Global Payments 2021All In for GrowthOctober 2021 By Yann Snant, Markus Ampenberger, Ankit Mathur, Inderpreet Batra, Jean Clavel, Tijsbert Creemers, Toshihisa Hirano, Kunal Jhanji, Stanislas Nowicki, Michael Strau, Alejandro Tfeli, lvaro Vaca, and Michael Zhang Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholdersempowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.Contents01 Overview02 Market Outlook Five Global Trends Regional Outlook10 Merchant Payments Players Are Fighting Disintermediation Three Challenges to Address A Time to Refocus and Retool16 Issuers and Networks Have to Chart a New Course Navigating Immediate Headwinds How Issuers Can Return to Growth How Networks Can Sustain Their Market Leadership20 Wholesale Transaction Banks Must Go Digital Three Forces Reshaping Transaction Banking How Wholesale Transaction Banks Can Meet This Moment 24 Fintechs Are at an Inflection Point As Fintechs Mature, Challenges Grow Its Time to Prepare for the Next Stage of Growth Incumbent Players Will Also Need to Make Changes 28 Conclusion: Act Now to Capture Long-Term Advantage29 For Further Reading30 About the Authors1 ALL IN FOR GROWTHOverviewAs purchasing habits shifted almost overnight from offline to online and from cash to noncash, payments players responded in kind, accelerating e-commerce enablement, expanding fulfillment options, and streamlining point-of-sale and online checkout. They helped people who were dealing with financial uncertainty by providing debt relief, flexible installment purchases, supplier financing, and cash-flow management.Although many industry experts, including BCG, expected payments growth to slow significantly as a result of the crisis, revenues declined only marginally from 2019 to 2020. We now anticipate that the total revenue pool could nearly double to $2.9 trillion by 2030, up from about $1.5 trillion today.But growth has a price. The industrys success is attracting new players and leading to faster innovation. Over the next several years, were likely to see continued platformization as payments acceptance and services become embedded in more digital ecosystems and as software solutions be-come more specialized. Regulators, governments, and central banks are engaging more actively, too. Many are developing new payments frameworks and holding players to higher standards in a number of areas. As a result of these changes, most industry participants will have to adapt their strategies, operating models, and routes to marketin some cases, retooling down to the core.These are among the findings of BCGs 19th annual analy-sis of payments businesses worldwide. Our coverage opens with a comprehensive market outlook, examining global trends and regional performance. Then we examine the likely implications of these trends for the industrys major participantsfocusing on challenges theyre likely to face over the next five years and on actions they can take to secure long-term growth.The pandemic revealed the payments industrys ability to respond to change. Now is the time to build on this capa-bility. The race for advantage starts now. Payments snapped back from the rigors of the pandemic faster than most observers would have expected. Analysts use the term elastic to describe a market participants success in absorbing change. But the payments industry wasnt just elasticit was a slingshot. The nimble ness with which it adapted to the crisis enabled economies the world over to rebound faster as well. BOSTON CONSULTING GROUP 2Market OutlookOne year ago, as the pandemic threw communities and the wider global economy into turmoil, BCGs payments modeling suggested that revenue growth could drop by nearly halffrom a compound annual growth rate (CAGR) of 9% from 2015 to 2019 to just over 4% going forward. But even though transaction volumes globally dipped in the early months of the crisis, a combi-nation of government stimulus and the rapid recovery of major markets such as the US and China prevented a major decline from occurring. Overall, payments revenues globally declined only marginally in percentage terms from 2019 to 2020 and stayed at roughly $1.5 trillion year on year. (See Exhibit 1.)The pandemic also accelerated two important drivers of global payments activity: cash-to-noncash conversion and e-commerce adoption. BCGs five-year outlook suggests that global payments revenues will expand by a healthy 7.3% from 2020 to 2025. Growth will continue at nearly the same pace for the remainder of the decade, and we expect the total revenue pool to reach $2.9 trillion by 2030.