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Seven areas that will shape the future of payments

Innovation and technology are disrupting the conventional payments landscape and making the global payments industry increasingly digital, frictionless, resilient, convenient, speedier, cheaper, efficient, transparent and ubiquitous.  

According to the McKinsey 2022 Global Payments Report, the five-year revenue outlook for the global payments industry now exceeds pre-pandemic expectations, topping US$3 trillion by 2026. Revenue growth in 2021 was 11%, the highest since 2017, leading to a record $2.1 trillion globally.

Growth was healthy across all regions, with the Asia Pacific region accounting for more than half of global payment revenue last year, generating $1.1 trillion. North America hit $0.5 trillion ($500 billion), and the Europe, Middle East and Africa (EMEA) region reached $0.4 trillion ($400 billion), as per McKinsey’s report.

The payments industry’s role in fostering inclusion, supporting the development of digital economies, and functioning as the backbone for our economies is making it a disruptor to the world’s retail, banking and financial systems.

This disruption promises to transform the experience of making and receiving payments in the coming years through a shift that is taking place from transitioning off old payment methods to the new. What is classed as emerging, novel or alternative payment methods today is likely to be mainstream soon.

As the digital world grows and as governments, corporations, small and medium-sized businesses and consumers appetite for seamless payments increases, “Seven forces are significantly changing how payments are evolving”, observes EY’s recent report, The rise of PayTech – seven forces shaping the future of payments.

The report aims to help payment service providers (PSPs) assess the level of innovation enabled by “PayTechs” (fintechs, payments facilitators, PSPs, networks creating new payments propositions, and payments technology suppliers) across the most influential areas impacting payment today. The seven areas that EY regards as having significant influence over today’s payments landscape and the future’s are as follows:

Real-time payments

Real-time payments (RTP) are at the heart of the new global payments landscape, which is evolving rapidly. RTP improve overall market efficiencies in the economy, enhance liquidity in the financial system and act as a catalyst for economic growth by allowing for the transfer of funds between businesses and consumers within seconds rather than days, according to ACI Worldwide’s 2022 Prime Time for Real-Time report.

Grand View Research, Inc. points out that “The global real-time payments market size is currently valued at $17 billion and is expected to reach $193 billion by 2030, growing at a CAGR of 34.9% from 2022 to 2030.”

Real-time transactions and growth forecasts continue to rise globally, with emerging countries leading the way and outpacing developed nations. Research by ACI Worldwide shows that India has extended its global leadership in real-time payments, hitting a staggering 48.6 billion transactions in 2021, which is almost threefold that of the closest challenger, China (18 billion transactions in 2021), and almost seven times greater than the combined real-time payments volume of the world's leading economies – the US, Canada, the UK, France and Germany (7.5 billion).

Data from the ACI Worldwide report reveals that the US is lagging behind other nations when it comes to RTP. It recorded 1.8 billion real-time transactions in 2021, compared to the near 49 billion for global leader India, helped by the country’s United Payment Interface. However, the US is one of 60 different countries with a real-time payments infrastructure, and more are joining the club every year, with Canada, Indonesia, New Zealand and Peru expected to launch their national networks this year, as per the 2022 Global Payments Report by Worldpay from FIS.

The launch of the US Federal Reserve’s (Fed) real-payments network, FedNow, in May or June of 2023 is expected to modernize the way thousands of institutions move money and allow for greater use of instant payments at all times. FedNow, built on ISO 20022 standards, will help improve payment speed, traceability and transparency.

“RTP have five main characteristics that impact the people, process and technology of banks and non-banks alike: 24x7x365 availability, ISO 20022 message format, immediate access to deposited funds, irrevocable payments and immediate notifications”, the EY report explains. This will help RTP become a strategic differentiator as companies look to launch value-added services to pay their vendors or employees immediately, while also gaining better visibility into cash flow and control over their working capital.

Cross-border payments

EY’s payments report expects that the volume of international payments will continue to rise, reaching $200 trillion in 2027.

Wholesale B2B payments represent the largest share of cross-border payments, which is dominated by correspondent banking models. With regulations laying the groundwork for cross-border payments to be modernized, PayTechs are remodelling cross-border payments (both wholesale and retail), while reducing fees and improving speed and transparency of payments transactions, the EY report further mentions.

Banks and central banks around the world are starting to recognize the potential of digital assets, cryptocurrencies and DLT technology at large, which can help improve and transform cross-border clearing and settlement processes. In addition, the EY report states that “In some regions, government and regulatory bodies are developing intra-regional cross-border payments systems in a quest to develop a global harmonized solution.”

In this context, SWIFT, EBA Clearing and The Clearing House (TCH) have joined forces, and with the support of 25 financial institutions from both sides of the Atlantic, they are testing the feasibility of immediate cross-border payments (IXB) from the US to Europe. IXB will process the first live transaction in the euro and US dollar currency corridor in the coming months.

The P27 is another intra-regional initiative that aims to build a cross-border and multicurrency payments region, connecting 27 million people living in the Nordics and beyond. P27 is the world’s first real-time, cross-border payment system to support multiple currencies in multiple countries.

Furthermore, in October 2020, the G20 endorsed an ambitious roadmap to boost cross-border payments around the world. The Financial Stability Board (FSB), the Committee on Payments and Market Infrastructures (CPMI), the World Bank, the IMF and other international bodies were asked to coordinate a three-stage process to develop a road map to enhance cross-border transactions.

The FSB has set global quantitative targets for addressing the challenges of high cost, low speed, insufficient transparency and limited access in retail and wholesale cross-border payment arrangements so that the future of cross-border payments is faster, cheaper and more efficient.

“Swift is also expanding its capabilities beyond financial messaging to provide comprehensive transaction management services, as part of its mission to make cross-border payments instant and frictionless. Swift has played a leading role in defining ISO 20022 standards and is driving industry-wide ISO 20022 adoption for cross-border payments”, the EY report highlights.

Given that regions and organizations across the world are working to lay the groundwork for instant, frictionless and interoperable international transactions to power a whole range of new digital opportunities for financial institutions, corporates, small and medium-sized enterprises (SMEs) and consumers, a new era in cross-border payments is coming that will cut through borders and help grow it at a staggering rate.

CBDCs and digital currencies

“105 countries, representing over 95 percent of global GDP, are exploring a CBDC”, according to the Atlantic Council GeoEconomic Center’s Central Bank Digital Currency (CBDC) Tracker.

The tracker also mentions that a new high of 50 countries are in an advanced phase of CBDC exploration (development, pilot or launch), with 16 of the Group of Twenty (G20) countries already in the development or pilot stage. 

Central Banks around the world are developing a digital representation of their sovereign currency (CBDC), backed by government commitment that promises to be a means of payment (domestic and international), a store of value and a common unit of account.

PwC’s Payments 2025 & Beyond series notes that “CBDCs — digital tokens or electronic records that represent the virtual form of a nation’s currency — along with private sector cryptocurrencies are predicted to have the biggest disruptive impact over the next 20 years.”

Businesses and financial institutions could also use CBDC. “Twenty percent of large organizations will use digital currencies for payments, stored value or collateral by 2024”, according to Gartner, Inc. This prediction has important implications for finance leaders and corporate treasurers as they consider adoption of digital currencies.

EY’s payments report states that digital currencies and CBDCs are gaining momentum and rising to the top of the agenda for payments providers that are looking for regulated alternatives as first industry solutions emerge. As a result, more payments and cryptocurrency ecosystem providers are entering the digital currency market. In context, the global cryptocurrency market capitalization stands at $1 trillion, and the market capitalization of Bitcoin is $384 billion (as of October 7, 2022), as per CoinGecko, which is involved in providing fundamental analysis of the crypto market.

Banks and central banks around the world are starting to recognize the potential of digital assets, cryptocurrencies and distributed ledger technology (DLT) at large. “Crypto and digital currencies will offer not only new payment methods, but a new infrastructure enabling instant settlement through DLT, programmability, smart contracts and tokenization”, EY explains.  

“The ultimate benefit of digital currencies will be instant/atomic settlement, increased automation, transparency and efficiency, as well as support of new business models via programmability of money”, EY adds further. This is expected to lead to the broader adoption and rise of digital currencies as acceptance by banks, merchants and regulators increases.


Source: EY’s The rise of PayTech – seven forces shaping the future of payments

Embedded payments

“Embedded payments constitute the largest subsector within embedded finance, and their market value is estimated to be nearly 60% to 70% of that embedded finance, approximately $4.5 trillion by 2030”, observes Aite-Novarica’s study, “Realizing the Embedded Payments Opportunity”.

Embedded payments have become a core part of value propositions offered by businesses to their customers by enabling personalised, frictionless and instant payments at the touch of a button. Payments technology enables non-financial firms (e.g., Uber or Shopify) to integrate or embed payment services and more into their apps and digital platforms. As such, embedded payments are becoming increasingly common for B2B2B and B2B2C segments like platforms and marketplaces, while PayTechs continue to play a major role in driving adoption rates. Additionally, payments for gig economy and service workers that range from embedded wallets to instant pay-outs continue to generate meaningful revenue for numerous platforms, the EY PayTech report reveals.

Seamless payment experiences augmented with frictionless payments will help embedded payments to scale further and “Become more invisible as non-financial services providers integrate payments into customer journeys”, the EY report explains.

“For example, check-out-free stores use invisible payments to provide a ‘just walk out’ shopping experience. In the automotive sector, cars are being embedded with in-vehicle commerce to allow drivers to pay directly for a range of car journey services (fuel, parking, vehicle repair payments, insurance), purchase (financing, payments, car-share, car rental), mobility and more from the car touchscreen”, adds EY.

This invisibility of payments will lead to the increased adoption of embedded payments and will pave the way to greater opportunities for the entire financial landscape.

Digital wallets and super apps

“In 2021, digital wallets accounted for nearly half (49%) of global e-commerce transaction value, far outpacing credit cards, which are in second place at 21%. Our current projections see digital wallets commanding a 50% share in 2022, approaching 53% by 2025”, according to FIS’s 2022 Global Payments Report.

The adoption of digital wallets surged during the COVID-19 pandemic. Along with pandemic disruptions, rapid advances in technology also made it easier to provision credit and debit cards to be used as digital payments on consumer smartphones, and also to port cards from one wallet to another.

In today’s digital-first economy, where consumers are concerned about security while storing and dispensing with their wealth, digital and mobile wallets bring a unique sense of security to the table, thanks to tokenization. Besides security, the popularity of digital wallets is also linked to embedded value-added offerings, such as loyalty programs and the transformation of closed-to-open loop wallets.

Digital wallets also help to “Significantly reduce payments transaction fees while offering customers a single destination to manage their finances”, affirms EY.

While North America and Europe are still heavily reliant on payment cards and card networks, the Asia Pacific (APAC) region has witnessed the biggest adoption of digital wallets and super apps. However, digital wallet providers outside APAC are striving to transform into super apps by expanding their array of omnichannel services, such as crypto wallets, contactless pay modes and more. 

EY reports that digital wallets and super apps are actively expanding into services, namely, buy now, pay later (BNPL), digital identity and contactless payments (e.g., wearables), QR code payments, near-field communications (NFC) and others. By going a step further, EY remarks, “Super apps are setting out to fulfil almost any financial, leisure, or lifestyle need their users may have.”

The future of digital wallets and super apps is bright, and further expansion by PayTech organisations is in the offing that will include new services to grow their user base. EY expects to see super apps services with social media-initiated payments, voice activated payments, cryptocurrencies, non-fungible tokens (NFT) management, metaverse payments, biometric payments and facial recognition all becoming mainstream.

Buy now, pay later

BNPL is a newer payment method that allows customers to buy a product or service immediately at the point of sale and pay it off in instalments. This method gained momentum during the pandemic, as more consumers went online for their purchases and looked for ways to stretch their money.

Retailers and merchants use this instant credit option to drive sales, attract customers, boost customer loyalty and reduce cart abandonment, while consumers choose BNPL for its convenience, low cost and predictable payment schedule. BNPL has also extended to corporate purchases as a cash flow management tool and for introducing predictability into repayments.

As per FIS’s 2022 Global Payments Report, BNPL accounted for nearly 3% of global e-commerce spend ($157 billion) in 2021. It is expected to be the fastest-growing payment method, both online and in stores, through 2025.

EY’s payments report asserts that BNPL has established itself as an alternative payments method, and given that the popularity of BNPL shows no signs of abating, it will continue to evolve and expand.

Banks are also expected to grab the major opportunity BNPL presents, including collaborating even further with PayTech partners. BNPL will likely increase the spending and lending volumes for consumer banking. For corporate banking, it can trigger additional services around cash and liquidity management. 

Open banking

Spurred by innovative technology, open banking is a global phenomenon that gives consumers full control of their data, identity and payments, thereby enabling authorised third-party providers (TPPs) to access banking capabilities on their customers’ behalf. Third-party access to customer data is done through secure application programming interfaces (APIs).

Open banking allows customers and TPPs to initiate payments disbursements and/or collections. “It provides new possibilities for faster, more secure, cheaper payments that are convenient for customers by connecting merchants and customers directly”, EY emphasises.

“The APIs that exist alongside open banking have also unshackled the potential of A2A (account-to-account) payments by removing the barriers created by fragmented banking rails, forming an effective ‘pay by bank’ option. This makes it easier to access payments clearing systems and embed an A2A payment at the point of purchase. As a result, customers and merchants have far more options”, EY stated.

Public policy makers worldwide are exploring the opportunity of open banking transitioning towards open finance. This means if open banking evolves into open finance, data-sharing will not be limited to transactional bank account data only. Other types of information (financial) will also become accessible to authorised TPPs, creating a more interconnected and sustainable financial ecosystem.

Grand View Research data shows that the global open banking market size was valued at $16.03 billion in 2021 and is expected to grow at a CAGR of 26.9% from 2022 to 2030. 

EY reports that the “Open banking movement is building momentum globally, radically changing the way banks approach business models, customer engagement and service delivery.” With digital experiences fuelling the new digital economy, open banking could be the game changer that helps banks regain customer loyalty and elevate customer conversations.


The payments industry is undergoing radical change. A confluence of factors is reshaping the payments landscape – inflation, interest rate hikes, cybersecurity threats, volatile stock markets, supply chain snarls, global economic slowdown, currency swings, geopolitical issues, increasing complexity of regulatory compliance, and more importantly, rapid development of payment technologies.

Innovation and technology will create new opportunities for players in the global payments ecosystem to transform their approach and ultimately offer what EY terms “value beyond payments.”

Payments lie at the heart of global commerce and its digital economy. Understanding the seven forces that will have a significant influence over the future of payments will help the stakeholders in the global payments industry leverage each force to play a major role in shaping the outlook of the sector in time to come.

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