rising,
cash-in-circulation will also continue to rise unless merchants and
consumers are incentivised to switch.
While final data on 2009
payments volumes are not yet available, initial data suggests
payments flows remained strong in emerging markets into 2009. The
payments markets in mature Europe and the US remained resilient, as
evidenced by the findings shown below from data produced by central
banks and other payments-industry bodies.
In the US, the volume of
retail payments continued to grow, though the mix changed. There
was a small decline in the volume of credit card payments (down
4%), due in part to a tightening of credit standards by banks, but
the decline was more than offset by an increase in the use of debit
cards and prepaid cards (up 13%).
The number of transactions
processed as automated clearing house (ACH) payments grew 2%,
largely due to ongoing efforts to replace inefficient instruments
such as cheques.
In Europe, the use of cards
and other retail payment instruments also grew. For example, across
the UK, France, Italy and Spain (accounting for 60% of European
payments), the retail payments market continued to grow at a
2%-to-6% rate, with the increased use of cards, direct debits and
credit transfers more than offsetting any decline in cheque
There was significant growth
in cards usage, while the average value of card transactions
continued to decline, reflecting greater use of cards for low-value
cash transactions, and possibly some crisis-related belt-tightening
by consumers. While retail payments flows reportedly remained
strong in 2009, there was a decline in the number and value of
high-value payments as a direct consequence of the liquidity
crisis. The number of payments cleared through the UK’s Clearing
House Automated Payments System (CHAPS) dropped 10.8% and their
value by 20%. Target 2 payments dropped 6.5% in volume and 19.3% in
The value of US dollar
large-value payments processed on the central bank Fedwire fell
29.5%. Overall though, there is no evidence in early data to
suggest there was any decline in global payments volumes in 2009 or
even in early 2010. Admittedly, there is a significant lag in
global payments data, so it is premature to conclude what effect
the crisis will ultimately have had on payments flows. But there
has been no significant impact on emerging-market payments flows in
2009; the mature markets of Europe and the US continued to grow
overall, though the mix of payment instruments may be
In fact, the report’s authors
expect data to show that the size of the US and European payments
markets increased slightly in 2009 in terms of the number of
transactions and the aggregate value of those payments
Moreover, interim data from the UK and other developed
economies suggests there is every reason to believe payments were
still growing as of mid-2010. This resilience in payments further
demonstrates why retail payments remain a critical source of stable
revenues for many banks.