APAC Remains Pivotal to Global Payments Revenue Growth

The 2023 McKinsey Global Payments Report highlights the significant role of the Asia-Pacific (APAC) region in the industry’s growth. Despite a more muted growth rate of 4% compared to other regions, APAC contributes to nearly half of the global payments revenues, solidifying its position as a linchpin in the industry’s expansion.

The APAC Influence and China’s Downturn

The APAC region’s importance is further underscored when excluding China’s 3% downturn in payment revenues. Without China, APAC’s growth soared to 25%, exceeding the previous year’s rate. China’s subdued figures can be attributed to a 5% drop in transactional fee revenue, settling at US$255 billion, largely due to smaller card transaction sizes and strategic fee waivers by payment providers.

New Growth Dynamics in Global Revenue

Interestingly, approximately half of the revenue growth in 2022 was fueled by escalating interest rates, challenging the traditional growth trend where fees played a significant role. Additionally, commercial and consumer segments exhibited revenue variances regionally, with APAC and EMEA dominating in commercial revenues and North America and Latin America in consumer-driven revenues.

Cross-border Payments Gain Momentum

Cross-border payments saw exceptional growth, with the value of such flows reaching US$150 trillion in 2022, marking a 13% annual growth. This resulted in a 17% increase in associated revenues, amounting to US$240 billion.

The Shift from Cash to Digital Transactions

The transition from cash to electronic transactions outpaced revenue growth, with cash usage globally declining by nearly four percentage points in 2022. Nations traditionally reliant on cash, like India and Brazil, led this decline. Instant payments are crucial to this transformation, with countries like Brazil expecting almost half of its transactional revenue growth until 2027 to be driven by instant payments.

A Look Into the Future

By 2027, developing nations with cash-centric economies are expected to shift towards instant payments, potentially making up around half of all payment transactions. This is a significant increase from 2022 figures. In contrast, mature markets like the US and the UK are expected to experience minimal impact.

India, which has seen a tenfold surge in digital payments over the past five years, is predicted to continue growing at approximately 35% annually for the next half-decade. The Unified Payments Interface (UPI) system in India has played a key role, capturing a market share that rose from 8% in 2017 to 75% in 2022.

In summary, the payments industry’s robust revenue and valuation growth in 2022 reflect an optimistic outlook for the sector. McKinsey forecasts a sturdy revenue growth rate of 6% to 8% over the next five years. By 2027, the payments industry is projected to exceed US$3 trillion in revenues, with APAC (excluding China) at the forefront of this growth.