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Globally, payments revenues have proved remarkably resilient, overcoming a variety of regional headwinds to grow at rates well above the established long-term trend.
Payments revenues grew at 11% in 2022—a double-digit rate for the second consecutive year—reaching more than $2.2 trillion, an all-time high.
Analysis suggests that future revenue growth will likely be stimulated by instant payments innovations and the rise in digital wallets in certain geographies.
The increase in electronic payments transaction volumes has consistently outpaced payments revenue growth (17% versus 6%) over the past five years.
This is indicative of the continuing evolution in payments preferences, a general migration toward lower-fee instruments, and the gradually declining margins that accompany scale.
These dynamics are also evident in cash displacement. Cash usage declined by nearly four percentage points globally in 2022.
Worldwide, the decline in cash usage during the pandemic shows no evidence of being reversed, led downward by the cash-reliant economies of India and Brazil, where the share of cash transactions fell by seven to ten percentage points.
Brazil’s cash declines are concurrent with the rapid uptake of the country’s Pix instant payments network.
A similar transformation is taking place on a smaller scale in Nigeria, where instant-payments capabilities are being built into point-of-sale devices to facilitate merchant enablement.
Nigeria’s share of cash transactions fell from 95% in 2019 to 80% in 2022. Over the same period, instant payments’ share quadrupled to 8%.
Instant payments are playing a key role in this transition out of cash.
The rise of instant payment
In Brazil, almost half of the transactional revenue growth through 2027 is expected to come from instant payments. Yet in other places, revenue growth from instant payments could be meagre.
Instant payments in India are expected to contribute less than 10% of future revenue growth because no fees are currently charged for the Unified Payments Interface (UPI).
Conversely, in several European countries such as Germany, instant payments are perceived as a premium option, resulting in relatively strong potential for revenue growth.
By 2027, cash-heavy developing economies to make further significant shifts toward instant payments, bringing these transactions’ share to roughly half of overall payment transactions—nearly two-and-a-half to three times greater than in 2022.
By contrast, analysis indicates that near-term impact in mature markets such as the US and UK will be nominal.
Instant payments remain in a nascent stage in the US, where 2022’s cash decline was more muted following 2021’s pandemic lockdown-related reduction.
July 2023’s launch of the Federal Reserve’s FedNow real-time payment rails may prove to be an inflection point, but the effect will be gradual.
Instant in Europe
The story varies from country to country, but the developments in Europe are worth a second glance.
Today, instant payments currently constitute 12% of the credit transfer volume in the Single Euro Payments Area (SEPA).
Absent regulatory intervention, this share could double by 2027; however, if regulators proceed with anticipated actions to encourage adoption, this share could rise to 45% of SEPA’s 23 billion annual transactions and a far higher share of account-to-account (A2A) payments, including transfers done through automated clearing house (ACH), real-time gross settlement (RTGS), and instant payments.
Digital wallets, the source and destination of much of the flow in instant payments, are similarly booming.
Several business models are taking shape in different parts of the world.
In several African countries (Kenya, Ghana, and Tanzania, for instance), mobile-wallet infrastructure is ubiquitous and interoperable.
Nigeria’s Central Bank spurred uptake by pushing a “cashless economy” during a note-change process in early 2023.
Demand for digital payment solutions has spiked among Nigerian merchants of all sizes. One acquirer reports that 70% of the new merchant customers haven’t previously accepted digital payments—a clear indicator of expanding network effects.
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