Banking is no longer boringPayments are changing the way we live. Fintech is expanding the capacity our of economies. To fall behind these trends is to go out of business. PCMI gives you the tools you need create the future rather than react to it. We serve as clients’ eyes and ears in the following expertise areas, supplying the insights, so they can focus on execution.
In the last five years, cash has lost its reign as “king”, even in emerging markets where informal economies still represent the majority of employment. New payment systems incorporating account-based transfers, fintechs and digital wallets have empowered formerly excluded consumers and small businesses to adopt digital payments for the first time.
In 2022, cash penetration of face-to-face retail fell below 50% in Latin America for the first time in history; instant payment systems across Asia and Europe continue to drive cash use down. Despite new competition, credit and debit card networks continue to grow 30%+ YoY as they invest in new payment technologies and digitize and tokenize payment credentials.
With enhanced fraud tools, biometic payments, digital identity, open banking and other technologies, the next ten years holds a future in which payments are embedded, intuitive and invisible, requiring an even higher standard for user experience and security.
E-commerce continues to surge, exceeding 15% of retail payments in emerging markets, up from 5% pre-pandemic, and exceeding 20% or 30% in markets like the US and China. Social media, the influencer and gaming economies and the new work economy have created new payment channels, requiring the need for seamless, mobile, micro payments, both to and from consumers. Payments are becoming faster, more agile, more flexible, and more international, creating major complexities for brands navigating these changes.
While card payments dominated e-commerce for the last two decades, the next decade will see a rise in account-based transfers; in 2022, cards lost share of e-commerce in Latin America for the first time in history. Interoperable bank account transfers will undermine the ability of closed-loop networks to compete, as cash-based online payment methods continue to represent 5-10% of online payments in emerging markets, and higher in industries like gaming and gambling.
Cross-border e-commerce is growing faster than domestic e-commerce as innovative payment processors handle the complexities of local payment methods F/X risk, and taxation. Representing anywhere from 5%-25% of e-commerce today, in the next ten years, cross-border trade will continue to climb to 40%+ of online sales as international borders dissolve for both payments and fulfillment logistics.
CRYPTOASSETS AND ALTERNATIVE FINANCE
Since Bitcoin hit historic highs in 2021, the adoption of cryptocurrency has spread like wildfire around the globe, with more than 40% of consumers having purchased a cryptoasset in some markets like Brazil and Indonesia, as reported by crypto exchange Gemini. Cryptocurrency appeals to multiple end user segments, including those looking for speculative investment opportunities, those wanting to protect their savings held in volatile national currency, those transacting in the metaverse, and companies and individuals moving money around the globe, as well as creative fraudsters and criminals. Crypto and blockchain technologies hold many promises—the ability to erase national borders, smart and programmable money, new financing opportunities, and decentralized platforms in which the user is ultimately empowered—as well as many unknowns around risk, regulation, and long-term sustainability.
Cryptocurrency innovation is rapidly changing the competitive landscape, ushering in a whole new set of industry players, including crypto exchanges, crypto-as-a-service providers, crypto-based remittance players, and NFT marketplaces. Legacy players must come to terms with these changes and at a bare minimum, come to understand them, to properly strategize. The most innovative industry players will learn how to effectively partner to leverage the excitement around crypto, the metaverse and Web3 to bring added value to their customer base.
At PCMI, we advise clients on multiple verticals related to crypto and blockchain, including:
- Crypto payment and custody
- Remittances and cross-border payments
- Legal and regulatory
- Stablecoins and CBDCs
- Tokenization and tokenomics
- NFTs, art and gaming
- Web3, DAOs, and DeFi
CREDIT, lending, banking
Banking has become universal, even in emerging markets, thanks to digital banks and fintechs and government efforts to digitize social benefit disbursement. In 2022, 70%+ of Latin Americans own a financial account, up from <50% pre-COVID. This number stands at more than 50% across Africa and 80% across most of Asia. Traditional financial institutions still hold majority market share in terms of assets, but neobanks Nubank, Revolut, Chime and others are rivaling legacy competitors in number of customers and are winning in terms of new customers. Today’s teens getting exposed to banking through the social media and gaming industries are much more likely to bank with a digital than a traditional player.
Buy Now Pay Later and credit fintechs are actively transforming the way consumers shop for goods, homes and cars, making credit exponentially more accessible and expanding consumers’ purchasing power. Through data sharing and innovating credit scoring models, payment at sight is experiencing a swift downward trend. After years of burning cash, fintechs seeking to become profitable are entering the credit and investment space, making these more advanced products available on an even wider scale.
And, through banking-as-a-service, over the next ten years, financial services will be offered by any institution—retailer, gaming platform, gas station chain, increasing competition, product personalization and the improving the user experience. Financial services will become increasingly disintermediated and embedded, unbundling decades old commercial relationships for a more democratized future.
RETAIL AND COMMERCE
Omnichannel no longer means online and in-store. It means via web, mobile browser, mobile app, in-store, click and collect, pick up at a locker, WhatsApp, Instagram, Facebook, TikTok, chip card, NFC, digital wallet, wearable, facial payments, cryptocurrencies, Metavese…the list goes on. Retailers and online companies must constantly adapt to changing consumer preferences around payments and shopping to enable a frictionless checkout experience.
Globally, over 200 million people used digital payments for the first time since 2020. These first time users are experimenting with e-commerce, debit cards and P2M payments and represent billions of dollars in formally unaddressable market. Global brands are experimenting with how to attract, retain and loyalize these new digital shoppers, whose preferences and shopping habits are different than their traditional customer base.
Understanding consumer trends is at the crux of any successful retail business, and as millions—even billions—of new consumers become digitized over the next decade, delivering shopping experiences that align with consumers—whether in physical stores or in the metaverse—will be a crucial strategic priority.