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Banks in Southeast Asia Risk Losing Nearly US$5 Billion in Payments Revenue by 2025, According to Accenture Report

          - As much as 17% of banks' payments revenue in Thailand, or nearly US$1 billion, is likely to be displaced by the growth of digital payments and competition from non-banks
          - Yet, as digital payments continue to grow, banks in the region can tap into US$11 billion opportunity in new payments revenue if they adopt innovative business models

          As much as 14.3% of banks' payments revenue in Southeast Asia, or nearly US$5 billion, is likely to be displaced by the growth of digital payments and competition from non-banks, as payments become more instant, invisible and free, according to a new report from Accenture (NYSE: ACN).
          As much as 17% of banks' payments revenue in Thailand, or nearly US$1 billion, is likely to be displaced by the growth of digital payments and competition from non-banks.Payments revenue in Thailand is expected to grow at an annual rate of 5.2%, from nearly US$5.4 billion in 2019 to US$7.2 billion by 2025, creating an opportunity worth US$1.9 billion in incremental revenue growth that banks implementing new technologies and innovative business models could tap.
          The report found that payments revenue in the region will likely grow at an annual rate of 6.1%, from US$26 billion in 2019 to nearly US$37 billion by 2025. Only banks that change their business models to adopt the latest technologies and focus on providing value-added services to customers will capture a share of the US$11 billion in incremental revenue growth.
          Titled "Banking Pulse Survey: Two Ways To Win," the report is based on a revenue-risk analysis model that Accenture developed to measure trends in how consumers pay and projected changes in merchant behavior, technology and regulation. The research is complemented by a survey of 240 payments executives at banks across 22 countries to determine how they plan to mitigate and capitalize on the disruption in payments to grow customer loyalty, revenues and profitability.
          "The world of instant, invisible and free payments is here to stay, squeezing margins further on a business that was already feeling a lot of pressure from new competition, particularly in Southeast Asia with the proliferation of e-wallets," said Nontawat Poomchusri, Country Managing Director and Financial Services Lead, Accenture in Thailand. "As payments modernization has already made a good headway in ASEAN, with the introduction of instant payment schemes in many countries, revenue from the consumer space is already low or near zero, except in the cards space, so the push to find alternate sources of revenue and optimize costs is already an immediate concern here."
          "The payments market is booming and there's a multi-billion-dollar opportunity for those willing to invest in new technologies and business models based on the new digital landscape ahead. Banks lagging behind risk being relegated to the plumbing of payments."
          The report notes that over the next six years, banks will face further pressure on income from card transactions and fees, with free payments putting 9.6% of payments revenue at risk in the region. In addition, competition from non-banks in invisible payments — where payments are completed in a 'virtual wallet' on a mobile app or device — will put 3.1% of bank revenues at risk. Card displacement by instant payments, where funds are settled and transferred in real-time and banks make little to no interest, is projected to put an additional 1.7% of payment revenues at risk.
          This builds on current declines in income from card transactions and fees, with regulation triggering fee compression and technology displacing the role of banks in payments. Already between 2015 and 2018, revenue from business customer credit card transactions dropped 33% globally, revenue from consumer debit card transactions dropped nearly 15%, and revenue from credit cards dropped almost 12%.
          The research found that the industry is aware of the challenges posed by new technologies in payments. More than two-thirds (71%) of the banking executives surveyed in all markets agree that payments are becoming free; nearly three-quarters (73%) believe that most payments are already invisible or will become so over the next 12 months; and even more (78%) said that payments are either already instant or will become instant over the next 12 months.
          "The digital transformation in payments throughout the region will have a deep impact on all industry players and banks will have to fundamentally change how they think about their revenue in this area," Nontawat said. "Banks previously earned billions of dollars from some of these channels and that'll dry up eventually as competition heats up, so they'll need to develop new digital business models to compete in this new era."
          In response to these key market challenges, 18% of respondents said the main priority for the bank is to build security into retail payments transactions. Nearly one-quarter (22%) cited artificial intelligence, robotics, machine learning and innovative payments hubs as the key platform technology capabilities they need to adapt their core systems to high-speed and continuous payment flows.
          About the Accenture 2019 Global Payments Survey
          Accenture conducted an online survey of 240 retail and corporate payments executives globally from the largest banks in the following countries: Australia, Brazil, Canada, China (mainland and Hong Kong), Denmark, Finland, France, Germany, India, Indonesia, Italy, Japan, Malaysia, Mexico, Norway, Singapore, Spain, Sweden, Thailand, United Arab Emirates, the United Kingdom and the United States. The survey was conducted between Feb. 14 and March 10, 2019. The overall margin of error is +/- 1.55 percentage points at the midpoint of the 95th percentile confidence level.

          About Accenture
          Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions — underpinned by the world's largest delivery network — Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With 492,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.