Innovators are redefining the market and already tight margins are shrinking further — those that don’t adapt face extinction.

The impact on monetization and value creation


The total global transaction value for the digital payments market was $5.44 trillion in 2020. Driven by the ongoing wave of innovation and rising customer demand, that number is projected to more than double to $11.29 trillion by 2026. 

But surprisingly, that massive projected growth isn’t necessarily good news for incumbent payment providers. According to Citibank, small and medium-size payment enterprises are contributing to a growing share of value-added services, with most revenue growth in merchant services coming from small and medium-size enterprises.

As the payment market grows, increased competition is eroding margins for traditional providers. And new digital services created by innovative new market entrants are creating a new service paradigm that traditional providers are increasingly forced to keep pace with.

This new wave of innovation and competition is challenging traditional payment providers to undertake value-driven digital transformation — evolving their offerings to create new value for customers, partners, and themselves in innovative and engaging ways. 

The good news is that some of the most globally prominent traditional payment providers have already made big leaps to get ahead of these shifts. Both Visa and Mastercard have recently made huge investments in data aggregation and insights, to help them deepen their services, create value in new ways, and plot a clear path forward in today’s shifting payments landscape.

Three emerging paths to digital payments success

To adapt to these shifts, traditional payment service providers face a tough choice. There are three primary paths forward that can help them stay competitive:

  • Diversification: Changing how services and platforms are monetized

  • Partnerships: Building value-driven partnerships and ecosystems with adjacent organizations

  • Advancement: Offering stronger customer experiences than the competition

Which path — or combination of paths — is right for an organization will depend on its current market position, capabilities, and technology. Each option carries its own advantages and drawbacks, which is why Thoughtworks uses a solid framework to help organizations navigate the process, and ultimately make decisions that are right for them.

Path #1: Monetizing payments data

The opportunity: Today’s digital payment services and gateways generate and gather huge volumes of data that can be monetized. Payments data can be used to help understand customer needs, contextualize other customer journey data, analyze and hyperpersonalize customer experiences, and even fight fraud through the detection of malicious authorizations and fraudulent payments.

Allied Market Research forecasts the global data monetization market to reach $370.9 billion by 2023, with McKinsey projecting it to account for between 5–10% of payments revenue.

Value created: Payments data holds insights into both customer and merchant activity, helping to bridge the gap between the two. These insights are not just helpful for buyers and sellers but also helps other players who need to come together to make the B2C transaction happen. Insights are extremely valuable to payments providers and any organization that wants to better understand commercial activity, fraudulent activity, and even exposure to financial risk.

Insights are also a highly-valuable strategic asset that can help organizations understand and uncover further opportunities to expand their offering and meet new and emerging customer needs. For example, both AliPay and WeChat Pay have used payments data to build and drive strategic services, including credit and lending businesses, and credit rating services.

Challenges: Monetizing this data, or using it to create new services is one of the clearest opportunities payment providers have to drive revenue today. It enables them to sidestep the issue with eroding margins for traditional services, using data and assets they already have.

However, it does carry several challenges. Monetizing data is very different from providing payments services, and brings its own requirements and compliance demands. Depending on where an organization operates, and the terms outlined in its service agreements with customers and partners — including privacy arrangements — directly monetizing data might simply be unviable.

Path #2: Building high-value partnerships

The opportunity: As retailers and other organizations rush to join the payments boom and create their own services to enhance customer buying experiences, new opportunities are emerging for payments providers to partner with them, build ecosystems together, or provide them with white-label services. 

For large conglomerates, creating a payments organization provides an opportunity to connect diverse business lines. It’s a major step forward in their push to unite business lines and services into a single ecosystem. No matter what you buy across the company, you receive a predictable, consistent payment experience, with no need to recapture payment information — helping to increase customer loyalty, value, and retention.