This is sequel to the 1st unveil of the report in Lagos, Nigeria, where Interswitch is Headquartered in mid-March.

Presenting the latest report titled: “Market meltdown – impacts on infrastructure, regulation and innovation” at Interswitch’s offices in Nairobi, East Africa’s key hub for payments and fintech, John Chaplin, senior adviser/board director at Interswitch, and also the founder and Chairman of the Global Jury unpacked some major insights encapsulated in the report, which analyses the in-depth perspectives of over 130 payment experts spanning all continents of the globe.

At the media presentation, which represented an opportunity to engage with key stakeholders in the region, Chaplin, whose career trajectory spans over 4 decades in the payment industry across leading payment companies including Interswitch, Visa, First Data Corporation and Global Processing Services reflected on the last 2 years of dynamic market activity in the global fintech and payments space, stressing that the unique insights of industry leaders across various markets has never been more needed than at a time such as this.

He particularly highlighted the jury’s depth of understanding of the causes and effects of macroeconomic changes and their impact on the long-term direction of the payments industry which helps the industry as a collective to understand how to navigate the turbulence of the times.

Asked which findings from the report findings were somewhat unexpected, Chaplin cited the general views expressed by the payments innovation jury alluding to banks being seen to have potential as long-term players in the mobile wallet space.

According to the report, which plays up the growing importance of compliance and risk management as pivotal considerations as payment volumes grow exponentially, “Most of the mobile wallet buzz is around new market entrants (mainly MNOs in developing markets and fintechs everywhere) but the Jury thinks that the banks are not finished yet and that they are best placed for success once the market for wallets becomes more regulated, as they have so much experience managing compliance at scale…”

From a perspective of profitability versus growth, Chaplin opined “I think that profitability will remain much more important than hyper growth. Over the past few years, investors and the broader market have tended to believe that high growth automatically leads to profitability. I don’t think that is always right. Business leaders should always be seeking to generate a return for shareholders in the not-too-distant future.”

With research undertaken in collaboration with World Bank and supported by Interswitch, FIME and HPS, the 2024 Payments Innovation Jury is the most diverse in its 16-year history.

136 Jurors from all over the world participated in the research, all in senior roles at national payments companies, banks, fintechs, payments policy bodies, central banks and investors.

This year, the number of central bank & regulators and investors each increased by 25%, enabling an even more representative picture of the challenges and opportunities ahead.

The Jury was also delighted to welcome several Jury members from South and Central America for the first time, making the insights gathered truly global.

Commenting on the Interswitch Group’s frontline role in bringing the report to fruition, Mitchell Elegbe, founder and group chief executive officer stated that “We are thrilled at Interswitch to also contribute our perspective, as a pan-African payments innovation enabler, to this report which, with every edition, continues to facilitate more balanced appraisal and better understanding of the global payments industry as it continues to evolve ever so dynamically.”

The 2024 Global Payment Innovation Jury report offers insight into many aspects of the payments industry that were impacted by the recent period of market turmoil.

Key findings from the report:

• The primary reason for previously high payment company valuations and funding rounds was investors bidding up deal prices and paying insufficient attention to profitability – a view shared by the investors canvassed.
• The above has led to a greater focus on earlier profitability over hyper-growth, which the Jury overwhelmingly regard as a positive for the industry – although there’s a lack of consensus on whether this is a long-term market movement
• The key differentiator between profitable and nonprofitable players is now cost management, not revenue growth, howbeit with a significant number of respondents positing that they believe this is ultimately a positive change for the global payments industry, tempered by equally valid concerns that direct consequences of the recently increasing focus on early profitability could be reduced levels of innovation which may impact future growth.
• Businesses developing AI and climate fintech tools and technologies will benefit from the diversion of investment from payments businesses.
• In emerging markets where cards have not yet gained a significant foothold, they will struggle to gain cut through when competing with account-to-account payments and mobile money.
• Credit and debit cards will be hard to dislodge from their leadership role in developed markets, but growth will be much harder to achieve than previously.
• Banks, rather than fintechs or mobile network providers, will ultimately be the major players in mobile wallets globally.
• The talent acquisition activities of payment enterprises in developed markets are a significant challenge for those in emerging markets, with almost 60% 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.
• High-profile crypto exchanges failures, such as FTX in the US, can impact confidence in global markets – not just where the failures occurred. This is clearly a concern for national regulators but remains complex to address.
• APAC retains its crown as the region with the most payment innovations, 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 a talent drain – a clear tribute to the resourcefulness of the continent’s entrepreneurs and policy makers.

Importantly, it is a foundational practice of the Payments Innovation Jury that all members participate on an anonymous basis, as this allows them to speak freely – unencumbered by the commercial priorities of their current organisation.

Download Market meltdown – impacts on infrastructure, regulation and innovation and all previous Payments Innovation Jury reports HERE.

The 2022 Payments Innovation Jury whose expert insights and perspectives essentially drove the report was made up of 79 senior payments leaders across 30 different markets.

To give a full, 360- degree picture, a significant number of senior regulators and investors were recruited to the Jury for the first time since its inception, alongside national payments companies, banks, fintechs, and payments policy bodies. Importantly, all Jury members participate on an anonymous basis to allow them to speak freely, unencumbered by the innovation priorities of their current organisation. The 2022 report is the tenth in a series spanning 14 years.

According to Mitchell Elegbe, Founder and Group Chief Executive Officer at Interswitch, “As one of the leading and influential players in payments who regard Africa as both our origin and primary catchment market, we are extremely enthused at Interswitch to yet again facilitate this timely and important research effort, which curates practical insights and expert perspectives of senior leaders globally, and across the entire spectrum of African retail payments. It is worth mentioning that this edition coincides with the 20^th anniversary of Interswitch’s inception, and I am thoroughly delighted that at such a significant milestone in our journey as a front-row contributor to payment innovation in Africa, we once again have the privilege of supporting this worthy initiative that is facilitating balanced appraisal and better understanding of the payments industry as it continues to evolve”.

John Chaplin, Founder/Chairman of the Payments Innovation Jury and Board Director at Interswitch opines that “In the payments industry there have long been competing ideas on what will be the ‘Next Big Thing’, particularly as many good ideas fail to achieve the scale to operate economically. As such, what is surprising about the 2022 Payments Innovation Jury is the level of consensus achieved in almost all areas, from the future of BNPL to the end user benefits of CBDCs.

“It has been incredibly rewarding to gather the insights of 79 of the most senior players shaping the global payments industry. My grateful thanks to them for taking the time to share their views, which have been curated in this report. The support of Interswitch, the World Bank, and Global Processing Services is much appreciated, as their patronage allows us to operate on a not-for-profit basis and

distribute the report free of charge to anyone with an interest in the future of innovation in the payments industry.”

Some of the report’s key findings include:

• Market share of account-to-account (A2A) transactions is expected to increase steadily over the next five years, but the lack of a sustainable income stream for participants calls elements of the A2A business case into question.
• Although the dominance of the card model in developed countries will be hard to shake, volume growth in card payments will be harder to achieve as alternative payment methods such as A2A grow their market share.
• In terms of which initiatives regulators should prioritise to promote innovation, the establishment of payment institution licenses with lower regulatory capital than full-service banks was seen as most effective, with sandboxes not being viewed as impactful.
• There was an almost even split between whether Banking as a Service (BaaS) is a technology model or a business model. Hopes that traditional banks would benefit seem largely misplaced, as it is a new generation of specialist platform providers that are leading the charge.
• BNPL usage is set to increase in the short/medium term because of strong benefits for consumers and merchants. However, its rapid expansion is likely to be a short-term phenomenon in the face of future regulation and rising credit losses.
• The introduction of CBDCs is seen as highly likely in most markets. The Jury was not convinced that there is market demand for CBDCs, however, and highlighted the significant operational costs of deployment. Essentially, the Jury believes that CBDCs will happen, but not that there are tangible benefits for much of the industry nor end users.
• Payment data is still not being utilised to its full advantage, with the exception of fraud control. Regulatory restrictions on the use of personal data are leaving the field largely clear for a small number of global bigtechs who have better technology and a different business model than conventional payment providers.
• Whilst the mobile is becoming the preferred form factor for payments globally, and gathering particular momentum in developing markets, mobile money has significant regulatory hurdles to overcome.
• Asia continues to lead the global charge on payments innovation and Africa comes out ahead of the USA and Europe, despite traditionally having much lower levels of investment.
• The two areas of payments innovation where the Jury feel reality will diverge most from the promises were cryptocurrency and BNPL.

The 2022 Payments Innovation Jury report: Payment Innovation: Myths and Realities can be read in full here.