The future of payments in Asia
Payments have never been as important to Asia’s financial services ecosystem as they are today. Asia has outpaced all other regions in terms of payments-revenue growth over the past several years. The region is also the largest contributor to global payments revenue, generating over
$900 billion in 2019, nearly half the global total. The role of payments in Asia’s overall banking landscape has expanded as well, now representing 44 percent of aggregate banking revenues, compared with a third as recently as 2007.
The dollars involved tell only a fraction of the story, however. Payments remain the bedrock of the customer relationship for both consumers and businesses, representing the most natural opportunity for ongoing engagement, keeping the institution’s brand top of mind, and creating a practical reason to keep a healthy level of funds on account. Payments have never been more important for traditional banks, longstanding service providers, and fintech innovators aiming to disrupt the status quo.
The global effects of COVID-19 prompted a reset in the payments ecosystem. In most cases, the result was an acceleration of trends—such as increased digitization—that were already underway. Although we forecast a decline of 1 to 8 percent in Asia’s 2020 payments revenue, the industry’s solid foundation is poised to foster a relatively rapid return to mid-to-high single-digit growth rates. Asia’s payments sector remains well positioned to exceed $1 trillion in annual revenue by 2022 or 2023. The first chapter of this report explores these dynamics in greater detail.
Our perspectives are informed by ongoing dialogue with industry leaders and McKinsey’s global network of payments experts, and by our work with payments providers in the region. McKinsey’s Global Payments Map also provides a quantitative foundation of longitudinal revenue and volume data. Additionally, our recently launched Asia Payments Practitioner Survey (APPS) polled payments business leaders in 13 Asian markets to document their strategic perspectives and illuminate key themes and areas of consensus.
Asia’s future payments landscape will look quite different from the ecosystem currently in place. We have distilled the fundamental themes governing this future vision into a list we call the Five Cs: connected commerce, contactless consumers, a cashless economy, cross-border activity, and consolidation. Our goal is to identify a comprehensive set of trends that will reshape the payments industry, and to initiate a dialogue on how Asia’s payments ecosystem of 2025 will differ from the current state.
The second chapter of this report considers the likely scenarios for the Five Cs, based on our analysis of the APPS findings. The third chapter outlines a series of potential actions for various sets of players across the ecosystem: banks, acquirers, card networks/schemes, nonbanks and tech firms focused both on financial services and other areas, and governments and regulatory bodies. Naturally, significant interdependencies exist across these constituencies; notably, there are very few areas in which these groups’ objectives are in direct conflict.