Payments generated a whopping $1.9 trillion of revenue last year, according to research from McKinsey. As digital transactions displace those using cash, financial companies in Asia Pacific took home more of that money than almost all other regions combined.
Some $880 billion of revenue was generated in Asia Pacific last year, according to the consulting firm. North America accounted for $515 billion and Europe, the Middle East, and Africa for $345 billion. Revenue from transactions has been growing at about 6% per year, and McKinsey expects that expansion to continue, reaching $2.7 trillion by 2023.
Below the surface, the sources of revenue vary greatly from one region to the next. In Asia Pacific, more than half of the money is generated by commercial payments, compared with around 35% in North America. Europe’s revenue is more balanced, but the money its financial institutions derive from interest on current accounts (or checking accounts, as they are known in the US) is in decline amid negative interest rates in much of the region.
Net interest income in Western Europe has fallen for six years, dropping by nearly 40% during that span, according to McKinsey. While sluggish economic growth has dampened transaction revenue, the shift from cash to cards is Europe has provided a tailwind for payment digital payment companies.
Transactions in China generated an eye-popping $605 billion of revenue in 2018, some $100 billion more than the US; China also comprised two-thirds of all payments revenue in Asia Pacific. While the Alipay-WeChat Pay duopoly in Chinese mobile payments gets the most attention, some 60% of the country’s revenue from payments derives from commercial activity.