The payments industry wasn’t impacted as much by the COVID-19 crisis as some had expected. It has returned to growth with renewed momentum. The good news is that the region will be one of the fastest-growing in the future. Jason Simon, an expert in the new era of commerce-related technology, explains how digital payments are coming to change the game.

The pandemic hit all activities and the payments industry suffered as well, although a report shared by Simon indicates that “global payments revenue declined only 2.5% from 2019 to 2020, to $1.5 trillion.” The interesting data comes ahead, as the five-year analysis suggests that global payments revenue will expand at 7.3% from 2020 to 2025.

The data shows that growth will continue at about the same pace for the rest of the decade and projects the total revenue pool to reach $2.9 trillion by 2030. As for where it will grow the most, while all regions are estimated to make the jump, Asia-Pacific will continue to lead with a compound annual growth rate of 8.8%. The interesting news comes from Latin America, which would be the second-fastest-growing bloc with 8.3%, then the Middle East and Africa with 6.9%, North America with 5.8%, and finally, Europe with 5.3%.

“During the COVID-19 crisis, the payments industry had to take on challenges in a matter of months that would otherwise have taken years. Overall, the industry responded by being a facilitator of economic recovery,” explains Simon. “To cope with the pandemic, a wave of innovation has opened up that will allow new players and more competitive proposals to enter the market. Over the next few years, companies that adapt quickly to this new panorama will stand out”.

In the case of Latin America, revenues in the payment media industry are on track to grow by 8.3% annually over the next five years. “In 2020, revenues in this sector were estimated to be $127 billion, down 2.3% from 2019, with revenues projected to reach $190 billion in 2025. In part, this trajectory reflects steady improvements in the region’s RTP (real-time payment) infrastructure,” continues Simon.

Brazil, in particular, has seen RTP usage soar since it introduced PIX in November 2020. This system, developed by Brazil’s central bank, is now the country’s dominant transfer model for person-to-person payments, a position it claimed within the first six months after its launch.

“RTP systems similar to PIX are also available in Argentina, Colombia, and Mexico, and will soon appear in Chile. However, interoperability challenges between the different systems, coupled with a lack of strict regulatory mandates, have slowed RTP adoption in these countries,” notes Simon.

Another important aspect for the industry in LatAm is the strong adoption of digital payments solutions, which are driving payments revenue growth in the region and spurring fierce competitive activity.

They aren’t the only ones in this hot industry. To gain access to digital payments, many banks and payment specialists are teaming up with consumer, retail, and telecoms companies.

As integrated software providers, big tech players and FinTechs join the market, digital ecosystems and specialized solutions will play an increasing part in the industry and banks increase their involvement.

This trend will be accompanied by a wave of industry consolidations, mergers and acquisitions. With the possibility of central banks launching more digital currencies, digital currency activity could also increase. Financial regulators will promote open banking and work to improve the payment infrastructure.