Taxonomy of Payments: Part I

by Zilvinas Bareisis, July 14, 2010
Industry Trends
Global, Asia-Pacific, EMEA, Latin America, North America

Abstract

Payments are critical to a well-functioning economy and are very important to the providers: products where payments are a key feature (DDA and credit card) account for 30-50% of banks’ revenues. At the same time, payments is a broad, diverse, and complex topic with significant differences in underlying trends for different payment instruments and geographies.

In a two-part report, Taxonomy of Payments, Part I: Everything You Wanted to Know About Payments But Were Afraid to Ask, Celent introduces an organising framework for how to think about payments and reviews the key developments in the industry.

Part I of the report starts with an introduction to the basics of payments, such as key terminology and the overall value chain, and proceeds to discuss the major payment instruments: cash, cheque, electronic bank transfers, both domestic and international, and cards. Each section introduces an instrument, further details the value chain, explains the transaction economics, examines key players, describes major trends, and points the reader to other relevant Celent reports.

“Many of us take payments for granted, yet it is a diverse and complex topic,” says Zilvinas Bareisis, Senior Analyst with Celent’s Banking Group and author of the report. “While transaction-related revenues remained relatively robust during the financial crisis, the margins are coming under significant pressure. Understanding key trends in payments and making informed decisions on where to invest is more important than ever before to executives in the payments industry.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Introduction

7

The Basics of Payments

8

 

Key Definitions

8

 

Payments Value Chain

11

Complexity of the Payments Ecosystem

17

Cash

20

Money Supply Account-Based Instruments

30

 

Cheques

30

 

Electronic Bank Transfers

34

 

International Transfers

39

Cards

48

 

Introduction: Differentiation of Cards

48

 

Card Schemes and Transaction Economics

50

 

Cards Value Chain and Key Players

53

 

Cards: An Overall Growth Story

58

 

Prepaid: Segmented Approach Is Key to Success

60

 

Debit: A Story of Success and Local Competition

61

 

Card Innovation

65

Coming Up in Part II

68

Leveraging Celent’s Expertise

69

 

Support for Financial Institutions

69

 

Support for Vendors

69

Related Celent Research

70

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