A study by Accenture revealed that the global payments revenue in markets they surveyed could grow over $2 trillion by 2025, with banks able to catch at least $500 billion of that. This study found that lagging behind is not an option in the finance industry.
It is dangerous if traditional China banks by 2025 don’t catch up and join in on providing digital payments. They risk losing as much as 13 percent in payments revenue to fintech firms that do in 2025. That’s a whopping $61 billion worth of loss for the price of refusal to keep up with painless, digital payments.
As the study observed growth and revenue in the finance industry, it was able to forecast that in Mainland China alone. Payments revenue is likely to grow at an annual rate of 9.1 percent, to $494 billion by 2025, from $292 billion currently.
To be able to capture a share of more than $200 billion in incremental revenue growth, banks have no choice. They have to change their business models and adapt to the latest payments technology.
Fintech Firms on the Rise
In line with this prediction, traditional, institutional banks across the world have come under pressure. They are now having problems with this explicit competition from fintech firms.
The latter offers lucrative deals on payments and transactions that customers can’t refuse. These deals include shopping points, airport lounge uses, cash backs, and retail discounts.
Besides, it also includes inclusivity for users with risky financial profiles to avail of their services.
“The payments industry has been under a lot of pressure from new competition and margins will likely get squeezed. Worst, the instant world squeezed it further, invisible and free payments are here to stay,” said Albert Chan, the financial services practice lead for Accenture in China.
Additionally, digital payment companies and fintech firms continue to have the upper hand as consumers choose to pay online at no extra charge than use a debit or credit card that comes with extra fees and annual membership.
To compete with these digital payment companies, traditional China banks by 2025 need to step up and change their business models to avoid losses and retain consumers.
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