As global cashless transactions boom and competition flourishes, many banks remain reluctant to embrace Open Banking, ecosystem partnerships and open platforms, according to Capgemini.

The consultancy’s World Payments Report combines its 18 market Open Banking Assessment, an online survey across banks, non-bank financial services institutions and corporates in June, and several senior executive interviews.

The report found that the transaction volume of non-cash payments is growing rapidly, particularly in developing markets within Asia (32 per cent growth) and Central Europe, Middle East and Africa (19 per cent growth).

It is projected to top 1,046 billion non-cash transactions globally by 2022, which equates to a compounded annual growth rate of 14 per cent.

Yet in a market defined by innovation, Capgemini stated that many incumbents are more fearful than optimistic about the pace and direction of change. In numerous cases, they cited the threat of BigTech challengers alongside only embracing Open Banking to the extent that regulators require, rather than seeing it as an opportunity for offering differentiation, customer retention and market leadership.

Less than half (48 per cent) of those surveyed said they are planning to use open Application Programming Interfaces (APIs) beyond the level needed for regulatory compliance.

Although banks are gradually moving towards a more open, data-led and cloud-based approach, there remains a reluctance to fully embrace Open Banking, with 90 per cent identifying ecosystem-based business models as key to long-term success, yet only 44 per cent expressing interest in building and orchestrating an ecosystem of their own.

Digital transformation efforts at 60 per cent of banks are in response to regulatory compliance. Adoption of APIs beyond what regulation requires has been sluggish: a majority of banks have no plans to implement APIs that expose data in areas including intra-bank statement (53 per cent), conditional payments (53 per cent) and branch/ATM location (67 per cent).

The research revealed that 63 per cent identified BigTech competitors - leveraging their global reach, brand equity, customer trust, great customer experience and finally payments infrastructure - as a leading threat.

Developing markets are leading the growth in the non-cash payment sector, projected to rise by a compound annual growth rate of 23.5 per cent between 2017 and 2022.

In 2017, emerging markets accounted for 35 per cent of global growth, a share expected to rise to 50 per cent in the coming years. Key contributors include Russia, where non-cash transactions grew by 40 per cent in 2017, India (39 per cent) and China (35 per cent).

By contrast, mature markets including Asia Pacific, Europe and North America saw a steadier growth rate of seven per cent.

Debit cards were the fastest-growing non-cash payment instrument, with transactions up by 17 per cent in 2017, ahead of credit cards (11 per cent) and credit transfers (10 per cent).

“The global payments landscape is undergoing significant evolution, but not all participants are comfortable with the pace and direction of change,” said Anirban Bose, chief executive of Capgemini’s financial services group.

“We encourage incumbent banks to consider quick-win solutions that position them for the future market, such as implementing a microservices architecture to circumvent the limitations of legacy infrastructure.”

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