The payment processing solutions category is anticipated to grow at a CAGR of 14.5% from 2023 to 2030. The major types of payment processing solutions include credit/debit cards, e-wallets, QR codes, and bank transfers. Credit cards accounted for the largest share, by payment method in 2022, with 44% of the total share. Companies and consumers are increasingly moving away from traditional payment modes like cash or cheques to digital payments spurred by the pandemic and technological innovations. Peer-to-peer payment (P2P) networks and mobile wallets are becoming more popular owing to their ease and real-time transaction possibilities. Furthermore, the limits of security are being pushed by AI-driven payment systems and biometric verification. More than 84% of consumers use P2P service in 2023.

The increasing adoption of digital wallets coupled with the preference for contactless payments, high penetration of smartphones in low and middle-income economies, and broad access to financial services and formal bank accounts are some of the factors driving the growth of the category. According to the World Bank 2022 estimates, in the Sub-Saharan region, mobile money adoption has increased steadily. More than 33% of adults had a mobile money account in 2022. Additionally, government initiatives promoting the digitalization of payments further aid expansion.

Non-bank companies (like PayPal, Adyen, Square) and payment providers owing to their strength of the latest technology infrastructure, are taking steps to develop additional services on top of their existing offerings. Using the latest technologies like blockchain, web 3.0 payments, and real-time payments, new competitors like Curve and Ripple have entered the market. For instance, in November 2023, Ayden launched a new platform aimed at QSR users to simplify the payment experience. This platform was launched in collaboration with TabSquare in Singapore.

On the other hand, changing regulations have contributed to the development of a more competitive market. For instance, in October 2023, a new interchange fee cap was proposed by the U.S. Federal Reserve for debit card issuers. The interchange charge on a USD 50 transaction, for example, would drop from 0.49% to 0.35% as a result of the adjustment. The new PSD2 2022 (EU) directives focus on increasing security and compliance checks and merging legal frameworks of electronic money to payment services as well.

Order your copy of the Payment Processing Solutions Procurement Intelligence Report, 2023 - 2030, published by Grand View Research, to get more details regarding day one, quick wins, portfolio analysis, key negotiation strategies of key suppliers, and low-cost/best-cost sourcing analysis

The payment processing solutions category is consolidated. The payments industry has seen a significant trend toward consolidation since 2020. Whether it's debit or credit cards, people/companies still utilize the Visa and MasterCard networks, but the fundamental principle of payment is volume and size. MasterCard and Visa, two of the biggest companies in the industry, have been actively seeking to acquire new and creative companies that might address the gaps in their existing offerings. With the emergence of new payment services and infrastructure, the few titans of the category are seen adopting a dual strategy - either acquiring the prevailing organizations having a good standing in the market to counteract price compression or acquiring their challengers in the emerging ecosystem. A payments company's higher size grants it the ability to regulate exchange rates and fluctuations which in turn increases the bargaining power of the suppliers. For instance,

• In September 2023, MasterCard collaborated with KredeX to enable easy digital payments for enterprises and vendors. As part of the deal, the KredeX platform will be integrated with MasterCard’s commercial card services and will have features such as price discovery, dynamic discounting, and early payment.

• In June 2023, Visa acquired Pismo, which was one of the notable deals, worth USD 1 billion. By purchasing Pismo, Visa would be able to use cloud-native APIs to provide clients with core banking and issuer processing services for debit, prepaid, credit, and business cards. Visa will use Pismo’s platform to serve its financial clients (i.e., the institutional clients) in a better way as operations will be expanded throughout Latin America, APAC, and Europe.

• In June 2023, FIS entered an extensive partnership with Visa. The former announced that its Worldpay-qualified U.K. merchants would be able to receive payments using the “Visa Instalments checkout” feature. This is the first time that a merchant acquirer can provide this specific “Visa Instalments” feature as a checkout option (FIS Worldpay being the first merchant). On the other hand, HSBC, also, for the first time, offered this premium service to its credit card consumers in the U.K. region.

The total cost can be divided into two major heads - technology and software, and service cost. Technology and software form the largest cost component and include elements such as core development, payment gateways and processing, networks and security, salaries of technology professionals and developers, repairs, upgrades, and maintenances. Under the service head, costs can include marketing, infrastructure, cost of customer acquisitions (CAC), tax, legal, overheads, administrative expenses, etc. Factors such as card networks, country issuer, and the risk involved can impact the total cost.

Processing can include interchange, assessment, or payment processor fees. Processing costs for prepaid and international cards are often higher since they carry a larger risk. For instance, Visa and MasterCard’s processing charges for credit cards can range between 1.4% to 2.6%. American Express charges between 2.5% to 3.5% to its users. For small companies, having an annual credit card limit of USD 10,000 - 250,000, the average cost of processing these payments in 2023 is between 2.87% - 4.35%. The payment processing company can have other mandatory fees such as network access, fixed acquirer network, acquirer processing, kilobyte access, and brand usage fees. Certain companies use flat rates, which incorporate all necessary fees into a single, straightforward transaction fee. This is frequently observed with online payment processors like Stripe and PayPal.

Many payment processing service providers are outsourcing parts of their software development to India, Poland, Romania, Vietnam, the Philippines, etc. The companies prefer to engage in a hybrid outsourcing model. Preventing fraud and making sure PCI DSS compliance are two crucial components of payment gateway operations. A payment gateway may be obtained in three different ways: by purchasing an off-the-shelf/ pre-made product, by building it oneself, or by outsourcing the development to a reputable payment gateway software development firm. The cost of talent varies significantly depending on the nation outsourced. For instance, salaries of software developers in India range between USD 600 - 800 on average, monthly compared to Germany or the U.K., where salaries for the same position range between USD 4,000 - 5,000 monthly. It is crucial to evaluate vendors based on compliance and cybersecurity concerns like PCI DSS compliance, EMV 3-D Secure, tokenization, and P2PE. A merchant's failure to comply with PCI DSS may result in insecure transactions, an increased risk of fraudulent chargebacks, higher payment processing fees and even account closure. 

Browse through Grand View Research’s collection of procurement intelligence studies:

• Accounting Services Procurement Intelligence Report, 2023 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

• Corporate Treasury Management Software Procurement Intelligence Report, 2023 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

Payment Processing Solutions Procurement Intelligence Report Scope

• Payment Processing Solutions Category Growth Rate: CAGR of 14.5% from 2023 to 2030

• Pricing Growth Outlook: 2% - 4% (Annually)

• Pricing Models: Tiered pricing, flat rate pricing, and interchange-plus pricing model

• Supplier Selection Scope: Cost and pricing, past engagements, productivity, geographical presence

• Supplier Selection Criteria: End-to-end solutions, recurring payments, integrations, compliance and security, virtual terminal, operational and functional capabilities, technology used, and others

• Report Coverage: Revenue forecast, supplier ranking, supplier positioning matrix, emerging technology, pricing models, cost structure, competitive landscape, growth factors, trends, engagement, and operating model

Key Companies 

• PayPal Holdings Inc.

• PayU, Stripe, Inc.

• Adyen

• Mastercard Inc.

• Visa

• Fidelity National Information Services Inc. (FIS)

• Paysafe Limited

• ACI Worldwide Inc.

• Block Inc. (Square)

Brief about Pipeline by Grand View Research:

A smart and effective supply chain is essential for growth in any organization. Pipeline division at Grand View Research provides detailed insights on every aspect of supply chain, which helps in efficient procurement decisions.

Our services include (not limited to):

• Market Intelligence involving – market size and forecast, growth factors, and driving trends

• Price and Cost Intelligence – pricing models adopted for the category, total cost of ownerships

• Supplier Intelligence – rich insight on supplier landscape, and identifies suppliers who are dominating, emerging, lounging, and specializing

• Sourcing / Procurement Intelligence – best practices followed in the industry, identifying standard KPIs and SLAs, peer analysis, negotiation strategies to be utilized with the suppliers, and best suited countries for sourcing to minimize supply chain disruptions