KEY POINTS

  • From the customer experience to back-end systems, the payments industry is going through a period of rapid change. Digitization, globalization, and regulation are transforming the payments ecosystem, and transactions are getting faster, cheaper, and more convenient as a result.
  • The industry's core remains safe from disruption — for now. Except for some security upgrades, what happens after a payment card is swiped, from processing to settlement, has changed little. 
  • But shifting payment habits are opening the door to digital upstarts. These disruptive new companies are gaining ground, tapping into their lack of legacy infrastructure to cut costs and remain nimble. To keep ahead in high-growth areas, legacy payments providers are rapidly building, buying, and partnering with other firms. This battle is playing out across each of the major payment types detailed in this report. 
  • E-commerce continues to wrest dollars from brick-and-mortar stores. E-commerce has surged up 70%, or $160 billion, from 2012 to 2016 to reach $390 billion in the US. Spurred on by rising device engagement and increasingly attractive digital retail channels, we expect volume to more than double again over the next five years to reach $798 billion, making up 15% of all retail purchases. 
    • Desktop PCs still make up the majority of e-commerce purchases. Thanks to large screens that facilitate comparison shopping and physical keyboards that make interaction easier, PCs account for 81% of all e-commerce spending. 
    • But mobile devices are its future growth engine. Mobile commerce is projected to surge ahead, rising from $76 billion, or 19% of e-commerce, in 2016 to $357 billion, a 45% share, by 2021. That growth will be driven by technologies that ease the hassle of shopping on mobile, such as mobile wallets, carrier billing, voice payments, and chatbot payments.
  • In-store mobile payments carry great potential — but continue to suffer from growing pains. Android Pay, Apple Pay, and Samsung Pay combined only made up 0.25% of US debit transactions, according to a 2017 study by PULSE. However, mobile in-store payments are expected to rise in the years to come, thanks to the value of features such as order-ahead and integrated loyalty programs. 
  • Digital peer-to-peer (P2P) payments are only inching ahead, but mobile’s share is skyrocketing. As consumers gradually give up checks and cash in favor of digital P2P payments, total volume will rise by 4% from 2016 to 2021. However, in that same [...]