The cumulative impact of different
regulatory and industry initiatives need to be properly assessed by
banks.This is the conclusion of the latest World Payments
by Capgemini, Royal Bank of Scotland (RBS) and EFMA.
Duygu Tavan reports


The 55-page document analyses global non-cash
development and trends, as well as the impact of regulatory and
industry impacts on non-cash payments and considers methods to
capture the value propositions arising from the evolution of the
payments industry.

The report confirms the analysis of cash and
non-cash transactions based of European Central Bank data
Electronic Payments International published at the
beginning of September:

The World Payments Report found that
the volume of non-cash transactions amounted to 260 billion in 2009
– 5% higher than the previous year. Between 2001 and 2007, the CAGR
growth rate was 7.2%. Jean Lassignardie, global head of sales and
marketing at Capgemini Financial Services, says that the slight
slow-down in the growth is understandable, given the tough economic
conditions. This also proves that electronic payments are steadily
being established as an alternative to cash.

But to really understand the impact and seize
the business potential electronic payments offer, banks and
institutions in the payments value chain need to analyse and
understand the effects of regulatory and industry-wide initiatives.
And, Lassignardie emphasises, regulation and other initiatives need
to be considered cumulatively and not solely on an individual

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The key figures

The data in the report mainly refers to the
years 2001-2009, because, as Lassignardie, explains, there was not
substantial data for 2010.

“2009 is the first year we could observe
non-cash payment in a down turn mood. Observing that, overall,
non-cash payments continued to grow at a 5% CAGR rate globally in
2009 is an important signal. It proves how resilient and strong
non-cash payment are and the role that payments play in the economy
– because even in this very difficult year, non-cash payments
continued to grow,” he says.

“And that’s the first key message of this

The number of e-payments transactions totalled
17.9 billion in 2010 and is expected to grow at a sustained annual
rate of 19.1%, totalling 30.3 billion by 2013. Credit, debit,
prepaid cards dominate e-payments – an unsurprising finding as
these are the still the most common electronic payment methods in
most countries.

The aggregate value of global e-payments was
€824bn ($1,123bn) in 2010 and is expected to reach €1.4trn in
2013.The average value of each non-bank e-payments transaction is
nearly €45, far higher than for m-payments. The use of cheques
continues to lessen, accounting for just 16% of all non-cash global
transactions in 2009, down from 22% in 2005.

The number of mobile payments transactions
totalled 4.6 billion in 2010 and was worth €62bn in 2010. The
volume of transactions is expected to growth by 48.8% per year
until 2013 to 15.3 billion, while the value is estimated to grow by
52.3% on annual basis from 2009 to 2013, reaching a €223bn.
Remittances as well as consumer purchases provide the biggest
potential in this mobile payments space.


Astonishing statistics

These projections are global, though of course
the exact level of growth for both value and volume of non-cash
payments will depend on the individual country and Lassignardie
says that countries where cards are widely in use may not register
such a high uptake of mobile payments yet.

Lassignardie says that these statistics have
been “astonishing” and that Capgemini did expect to register a
“significant” growth in mobile banking, but did not expect to see
the figures mentioned above.

“If this growth continues over the next 10
years, then the amount of mobile payments might be equal or exceed
that of cards payments,” Lassignardie forecasts.

The report found – perhaps unsurprisingly –
that the potential for mobile payments is greater in developing
countries because the level of competition or infrastructure
already in place in mature markets is lacking.

“Therefore, it’s the perfect landscape for
mobile to develop,” says Lassignardie – but he adds that there are
initiatives and potential in mature markets as well.


With the rise of the alternative electronic
payment methods and technologies, the payments landscape is of
course getting more and more complex. Add to that key regulatory
and industry initiatives – and the complexity level rises

It is therefore important and necessary that
the inter-relation and cross-effects of this patch work of
initiatives are considered, says Lassignardie.

“We conclude that each financial institution
should have – urgently – a really detailed understanding and road
map of the implantation of the cumulative effective.”

(See box on the right; red stands for high impact, orange
for fairly high impact and green/yellow for low impact

“The core of this report is observing and
trying to see the evolution of this non-cash and the different
components. We listed 27 regulations and initiatives that have
impact on the payment sphere and we clustered that into five key
transformations that happened in this market, analysing the level
of impact on the industry.”


These five categories

  • Systemic-risk reduction and control:
    Regulators are seeking to reduce systemic risk through stricter
    capital and liquidity requirements;
  • Standardisation initiatives aimed at improving
    efficiency, streamlining processes and reducing costs
    : Some payments instruments and aspects of the
    value chain are commoditised in the process, which puts pressure on
    banks to differentiate themselves;
  • A drive for higher levels of transparency:
    Several initiatives are concentrating on making service fees to
    clients more transparent, with potential implications for current
    business models, such as cards;
  • Convergence:
    Developments in technology and evolving user and regulatory
    requirements are contributing to a gradual blurring of the lines
    between traditional payments activities supplied by infrastructure
    providers and Automated Clearing Houses for certain types of
    low-value payments;
  • Innovation: A critical success factor within
    the payments industry. It urges and drives the harnessing of
    emerging technologies and trends.


The views from SIBOS

Electronic Payments International
editor James Ratcliff was at SIBOS and spoke to industry insiders
about the implications of the report.

According to Christophe Vergne, leader of the
consultancy’s Cards & Payments Center of Excellence,
initiatives like Basel III, Dodd Frank, SEPA at Payment Services
Directive should not be acted on in isolation.

Vergne told Electronic Payments
that work needs to be done to analyse the ways
in which these initiatives interact and impact one another.

“As far as we see, very little work is being
done to determine the cumulative effects of the various regulations
and initiatives that are hitting the payments sector. Different
national governments and banks are interpreting the initiatives
differently, which means there is lack of clarity moving forward. I
would be very surprised if one roadmap emerges,” he said.

He added that, instead, it would be “up to
banks and payment institutions to make careful studies of the
interactions and impacts on their own business.”

When the report was officially released at
SIBOS, Pat Meredith, chair of the Canadian Task Force for the
Payments System Review, said the industry was at the beginning of a
decade of change.

These concerns have been echoed by others on
the floor at SIBOS.

Fundtech’s chief marketing officer George
Ravich expressed concern that the banking industry was not fully
aware of the extent of change to come, saying: “Basel III will
change banking models for the worse.”

He described the impact of the Dodd Frank Act
and Basel III on payments as unnecessarily severe – although he
emphasised that there was clear rationale behind ensuring banks
looked carefully at liquidity and capital reserves.

The regulatory pressure is too high
regulations – not specifically designed to target payments – will
have a predominantly negative impact on an area of banking capable
of stabilising itself.

This more and more complex environment for
payments will further drive commoditisation within the industry.
Banks have lost their dominance as financial service providers
already and as more and more payment services providers emerge,
there will be more aggressive competition. Innovation is
The sovereign debt crisis in Europe will eventually be over,
developing markets will become emerging markets, emerging markets
will be more and more sophisticated – and so the growth of value
and volume of e-payments will surely fasten again to, one day,
become a mainstream payment method.