Bahrain Payments Revenue Pool Projected to Reach $1.2 Billion by 2027, Despite Global Growth Rates Slowing Compared to Previous Years

Global payment revenues are projected to grow by $2.2 Trillion by 2027 at a CAGR of 6.2%.
The total payments revenue for the Bahrain payments industry grew at an annual rate of 6.3%, reaching $841 Million by the end of 2022.

Mohammad Khan, Managing Director & Partner, BCG

Amid global challenges such as the pandemic and economic fluctuations, Bahrain’s payments industry has demonstrated resilience. Between 2018 and 2022, the total revenue for payments industry grew at a Compound Annual Growth Rate (CAGR) of 6.3%, reaching a revenue pool of $841 Million by the end of 2022. In contrast, the global payments industry registered an annual growth rate of 8.3% to reach $1.6 Trillion by the end of 2022. According to the latest report from Boston Consulting Group (BCG), titled ‘Global Payments Report 2023’, slower growth is on the horizon globally.

BCG’s comprehensive analysis of the Bahrain payments market predicts a revenue growth at a CAGR of 5.3% over the next five years (2023-2027), projecting the payments revenue pool to reach $1.2 Billion. Global payment revenues are slated to grow by $2.2 Trillion by 2027 at a CAGR of 6.2%. The report provides an in-depth market analysis, exploring challenges and opportunities for acquirers, issuers, and other key players in the Bahrain payments ecosystem.

Mohammad Khan, Managing Director & Partner, BCG, remarked, "Bahrain is at a pivotal point for merchant services, transaction banks, issuers, and payment infrastructure stakeholders. Forecasts for the next five years up to 2027 suggest a CAGR of 5.3% and a revenue growth of 29% for the Bahrain payments industry. This outlook is heavily influenced by Bahrain's rapid adoption of advanced technologies, led by GenAI, which are integrated into various organizational processes. The resulting changes are expected to enhance client interactions and offer tailored solutions, thereby improving service quality and increasing revenue.”

The Transformation of the Bahrain Payments Ecosystem

A combination of factors, including the gradual migration from cash to electronic transactions, significant advancements have been observed in the Bahrain payments sector. Projections for 2023 to 2027 forecast a CAGR of 10.7% for transactions in Bahrain. This expected rise is driven by the country’s consistent move from cash to digital payments, accelerated by technological advancements in payment systems and supported by governmental initiatives. Economic development and a shift towards digital payments among the populace are anticipated to further propel this growth pattern.

The entrance of innovative technologies and new market entrants is revolutionizing the Bahrain payments industry. Over 5000 fintech’s globally are marking their presence in the payments sector, accounting for a considerable portion of the industry’s revenue. Bahraini companies are planning strategically to maintain their competitive edge.

Digital Currency Progress

Bahrain's financial landscape is a fusion of deep-rooted traditional banking and emergent FinTech innovations, underpinned by progressive regulations from the local regulator. The nation's banking infrastructure is diverse, featuring both conventional and Islamic institutions, regulated, and innovated through initiatives like the Regulatory Sandbox and the Open Banking Framework. The collaborative ecosystem between banks and FinTech is not just about enhancing efficiency but is also a step towards the exploration and integration of digital currencies, ensuring a balanced approach to consumer protection and financial stability in a rapidly evolving economic environment[1].

Mapping Bahrain Payments’ Future Direction

BCG's study highlights four key areas shaping the strategic direction of Bahrain's payments industry:

Operational Efficiency: Emphasizing robust operational performance is crucial. In the context of varied international outcomes, organizations in Bahrain should focus on operational robustness and cost-effectiveness. This strategic focus is anticipated to enhance operational outcomes and align business and financial strategies to boost shareholder returns.
Generative AI: The advent of GenAI is opening new pathways for the payments sector. Early adopters in Bahrain are already benefiting. Utilizing impactful GenAI applications is expected to yield significant productivity improvements. A long-term view should focus on incorporating GenAI across organizational processes, emphasizing key client engagements.
Risk Management and Compliance: A dynamic regulatory landscape in Bahrain necessitates thorough risk and compliance assessments, with a forward-looking approach to addressing identified gaps. Developing a focused operational plan will strengthen long-term resilience and elevate risk management standards.
Mergers and Acquisitions: Investment trends within Bahrain’s fintech scene reflect global tendencies. A noticeable transition from high-volume transactions to skill-focused acquisitions calls for a reevaluation of partnership strategies. This adjustment will aid in identifying and leveraging existing M&A opportunities, supporting ongoing growth and affluence.

Khan, added, "When examining the Bahrain payments sector, the priorities of operational efficiency and cost optimization are evident. GenAI’s influence is growing, as demonstrated by its widespread integration into core organizational processes. The evolving regulatory environment requires stringent risk and compliance structures, while the M&A trend emphasizes the importance of skill-focused acquisitions. In this scenario, organizational flexibility becomes a vital element for success."

[1] https://www.go-globe.com/bahrains-financial-sector-banking-and-fintech/