ACI Worldwide

THE GLOBAL TRANSFORMATION OF PAYMENTS

#SLEEPATNIGHTABILITY

Asia-Pacific continues to see strong and rapid growth in digital payments, and is working to keep up with customer demands that rest on the scalability, availability and reliability of systems.

Asia

The value of Asian non-cash transactions will have reached $301 trillion by 2020, up from $91 trillion recorded in 2010, with an annual growth rate of 13%.1

China

is the third largest generator of non-cash transactions.2

Number of non-cash transactions in the top 10 markets (Billion), 2014 - 2015 (World Payments Report)

Reliability

76%

of APAC banks are investing in payments technology with a view to reduce operating costs.3

How banks forecast investment in payments technology to develop in the next 18-24 months (Ovum)

Availability

Digital payments market share

SECURE

Asia-Pacific banks are clear on the importance of security for successful, customer-focused digital transformation.

$3B

Asia’s P2P app Toss simplifies the process of sending money online from 5 passwords and 37 clicks to 1 password and 3 clicks. It has been downloaded more than 6 million times and has handled more than U.S $3 billion in transactions since its launch in 2015.1

30%+

of Asian banks invested in security risk management in 2016, and in 2017 almost half of Asian banks invested in cybersecurity to improve the customer experience.2

Top 3 challenges according to banks (PWC)

Top 3 Investment priorities for banks (PWC)

FAST

Asia-Pacific was an early proponent of real-time payments. The region is now investing in upgrading systems to meet customer expectations around real-time availability, and value added services.

Scheme timeline

Japan

In Japan, Shenzin clearing is real-time but operates only during business hours. A move to a 24 X 7 operation is planned to coincide with the Tokyo Summer Olympics in 2020.1

Singapore

FAST transactions for corporates have increased by more than 20 times in the past three years.2

Australia

NPP with real-time clearing and settlement goes live on 26th Jan 2018.3

OPEN

Asia-Pacific banks are already responding to strong customer demand for digital payments, and now look to leverage open banking to meet evolving expectations around new payment types and seamless experiences. Banks are moving quickly in a market where fintechs are already gaining ground with customers.

90%

of APAC banks say delivering an enhanced end-user payment experience, specifically in reducing payment friction, is the most important product-level priority.1

63%

of APAC banks see clear business benefits to their organization from Open APIs.2

33%

of customers in Asia use banking products and services from non-traditional firms.3

How banks are approaching Open APIs (Ovum)

Positive customer experience for traditional and non-traditional firms (%), 2017 (World Payments Report)

Payment Executives on the importance of open innovation and their level of preparedness (PWC)

Non-traditional players - threat or opportunity? (Ovum)

TRANSFORM

Asia-Pacific banks recognize that digital transformation is imminent in their market. They are working to reframe their business models to put the customer at the centre, and leveraging new payment experiences to drive new revenue streams. The APAC opportunity is recognized by payments players outside the region.

95%

of APAC banks say a customer-centric business model is important within the banking industry today, and 81% are investing in this.1

64%

of global payments experts consider Asia as the top region for payments innovation.4

95%

of APAC payment executives say that banks will master the changes in the marketplace of the next 5-10 years.2

47%

of global payments experts say that – regardless of their current base – Asia would be their preferred location to start a payments business today.5

40%

of Chinese consumers are today using new payment methods.3

South Korea expects to be cashless by 2020, only 20% of current payments are made in cash.6

Executives who say it is important to consider the banking market in 2020 (PWC)

New investment spend on IT ($B) (Celent)

Estimated bank spend on IT (2015) (Celent)

#SLEEPATNIGHTABILITY

European banks are responding to regulatory requirements and customer demands for improved digital experiences, that place pressure on legacy payments foundations.

EUROZONE

The Eurozone is the 2nd largest global non-cash transactions generator.1

U.K

Non-cash payments in the U.K are predicted to reach 75% of transaction volumes by 2025.3

59.4%

of citizens believe that the U.K will be a cashless society soon. 12% feel that this will happen within five years time, while a more forward-thinking 4% think that physical money will be obsolete in less than two years’ time.2

£288M

was spent through mobile contactless payments in the U.K in 2016 with 38 million transactions carried out across the year. This was a 247% increase on 2015.4

Number of non-cash transactions in the top 10 markets (Billion), 2014 - 2015 (World Payments Report)

RELIABILITY

62%

Current investment in IT for payments will be strongest in Europe, where 62% of institutions are increasing budgets for payment-related projects, to reduce operational risk.5

21%

Banks in Europe are increasing their concentrated investment in modernizing payments technology to meet new demands; a 21% rise from 2016.6

How banks forecast investment in payments technology to develop in the next 18-24 months (Ovum)

AVAILABILITY

41%

of the U.K has contactless functionality in its cards.7

The value of non-cash payments in the U.K will be £1.44 trillion by 2026.8

2%

or so of the total value of current transactions in Sweden are cash, with a target to lower this to below 0.5% by 2020.9

The cashless society project by European Payments Council began November 2017, with the goal to eliminate cash across the Single Euro Payments Area.10

39%

of France has contactless functionality in its cards.11

Digital payments market share (MasterCard)

SECURE

European banks are investing in security measures beyond fraud. Secure is about meeting regulations around security across the whole payments chain, as well as repairing lack of trust in traditional financial services providers.

53%

of consumers in the U.K said that a reduced risk of fraud is the feature they would most like to see in alternative payment methods.1

75%

of the payment transactions in Europe are represented by EMV transactions.2

68%

of banks have recently or are currently investing in fraud detection and prevention, with a further 23% planning future projects. 67% have recently, or are currently expanding capabilities to meet regulatory change around anti-money laundering.3

Top 3 challenges according to banks (PWC)

Top 3 investment priorities for banks (PWC)

FAST

Europe is leading the way in graduating from domestic real-time payment schemes to cross-border real-time capabilities to comply with regulations, and meet customer expectations. As they modernize for instant international payments, European banks consider the impact of real-time on their end-to-end payments processes.

Scheme timeline

45%

of U.K consumers would move banks for real-time payments.1

59%

of European retailers believe real-time payments will have the biggest impact on their industry in the next 2-3 years.2

100%

average Liquidity Coverage Ratio is required by BASEL III for Europe banks by January 2018.3

OPEN

European banks are slightly ahead of their global counterparts when it comes to seeing the value in Open API enabled partnerships, and developing a strategy to deliver that value. Partnerships offer the chance to capitalize on new propositions whilst retaining the primary customer relationship, and to accelerate preparedness for the new open banking environment.

69%

of European banks believe that the ability to more easily partner with third parties – or become a part of a third party’s customer journey – would benefit their proposition.1

The U.K banking sector could have a fully functioning open data market by the end of March 2019.2

86%

of European banks are targeting the introduction of new payment tools to customers.3

Regulatory Technical Standards for PSD2 are expected from April 2019.4

63%

of European banks have a clear strategy for opening APIs for third party developers.5

23.3%

of customers in Europe use banking products and services from non-traditional firms.6

How banks are approaching Open APIs (Ovum)

Positive customer experience for traditional and non-traditional firms (%), 2017 (World Payments Report)

Payment Executives on the importance of open innovation and their level of preparedness (PWC)

Non-traditional players - threat or opportunity? (PWC)

TRANSFORM

European banks understand the need to transform but are in the early stages of allocating resources and executing a strategy to realize this change. However, they remain positive that the region can capitalize on the imminent market shift and evolving customer demands. European customers indicate they would prefer innovative services delivered by their bank, and the market is looking to how it delivers this in the future.

92%

of European banks say a customer-centric business model is important within the banking industry today, and 81% are investing in this.1

The Digital Single Market can create up to €415 billion in additional growth, with as many as 3.8 million new jobs and a vibrant knowledge-based society, according to the EU Commission.2

90%

of European payment executives say that banks will master the changes in the marketplace of the next 5-10 years.3

86%

of European financial services firms include digital as part of their strategy, with 63% establishing a Chief Digital Officer, yet only 37% have a dedicated budget for digital transformation.4

50%+

By 2018 banks in Scandinavia, U.K and Western Europe are forecast to have half or more of new inflow revenue in most products coming from digital sales.5

Currently in Europe just 10% of retail-banking revenue is “digitally disrupted,” defined as a majority of new revenue being captured via online or mobile channels. By 2018 digitally disrupted revenue is forecast to be around 50%.6

Executives who say it is important to consider the banking market in 2020 (PWC)

Share of new inflow revenue from digital sales in 2018 (McKinsey)

Preferred for mobile payments (ING)

Most respondents in a 2015 ING survey said they prefer their own bank over other online services when conducting mobile payments.

#SLEEPATNIGHTABILITY

The Americas is experiencing rapid increases in digital transactions, impacting scalability, availability and reliability. As non-cash volumes rise, payments players in the Americas must consider their throughput capacity.

U.S

continues to be the global leader when it comes to per capita non-cash transactions. 421 transactions were made per inhabitant, an increase of 4.7% in 2015.1

Canada

is catching up with global leaders in non-cash transactions; in 2015 electronic payments formed 63%+ of total annual volume and 54% of total annual value of transactions.2

Brazil

is the 4th largest country for non-cash transactions with 29 billion in volumes in 2015.3

Number of non-cash transactions in the top 10 markets (Billion), 2014 - 2015 (World Payments Report)

RELIABILITY

18%

of banks in the Americas are increasing their concentrated investment in modernizing payments technology to meet new demands; an 18% rise from 2016.4

OVER

1/2

of all banks will grow their spending on payments technology in 2017, with 31% increasing investment by more than 5%.5

How banks forecast investment in payments technology to develop in the next 18-24 months (Ovum)

AVAILABILITY

76%

of all U.S transactions will be non-cash by 2016.6

The value of non-cash payments in the U.S will be $46 trillion by 2026.7

2M

point-of-sale (POS) terminals in Brazil are ready to handle contactless payments.8

52%

of non-cash transactions in Latin America are made by cards.9

75%

of retailers in Canada accept contactless payments.10

Canada has contactless functionality in 26% of its population’s cards.11

516M

transfers were made in Brazil in 2016, up 91.8% from 2015. But mobile is still growing, with only 34% of total transactions.12

Digital payments market share

SECURE

Banks in the Americas are investing in secure payments to underpin their digital transformation projects, with a focus on combatting cybercrime, meeting regulations and improving the customer experience.

82%

of the digital transformation spend for U.S banks is taking place in the middle and back office and in commercial and payments areas where investments in security, risk management, infrastructure, and data initiatives are higher than in front-office, customer-facing spending.1

1.39%

is the total fraud rate for Latin America, but Mexico has three times higher fraud levels than other countries in the Latin American market.2

NEARLY

60%

of data breaches worldwide in 2015 occurred in North America, and the average cost of a data breach in 2020 will exceed $150 million, as more business infrastructure gets connected.3

EMV transactions represented only 7% of the payment transactions in the U.S, but 88% in Canada and 88% in Latin America.4

The U.S financial institutions cyber security market is the largest and fastest growing private sector cyber security market. It is forecasted to exceed $68 billion by 2020.5

48%

of consumers in the U.S say that a reduced risk of fraud is the feature they would most like to see in alternative payment methods.6

The biggest U.S banks are responding to the cybercrime epidemic with some of the biggest security budgets, spending around $500 million in 2016, more than double the $250 million it spent on cybersecurity in 2014.7

Top 3 challenges according to banks (PWC)

Top 3 investment priorities for banks (PWC)

FAST

The use cases and business benefits of real-time payments and its modern standards are evidenced around the globe. The U.S is now moving rapidly to catch up to other regions, without the legacy issues of early real-time adopters. Canada has yet to develop a real-time payments scheme but is clear on the benefits.

Scheme timeline

The ACH network moves almost $39 trillion and just under 22 billion electronic payments annually.1

64%

of American banks believe immediate payments will enhance the ability of their institution to serve its customers.2

Eligible transactions for NACHA same-day processing account for 99% of current ACH volume.3

Real-time payments are most salient for one-time, lower-value, B2B payments, which account for an estimated $11 billion in payments volume in the U.S alone.4

Canadians could save up to $4.5 billion over five years through reduced cheque use thanks to ISO 20022.5

60%+

of eCommerce in Latin America is done via installments.6

OPEN

Banks in the Americas see open payments as an opportunity to build on the strong existing customer relationships with new partnership propositions, and to enter new markets. The industry has work to do to be prepared to take advantage of these opportunities on day one.

76%

of banks in the Americas are investing to deliver value-added services with new capabilities.1

24%

of customers in North America use banking products and services from non-traditional firms.2

71%

of Latin American banks say that failing to rapidly adapt to changing technologies is the biggest threat to their business, compared to just 47% for new digital payment competitors.3

How banks are approaching Open APIs (Ovum)

Positive customer experience for traditional and non-traditional firms (%), 2017 (World Payments Report)

Payment Executives on the importance of open innovation and their level of preparedness (PWC)

Non-traditional players - Threat or opportunity? (PWC)

Latin American banks ability to provide customer access via any desired device (Technisys)

When do you believe your clients will be able to access your services in any device they want?

TRANSFORM

Banks in the Americas are cognizant of the potential cost of ‘doing nothing’ in the New Payments Ecosystem. As a result they are moving to capitalize on the opportunities afforded by digital transformation. They are confident that the region will deliver value from these projects in the short to medium term, but are less focused on the long-term market transformation.

92%

of U.S banks say a customer-centric business model is important within the banking industry today, and 92% are investing in this.1

75%

of Latin American banks are increasing customer engagement via the channels of Internet banking, mobile banking and ATMs.2

30%

of BBVA Bancomer's loans applications in Mexico are completed online.3

83%

of U.S payment executives say that banks will master the changes in the marketplace of the next 5-10 years.4

One in three millennials in the U.S are open to switching banks in the next 90 days and a similar proportion believe they will not even need a bank in the future.5

23%+

The CAGR at which Latin American banks spent on digital transformation in 2017.6

The largest institutions in North America are allocating more than 40% of their IT budgets to digital transformation.7

$20.2B

The amount spent by U.S banks on hardware, software, services, and internal IT staff to develop and implement Digital Transformation initiatives in 2017, growing at an average compound annual growth rate (CAGR) of 22.5% into 2020.8

$32B

Customers in Brazil, Argentina and Mexico will spend $32 billion more online in 2019 than they did in 2014.9

61%

of Latin American banks are actively investing in digital transformation.10

Executives who say it is important to consider the banking market in 2020 (PWC)

Latin American Banks' levels of digital maturity (Technisys)

GLOBAL TRENDS IN DIGITAL TRANSFORMATION
As the payments industry works its way through the Hierarchy of Payment Needs, we move closer to the New Payments Ecosystem. Discover how the trends of #SleepAtNightability, SECURE, FAST and OPEN payments are driving digital transformation in the regions where you do business.

CLICK ON AN ICON BELOW TO SEE THE KEY TRENDS IN YOUR REGION