Instant Payments lead growth in global payment sector, outpacing digital wallets

By Puja Sharma

 payabl., a Europe-based PayTech company, reveals that instant payments is the top revenue growth driver in the payments sector, ahead of digital wallets, reward schemes, fraud and risk management and rising interest rates. Overall sentiment revealed clear excitement about the future of the industry despite regulation being perceived as one of the biggest challenges impacting growth and innovation in the global payments sector. The mini-survey of industry professionals, conducted at Money20/20 Europe, looked to reveal pivotal trends and future expectations for the payments industry.  

Instant payments are the biggest driver of revenue growth; regulation is the biggest challenge 

Instant payments were identified as the key driver of revenue growth in the payment sector, with 27% indicating this. Digital wallets, transaction fees and rising interest rates were also seen as major drivers. 

However, despite these opportunities for growth, the industry still faces a number of substantial challenges. Regulation is cited as the primary hindrance of growth, at 41%, followed by technology and infrastructure challenges, and fraud and risk management. Globally, various new regulations and updates to existing policies have been implemented across the past year, including PSD3, CESOP, the EU AML/CFT Package and more.

Unsurprisingly, the industry has found this challenging to navigate, with the recent Future of Payments Review noting “the weight and complexity of the landscape is a hindrance to growth. We heard from many contributing Fintechs that the sheer volume and weight of regulation is almost impossible to navigate”. When asked how the industry can overcome this challenge, 43% stated better regulation is needed, suggesting improvements are desired but regulation as a whole is not seen as the enemy. 

AI has had the most impact on the sector 

Since Money20/20 last year, the industry has witnessed mass adoption of AI into operations and services across the entire financial landscape, from fraud detection to data processing, to chatbots for customer service. In congruence, almost half (48%) of respondents perceived AI to have had the biggest impact on the payments space in the past year.   

Other major impactful developments that were identified include regulation, embedded payments and fraud, at 40%, 37% and 31%, respectively. When it comes to the next 12 months, respondents believe that AI will continue to have the biggest impact.

The industry feels excited about sector evolution  

Respondents to the survey feel overwhelmingly positive about the global payments sector, with 82% being excited about the future of the industry and believing there has been great progress and evolution in the space in the last year.

When asked to identify the region leading in payments innovation, respondents ranked the European Union as the top innovator, followed by APAC, the UK, Latin America, North America and finally, Africa.

“While essential for maintaining security and trust in the payments landscape, regulation is one of the biggest challenges for innovation in the sector. To unlock the full potential of the payments industry, it’s crucial that we work towards creating a regulatory environment that balances security with room for innovation, growth and development,” said Ugne Buraciene, Group CEO at payabl. “Streamlining regulatory frameworks, education around what the regulations mean in practical teams, and collaboration and open communication between regulators and the industry is key to driving future progress and keeping pace with the evolving needs of consumers and businesses.”  

Opportunities for future growth and development  

When it comes to the future of cash payments, respondents were relatively split. 45% believe that cash payments will disappear within the next 10 years, and 55% believe they won’t. This closely mirrors the overall industry sentiment, with many unsure about the future of the payment method.

The relationship between banks and PayTechs 

In evaluating the cooperation between banks and paytechs, respondents overwhelmingly see the relationship as working ‘ok’ currently, but believe there is room for improvement.

There are clear opportunities for partnerships between banks and paytechs. Improving technology, enhancing cross-border payments and creating better services and products for end consumers are seen as vital areas for collaboration.

Commenting on the importance of collaboration in the industry, Buraciene added: “We’ve seen a significant competitive transformation in the payments ecosystem over the last year or so. There has been a clear shift towards a more collaborative dynamic between key players, where adaptability and cooperation are key for success. Those who can excel in the dynamic of collaboration are the ones who will see the greatest overall success and sustainability.”

Key Highlights   

• Data reveals that 27% see instant payments as the biggest opportunity for growth in the global payments sector, more so than digital wallets and reward schemes 
• Despite the challenge of regulation, an overwhelming 82% feel excited about progress and evolution in the industry 
• Around 55% believe that cash isn’t dead, and will remain in circulation for the next 10 years