According to Payment Innovation Review Committee Report 2024Many payment companies were overvalued before the pandemic, CBDCs are overvalued, and Asia remains the world’s most promising region for future payments growth, ahead of the Middle East and Africa. Latin America, on the other hand, appears to be out of the running.
2024 Payment Innovation Judges
A new report, ‘Market Disruption – The Impact on Infrastructure, Regulation and Innovation’, reveals the views of 124 global payments leaders on how turbulent macroeconomic changes over the past two years have affected the sector.
This iteration saw a record number of jurors drawn from Latin America and Asia, excluding China, ensuring that the voices of the “Global South” were adequately represented.
“Investors have been pricing in deals and, prior to the pandemic, they were not very interested in profitability.”
This year, the Payments Innovation Review Board argued that the massive decline in the value of many payment companies (including crypto players like Klarna and Coinbase) was due to investors pushing up transaction prices and not paying enough attention to profitability, which was a time before the pandemic when interest rates were ultra-low and a lot of capital was looking for places to invest in growth companies.
As a result, investors are now focusing on early-stage profitability, with companies developing AI and climate fintech tools and technologies expected to reap greater returns from investments than payments companies.
Cards that will struggle in new markets
This year’s report also predicts that cards will struggle to gain market leadership in emerging markets where they are not yet leaders, due to fierce competition between account-to-account payments in Latin America and mobile money systems in Africa.
Mastercard and Visa recently invested $1.2 billion in African mobile money companies, a testament to the sector’s growth potential.
In developed markets, credit and debit cards are unlikely to escape their dominant role, but they are unlikely to see growth compared to previous years.
Another piece of good news for global banks is that the panel predicts that banks, rather than fintechs or mobile network providers, will be the major players in the mobile wallet market due to their closer relationships with customers, improved technology stacks and status as regulated entities.
The war for talent is intensifying
This year’s report found that payments companies in emerging markets are losing talent to developed markets.
About 60% of emerging market jury members said they were losing an unacceptable number of employees, putting innovation programs and even existing operations at risk.
“Emerging market payments companies are losing talent to developed countries.”
Cryptocurrency failure could hit CBDC plans
The Payments Innovation Review Board discussed whether the failure of prominent cryptocurrency exchanges like US-based FTX could have an impact on trust in global markets.
Respondents were undecided about what long-term impact this failure would have on the government’s plans to introduce a central bank digital currency, with 38% of those surveyed saying they were unsure of the impact and 21% saying the impact would be negative.
Finally, there was a surprising result. The Asia Pacific region retained its position as the region with the most payments innovation, according to the judges. But what was even more surprising was that Africa and the Middle East came in second place, despite Africa’s macroeconomic challenges, relatively low investment levels, and ongoing talent exodus.
Payment Cards and Mobile Comments:
As always, the jury’s annual report contains a lot of common sense, a few controversial issues, and a few surprising facts that will make you raise your eyebrows.
One such surprising fact is that despite the tremendous progress made in instant payment systems like PIX and Yape in Latin America, as well as the tremendous growth of e-commerce in the region, Asia Pacific continues to be a leader in payments innovation.
Their apparent skepticism about CBDCs is not unfounded, as is their view that there will be no dominant single means of payment in any market by 2035.
This reflects the widespread consensus that payment cards will continue to have a role to play as digital wallets and account-to-account payments continue to grow significantly.