Five Forces Shaping the Global Payments Ecosystem 


The global payments industry is flourishing. Now worth $2.1 trillion, it’s exceeding pre-pandemic expectations 

Following an end to a decade of low interest rates and inflation, and in a climate where geopolitical disruptions mean electronic payments infrastructure is taking on heightened importance for national and regional governments, online payments play a critical role in the growth and development of the world economy. 

By stimulating competition and helping enterprises harness digital trade and contribute to economic growth, the payments industry is supporting the development of digital economies and fostering inclusion.

Currently, the payments landscape is reshaping in unexpected ways due to five forces – the macroeconomic environment, geopolitical factors, commerce expectations, technology modernisation, and social responsibility. 

Thriving in this new payments ecosystem means better understanding these core factors shaping it and influencing regional dynamics.

Macroeconomic shifts

Inflation is at its highest level in decades on a global scale, causing payment providers and financial services to rethink business models. This has also opened opportunities from this side of the payments equation, particularly for parties that hold deposits, like banks.

In response to inflation, many central banks have changed their policies, resulting in rising interest rates and greater net interest margins. This combination of inflation and interest margins alters consumer and business cash management strategies and will likely encourage the movement of balances from transaction accounts to deposit vehicles offering higher rates.

In parallel, economic-growth uncertainties, like the unexpected hike in global energy prices, are increasing the risk of recession – which will vary by region. This affects household and business spending and investment, altering the dynamic of payments economics on both the demand and supply sides of the equation.

Many leading payments providers are still getting to grips with a high inflation, high interest rate environment, and the emergence of untested payment products like buy now, pay later (BNPL).  Potential economic downturn and navigating the credit challenges aside, players like card issuers and traditional banks are well-positioned for this macroeconomic environment, given that liquidity typically goes to account-holding institutions.

Geopolitical disruption

Domestic, regional and local networks increasingly hold the key to central infrastructure in today’s geopolitical climate. With waves in the geopolitical environment creating demand for local and regional payment solutions, many countries have invested in modern instant-payment systems. 

Traditionally, solutions across geographies were standardised. Now that growing numbers of people and businesses are championing the use of domestic schemes and payments services, expect to see local regulations and requirements become more complex and scrutinised. Payments providers that simplify cross-border payments for customers and offer turnkey solutions for services like digital ID and Know your Customer (KYC) have an opportunity here.

Newly established local networks are supporting local policy agendas and reducing dependency on international providers. Using economic models and access rules that differ from international solutions, countries can deploy a point of sale (POS) systems and online applications of local payment solutions to grow local e-commerce and boost financial inclusion – helping individuals and businesses have access to affordable financial products and services that meet their needs.

World events and sanctions have also influenced trade and international treasury payments, which has amplified regional relationships and created shifts in segments and geographical zones. The trend for reshoring – the process of bringing manufacturing and part or all of the supply chain back to the home country from a foreign country – and nearshoring, which is a similar process but in locations closer to home – remains.

Sectors like healthcare, electronics and automotive continue to feel the disruption caused by lingering global supply chain issues. Logistics disruption, production delays, elevated transportation costs and reliance on a limited number of third parties continue to place pressure on supply chains, encouraging supplier diversification. Over the coming years, the impact of the transition will reflect in trade corridors.

The payments sector is on course to grow by almost 50% and a value of $3 trillion by 2026.

Commerce and ecommerce expectations

The expectation of revenue growth through nurturing customer relationships powered the high valuations of fintechs and startups. And today’s payment providers have evolved from providing stand-alone financial or money movement transaction payments to being integrated with the commerce experience and enhancing the journey.

Ecommerce has been an opportunity for merchants to enter new markets and emerging economies to reach new customers and be less dependent on declining markets. Digital payment providers facilitate cross-border trade and the participation of smaller and medium-sized enterprises in global trade and the economy. Not only will this help businesses survive economic downtown, but it also has a positive impact domestically as it means jobs are protected and taxes are generated locally.

Online payments impact the economy in other ways, including increased productivity through better supply chain management, the adoption of information and communications technology and increased competition.

The most promising new area for the future is integrating finance products into nonfinance ecosystems. Data is currency, so those that can monetise services and data will reap a larger share of the market.


Advances in technology

The accelerated rate of technological innovation that the pandemic produced has kept up momentum. Upgrades to networks and business and financial payment systems are more frequent, resulting in companies making structural, rather than incremental, improvements to their infrastructure.

Banks, for example, are aggressively modernising their systems to harness insight from real-time data and updating payments infrastructures due to demand for instant payments, open-banking requirements and cloud technology.

The next S-curve for model risk management (MRM) includes strategies to address new regulation and changing business needs. World events mean several countries are entering the next curve on instant-payment transaction growth with volumes expected to increase by up to 60% globally.

The continued growth of embedded finance means digital natives will expect the delivery of catered services and API-based access to payments information, placing steady pressure on providers to modernise their payment infrastructure as consumer and business requirements evolve.

Together, these factors are changing the relationship between payments and legacy providers as more payments adopt outsourcing and software as a service (SaaS) models.

instant-payment transaction growth with volumes expected to increase by up to 60% globally.

Social responsibility

McKinsey’s Global Banking Annual Review heightened expectations from governments, investors, regulators, and consumers to address climate risk and sustainability issues. And COP27 focused on connecting national governments with cities, businesses and investors to accelerate sustainable climate innovation.

As such, corporate social responsibility is influential in shaping the payments landscape given data privacy and its role in financial inclusion.

ESG increasingly weighs on domestic payment services, whereas before it was predominantly on international providers. Payments companies play a key component in governance, as they contribute towards the security, compliance, resilience and stability of economic systems. Governance also sees banks acting as gatekeepers against fraud, KYC and anti-money laundering – significant drivers of investment into the operational change being seen across the industry.

Inclusion and customer protection also are increasingly central to the mission of payments providers. In emerging markets, digital payments and wallets have been instrumental in bringing financial services to the underserved in cash-based economies. In developed markets, as consumer demand rises, so too will scrutiny of the role of payments in emerging verticals – such as gaming and cannabidiol (CBD).


Opportunities in the worldwide payments ecosystem

While notoriously tricky to forecast, even with consideration to interest rates, the payments sector is on course to grow by almost 50% and a value of $3 trillion by 2026.

While undergoing radical industry changes, payments lie at the heart of global commerce in the digital economy. To help customers traverse a fluid and increasingly complex commerce and payments landscape, providers must adjust to the five forces with a renewed strategic focus on adopting local and global operating models, domestically and cross-border. Those that can, complemented by an authentic commitment to ESG and social impact, will be best placed to capitalise in the new ecosystem.