Europe’s biggest financial technology (fintech) firms are poised to benefit from “secular tailwinds” in coming years as the payments industry continues to undergo a revolution, according to Citi.
A newly-published paper by the bank’s researchers Josh Levin and Ronit Ghose cites four key forces that are driving the new order in Europe: changing consumer preferences; which is linked to the ubiquity of mobiles; increasing merchant demands as payment firms are increasingly seen as technology providers able to handle complex transactions, boost revenues and profitability; and changing regulations designed to boost e-payments at the expense of cash.
The authors expect these forces to drive annual growth in electronic payments in the high-single digits range for years to come as cash still comprises the majority of transactions in most developed markets. What they dub an EMEA (Europe, the Middle East and Africa) ‘fintech five’ – Gemalto, Ingenico, Worldline, Wirecard and Worldpay – are seen as particularly well positioned to benefit
“As merchants adapt to this trend, we believe there’s a lot of low hanging fruit for our payments companies to pick given that much of today’s merchant payment acceptance technology is surprisingly primitive,” the report notes. “In addition, payment companies have the opportunity to further increase their profitability by providing value-added services.
“At the same time, we believe that changing regulations will drive consolidation in the European payments industry and that the industry will eventually evolve into an oligopoly with the attendant benefits which oligopolies usually enjoy.”
Data from S&P Global Market Intelligence suggest that the German lender is struggling to meet capital and earnings figures.
Global digital payment volumes are set to reach 426.3bin transactions in 2015, according to the World Payments Report 2016 fromCapgemini and BNP Paribas.
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