According to the 2024 report from the Payments Innovation Jury, many payments firms were over-valued prior to the pandemic, CBDCs have been overhyped and Asia remains the most promising region in the world for future payments growth ahead of the Middle East and Africa – with Latin America seemingly not at the races.
The new report, Market meltdown – impacts on infrastructure, regulation and innovation, reveals the views of 124 global payment leaders on how tumultuous macroeconomic changes over the past two years have affected the sector.
For this iteration, record numbers of Jurors were drawn from Latin America and Asia outside China so that the views of the “global South” would be adequately represented.
“Investors bid up deal prices and paid little attention to profitability before the pandemic.”
This year, the Payments Innovation Jury argued that many payments firms (such as Klarna and crypto players like Coinbase) had suffered huge reductions in their valuations because investors had bid up deal prices and paid insufficient attention to profitability prior to the pandemic when there were super-low interest rates and a good deal of capital looking for growth companies to invest in.
As a result, investors are now focused on early-stage profitability, with businesses developing AI and climate fintech tools and technologies set to benefit from investment more than payments businesses.
Cards set to struggle in new markets
This year’s report also predicts cards are going to struggle to attain market leadership in emerging markets where they are not already leaders, owing to stiff competition from account-to-account payments in Latin America and mobile money systems in Africa.
Between them, Mastercard and Visa have recently invested $1.2 billion in African mobile money players, testament to the growth potential of this sector.
In developed markets, the Jury finds credit and debit cards will be hard to dislodge from their leadership roles, although growth will be harder to find than in previous years.
Further good news for banks at a global level comes from the Jury’s prediction that they, rather than fintechs or mobile network providers, will be the major players in mobile wallets owing to their close customer relationships, improving technology stacks and status as regulated entities.
Talent war heats up
This year’s report finds that payments companies in emerging markets are losing talent to more developed markets.
Almost 60 percent of Jury members in emerging markets saying that they are losing an unacceptable number of staff with consequential risks to innovation programmes and sometimes even ongoing operations.
“Emerging markets payments companies are losing talent to the developed world.”
Crypto failures could hit CBDC plans
The Payments Innovation Jury debated whether high-profile crypto exchanges failures such as FTX in the US would impact confidence in global markets.
They were undecided as to what the longer-term impact of such failures would be on government plans to introduce Central Bank Digital Currencies, with 38 percent of those surveyed saying they were unsure of the effect and 21 percent saying the effect would be negative.
Finally and in a surprising finding, Asia-Pacific has retained its crown as the region with the most payment innovations according to the Jury but perhaps more surprisingly, Africa & the Middle East was a clear second favourite despite Africa’s macro-economic challenges, relatively low levels of investment funding and now talent drain.
PAYMENTS CARDS & MOBILE OPINION:
As ever, the Jury’s annual report produces much good sense, some points of debate – and a few eyebrow-raising surprises.
Among those surprises must rank the designation of Asia Pacific as the ongoing leader in payments innovation, despite huge strides made by instant payment systems such as PIX and Yape in Latin America – not to mention that region’s massive e-commerce growth.
Their evident scepticism about CBDCs is likely not misplaced, nor is their view that there will be no single dominant payment method in any market by 2035.
This reflects wider opinion that there will continue to be a role for payment cards even as digital wallets and account-to-account payments keep growing strongly.
The post Investors over-valued payments firms and CBDCs are overhyped: 2024 jury appeared first on Payments Cards & Mobile.