Payments services have continued to be a strong and growing earner for banks and other financial institutions, despite the slowdown in global economic activity over the past couple of years, McKinsey & Co reports. According to McKinsey’s 2023 Global Payments Report, total revenue grew by 11 per cent in 2022 to more than US$2.2 trillion – the second consecutive year of double-digit growth for the sector. McKinsey said there was growth in all regions, with revenue increasing 5 per cent to US$1 trillion in Asia Pacific. The region was below the global average growth rate because of a decline in payments revenue in China. Revenue from transaction fees rose 5 per cent, while higher margins on funds held on deposit contributed to strong growth in interest income. Cross border payments were a big contributor, with flows growing 13 per cent to US$150 trillion. A big driver of growth is cash displacement. McKinsey estimated that cash usage fell 4 percentage points globally in 2022. “Cash usage has been declining rapidly, losing 20 percentage points in the share of global payments over the past five years. Instant electronic payments are playing a key role in this transition out of cash,” McKinsey said. It said the development of instant payments in more markets will fuel continuing growth and is forecasting global payments revenue of US$3.2 trillion by 2027. “Digital wallets, the source and destination of much of the flow of instant payments, are similarly booming.” McKinsey said payments were moving from what it called the “account era” to the “decoupled era”, which would be characterised by more open platforms and less reliance on established account relationships. “Highly interoperable technologies such as tokenisation will reduce the need for a central agent. Banks will no longer be able to rely solely on the account ownership paradigm,” McKinsey said.