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September 28, 2011updated 04 Apr 2017 4:15pm

The cumulative impact of regulation on e-payments

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 Report by Capgemini, Royal Bank of Scotland (RBS) and EFMA 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.

By James Ratcliff

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 Report 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 basis.


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 report.”

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 further.

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 are:

  • 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 continue: 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 International 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 vital. 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.

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