Payments industry is bound to grow, but amid fierce competition

Over a fourth of the revenue of incumbent payments companies could be lost by 2020 due to competition from FinTechs. As the sector is well aware of the ongoing disruption, only 4% of the surveyed incumbents do not deal with FinTech.1


The popularization of e-commerce predestines payments to flourish; the PwC Market Research Centre estimates that the number of non-cash transactions will grow by 69% from 2013 to 2020, representing over one million transactions occurring every minute. This optimistic sector growth forecast is the reason why FinTech companies are visibly interested in entering the payments industry.

Getting ready for disruption

While paving their way forward, new entrants significantly disrupt traditional businesses and pose serious threats to incumbents. Pressure from the EU interchange regulation does not make the industry's life easier, and might lead to revenue losses for card issuers. In this constantly changing market, most payments companies (87%) believe that some part of their business is at risk to FinTechs.

As payments become frictionless, incumbents become increasingly concerned about margin pressure. Almost three in four (74%) payments companies see this as a threat, the highest percentage of all financial sector institutions. Customer churn is another concern for the industry (according to 61% of respondents), and more than a half of the those surveyed (52%) fear losing market share to new players. Compared to other financial sectors, the payments industry has the highest percentage of incumbents concerned about losing over 60% of their operations to FinTechs - 9% admit that in the coming years they might see between 60% and all of their business gone.

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Engaging with FinTechs

These potentially serious market re-shuffles encourage traditional players to invest heavily in new technologies. Payments deal with FinTech mostly through launching their own FinTech subsidiaries (35%) and by engaging in joint partnerships (35%). The areas witnessing partnerships between traditional players and new entrants include P2P payments (including gifting and splitting bills), payments processing, cross-border payments, digital currency exchange and building payments technology standards.

Only 4% of payments companies do not deal with FinTech at all, a proportion substantially lower than the financial industry average (25% overall).

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Growth is all around

As payments companies are active in launching their own FinTech subsidiaries, the technology-driven industry growth should be significantly organic. The main momentum for the sector's development derives from a continuous increase of smartphone use at the global level. Technological advances will make this type of payments even more convenient, secure and cheaper - resulting in significant benefits both for payers and payees.

In the past 30 months, M&As in the FinTech sphere have been generating billion-dollar deals and investors are constantly injecting more money into the sector. Although the US dominates the M&A market, 58% of the European FinTech companies acquired during the last 30 months were purchased by European buyers.2 The M&A activity in the FinTech business is bound to further proliferate as the market matures and start-ups continue to pressure incumbents. This will further buoy the industry as, parallel to organic growth, payments will also experience an inorganic business upswing.

The payments industry should brace for major FinTech-related disruptions, however, the technological change introduces significant opportunities too. The imminent growth of the sector will reward only those banks and payments players that possess the capacity to understand the changes in customer needs. The pace of adapting to new business requirements will determine future market winners and losers. Delivering innovative solutions for changing market expectations is key for incumbents who want to succeed in the reinvented payments ecosystem. You can find a more in-depth analysis of the underlying market mechanism ruling the payments industry in the PwC Payments in the Wild Tech West: Digitisation and changing customer expectations report available here.


1. The trends presented in this article come from the PwC Payments in the Wild Tech West: Digitalisation and changing customer expectations 2016 report which analyses the impact of FinTech on the traditional payments sector. Available for download here.

2. Hampleton, Financial Technology M&A overview, 1H 2016.

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