Here is how the consumer payments will change by 2030

By Puja Sharma

By 2030, 74% of consumer payments will be handled by non-traditional financial service providers. This figure is an increase from 60% in 2020, putting added pressure on incumbents such as banks, insurers, and credit unions.

• “Future-ready” pay tech investment to date by Financial Services Institutions has not been sufficient in slowing down this shift, resulting in a loss of $250 billion in payments revenue by 2030
• 73% of FSIs have payment infrastructures that are not well equipped to handle for 2023 and beyond

According to a new study by IDC Financial Insights commissioned by Episode Six, a payments technology company, 74% of consumer payments will be handled by non-traditional financial service institutions (FSIs) by 2030. This figure is an increase from 60% in 2020, putting added pressure on incumbents such as banks, insurers, and credit unions. The IDC InfoBrief, Future Ready Payments Technology Reshapes the Playing Field for the Industry, highlights that while the payments world is changing FSI Playtech is not, pushing lucrative consumer payment volumes to non-FSIs.

Factors driving this change include a rise in new (or emerging) digital asset classes, real-time payments and new point of sale payment options such as Buy Now Pay Later (BNPL):

• By 2030, 60% of global consumers will have made a transaction using an asset class other than fiat currency.
• 95% of physical non-cash payments will be through contactless methods and BNPL. BNPL grew 79% compared to 5% for cards in 2020 and is set to continue to grow by 15% annually through 2030. Cards will grow at 4% per year, according to IDC.
• Regulation is also playing its part, with the study exploring how Open Banking, domestic real-time payments schemes, and CBDCs are adding pressure to incumbent FSIs by shaking up traditionally safe revenue streams.

The payments landscape is changing at pace, but the IDC InfoBrief finds that 73% of FSIs globally currently have pay tech infrastructures that are not well equipped to handle payments for 2023 and beyond. IDC deemed only 3% of FSIs to have ‘future ready’ pay tech – meaning payments infrastructure that enables payments anywhere and everywhere for any possible present and future asset class. Future-ready pay tech also gives FSIs the ability to configure and reconfigure payment products to stay ahead of new entrant competition and consumer demands.

And while IDC predicts that global FSI spending on pay tech will double to US$80.3 billion in 2030 (from US$39.7 billion in 2020), FSIs are not investing enough in the infrastructure that enables them to compete with non-FSIs. Failing to adapt to future-ready pay tech will cost the FSI industry US$250 billion in payments revenue.

“The world of consumer payments is rapidly evolving; from the way, we make them to the companies that handle them,” said Michael Yeo, Associate Research Director at IDC Financial Insights “What this change presents is both a challenge and opportunity for incumbent FSIs. Despite the trends which are unfolding, FSIs can fight their displacement from consumer payments by reshaping the role that they fulfill in the payments landscape of tomorrow. To achieve this, their focus and spending must be on future-ready pay tech solutions – otherwise, they risk continuously playing catch up with digitally native non-FSIs”. he added.

Episode Six is a payments technology company that gives banks, FinTechs, and brands the freedom to design and bring leading digital payment propositions to market with unmatched speed. From issuer processing to digital wallet – across deposits, credit, savings, and loyalty rewards – and account management, we power clients’ payments journeys with the most flexible and adaptable platform on the market today, providing highly configurable products with user-driven tools and technology to stay ahead of, and respond to, customer demand and market shifts.

“Traditional financial services institutions will continue to lose consumer payments market share, and corresponding revenue, until they have infrastructure that can support new ways to pay” added John Mitchell, CEO of Episode Six. “Competition in payments is increasing. There is a land grab taking place for the hearts, minds, and wallets of consumers the world over. FSIs need to be able to process value in whatever form consumers demand – fiat, crypto and gaming currencies, loyalty points, and value denominations that don’t exist today. That requires pay tech infrastructure that’s fast to deploy, highly configurable, and future-ready. IDC’s data shows that FSIs are investing, but also suggests that they’re focusing on maintaining a quickly diminishing position, rather than ensuring an ability to compete in the future.