A recent report by McKinsey & Company on the global payments industry reveals significant growth and optimistic future prospects. The 2023 McKinsey Global Payments Report provides an analysis of the industry’s performance in 2022 and offers insights into what lies ahead.

Key findings from 2022

Double-digit growth continues: The global payments revenue grew by 11% in 2022, marking the second consecutive year of double-digit growth.

Interest-based revenue makes a comeback For the first time in several years, interest-based revenue contributed nearly half of the revenue growth.

Decline in cash usage Cash usage declined by nearly four percentage points globally in 2022. Over the past five years, the growth rate for electronic transactions has been nearly triple the overall growth in payments revenue.

Optimistic future outlook

Strong five-year outlook: The industry is expected to see a revenue growth of 6 to 8 percent over the next five years.

Innovation and digital wallets: Future revenue growth is likely to be stimulated by instant-payments innovations and the rise in digital wallets in certain geographies.

$3 trillion milestone: The payments market is on track to exceed $3 trillion in payments revenue by 2027.

Geographical insights

Broad-based gains: Revenue growth was distributed across North America, Latin America, and Europe, the Middle East, and Africa (EMEA), all posting their strongest increases in a decade.

Asia–Pacific slowdown: This region, which accounts for 47% of global payments revenues, saw a modest 4% growth due to a decline in payment revenues in China.

The dawn of the decoupled era

The report identifies a new era in the payments industry, termed the “Decoupled Era.” This era is expected to be characterised by payments becoming increasingly disconnected from accounts and other fixed repositories of value.

Users will have a greater voice as they seek convenience, affordability, and security. Technology will play a pivotal role, with contenders including platform as a service (PaaS) models and generative AI.

AI’s growing role in banking

Banking has already made significant strides using “traditional” AI in marketing and customer operations. According to the McKinsey Global Institute, generative AI could further increase productivity in banking by 2.8 to 4.7%, equivalent to $200 billion to $340 billion in annual revenues.

For more information, the full report can be accessed here.