Payments Trends 2017

Global Financial Services Market IntelligenceStrategic Analysis Group

Top 10 Trends in Payments – 2017

2Global Banking and Payments Trends_v1 0

Global Financial Services Market Intelligence

Adoption of digital payments is on the rise with wallets, cards, and mobile becoming

mainstream

$426.3Billion

$12.2 Billion

Volume of contactless payments is forecasted to grow nine fold by 2020

Projected global digital payment volumes in 2015

Increased Adoption of Contactless Payment

Enabled DevicesRetailer/Merchant Obligations

Customer Demand for Speed and Convenience

Source: Capgemini Financial Services Analysis, 2016“Digital Disruption Brews In Financial Data, Digital Identity, And Payments, 2015,”, Forrester; "Global Digital Payments to Reach $36 Trillion", Juniper Research, 2016



Instant payments are potential alternative to existing instruments while a few challenges

still exist

Euro Instant payments will revolutionize payments across 338.3 million people

and 19 countries

Changes to Operating Models

Investments Made in Existing

Infrastructure

Cross-Border Interoperability

Handling Inter-Bank Settlement Risk

Source: Capgemini Financial Services Analysis, 2016; "Instant Payments-The Longer View", European Payments Council, 2016, http://www.europeanpaymentscouncil.eu/; http://www.treasury-management.com/article/1/362/2987/instant-payments-the-longer-view.html



Banks need to adopt a transformational approach to address the dynamics of

regulatory landscape

Transformational approach will help banks to move towards integrated risk and governance

models

Provide Value Added Services to Clients

Enhanced Decision Support Systems

Slower Progress in Holistic Compliance

Complexity in Regulatory Compliance

Source: Capgemini Financial Services Analysis, 2016; “Building a transformation vision”, 2016, http://www.bankingtech.com/250742/building-a-transformation-vision/; World Payments Report, Capgemini and BNP Paribas, 2016



RegTechs and regulatory sandboxes emerge as key themes

Increased Focus of Banks towards Holistic Compliance Initiatives

Emergence of Niche Firms within FinTech Segment with Technology Solutions for Regulatory Compliance

Change in Regulatory Approach Globally, with a Focus on Fostering Innovation and Reducing Cost of Compliance

$118.7 Billion

Global demand for regulatory, compliance, and governance software expected by 2020

Source: Capgemini Financial Services Analysis, 2016; "Regulatory sandbox", Financial Conduct Authority, November 2015, https://www.fca.org.uk/news/regulatory-sandbox; “Regulatory Sandbox: Discussion Paper”, July 2016, http://www.bnm.gov.my/guidelines/50_others/dp_regulatory%20sandbox_July2016.pdf



Instant payments and Basel III norms could trigger changes in liquidity management of

banks

Instant Settlement Arrangements

FX and Money Market Management

Improve Liquidity Shorter Reconciliation Times

70%Target LCR Ratio for 2016 is set at 70% with phased implementation for 100% by 2019

Source: Capgemini Financial Services Analysis, 2016; “Key Emerging Trends in the Payments Industry”, July 2016, https://www.trxservices.com/blog/key-emerging-trends-payments-industry/



Technology and regulatory initiatives are inducing transformation in Cross-border

payments domain

$582 Billion

$85 Trillion

Global trade flows are expected to triple by 2025

Global international remittances in 2015

Thriving Opportunity in Emerging Markets

Focus on Payouts/Settlements

Shift Away from Manual/Batch Processing

New Operating Models in Trade Finance

Alternative Solutions for Network Rails

Source: Capgemini Financial Services Analysis, 2016; “Trade in goods and services has fluctuated significantly over the last 20 years”, World Trade Organization Statistics, 2015; “Bringing Emerging Markets Into the Flow”, www.thefinancialist.com



FinTech activity in corporate and retail domain can disrupt payments analytics and

authentication

Focus on Authentication &

Data Security

Decision Making Capabilities

Demand for Innovation

Need for Analytics Based Solutions

79%Bank executives view FinTechs as partners as per WPR 2016

Source: Capgemini Financial Services Analysis, 2016; “Yodlee’s FinTech Influencer Survey”, https://www.yodlee.com/blog/global-fintech-survey-results-51-experts-reveal-2016-trends/February 2016; Executive Interviews for WPR 2016 ; Online Survey for WPR 2016 ; Total 124 responses received



Adoption of Open APIs is Leading to Paradigm Shift in Payments

Demand to Build Innovative Solutions

(SVB)

Win-Win Situation for both Banks and TPPs

Regulatory and Industry Push (PSD

II, OBWG)

Improved User Interface for Customers

Commoditization of Bank Offerings

Reduced Cost for Providing New

Services

15000Number of Registered Public APIs grew more

than double in 2015 from7000 in 2012

Source: Capgemini Financial Services Analysis, 2016; “APIs – what do they mean for payments?”, April, 2016, www.paymentsuk.org.uk; “Indian banks testing blockchain, AI, biometrics, open API and payments”, September, 2016, www.biomtericupdate.com



Security and Authentication are the Top Priority for Firms

Increased Card Fraud

Higher Adoption of Digital Payments

Open Banking Initiatives

Increased Threat of Cyber Crime

$16.3 Billion

Losses from worldwide fraud on credit cards, debit cards, and prepaid cards in 2015

$7 Billion

CNP based fraud in the U.S. is expected to reach $7 billion by 2020

Source: Capgemini Financial Services Analysis, 2016; “The True Cost of Data Breaches in the Payments Industry”, 2015, Smart Card Alliance, http://www.emv-connection.com/downloads/2015/03/The-Cost-of-Data-Breaches.pdf



Real-Time Processing

Requirements

Convergence of Payments

Instruments

Front-End Innovation

Legacy Infrastructure Modernization

25So far, only 25 countries representing 45% of global credit transfers have begun to modernize infrastructures

Transformation of back-end payments systems is still high priority

Source: Capgemini Fin ancial Services Analysis, 2016; “The Payment Processing Industry is Undergoing Seismic Change”, 2016, https://www.vantiv.com/vantage-point/payments-basics/current-trends-in-payment-processing-industry

The information contained in this presentation is proprietary.© 2013 Capgemini. All rights reserved.

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Economy & Finance

Payments Trends 2017