Alexandra Samett|12 January 2022
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- The coronavirus pandemic has accelerated the digitization of the payments industry by two to three years.
- And online retail sales soared to $794.50 billion, a record 14.4% of total U.S. retail sales in 2020.
- Do you work in the financial services industry?Gain business insights into the latest technological innovations, market trends and your competitors with data-driven research.
The pandemic has accelerated the payments industry's transition to digitization: merchants have started to rely on e-commerce, more consumers have switched to contactless payments, and technology providers have developed new tools to counteract this change in behavior.
Insider Intelligence examines today's payments ecosystem, including the impact of the pandemic on industry growth drivers. We break down key terms relevant to the payment processing industry and share information on how consumers will pay for goods and services in the future.
Here are some key payment processing stats to keep in mind:
What is a payment processor?
A payment processor or payment intermediary acts as an intermediary between a merchant and a financial institution, authorizing transactions and facilitating the transfer of funds. Some options for vendors are Shopify, Square, Paysafe.
Online payment processing
Online payment processing connects a brand website with a payment processor to connect a merchant account with credit and debit card issuers. Merchants can set up recurring payments, accept or decline transactions based on predefined parameters, and process foreign currency payments.
The pandemic has fueled increased use of online payment processing as more businesses begin to offer online and mobile transaction options. US mobile P2P apps like Venmo and Square Cash are growing in popularity, with volume expected to reach $797.43 by 2024.
Processing of credit card payments
Credit card payment processing is a system through which a customer's credit card details are transmitted in order to authorize a dollar transaction from their account to the merchant's account.
While we've seen the value of in-store credit card transactions fall during the pandemic, Insider Intelligence predicts the value will return to pre-pandemic levels, reaching $2,107.94 in 2021 and rising to $2,113.43 in 2022.
ACH payment processing
Automated Clearing House (ACH) transactions route payments between banks. There are two types of ACH transactions: Credit transactions, where funds are sent to a recipient, e.g. direct deposit, and direct debit transactions where funds are debited from the requesting party, e.g.
They grew in popularity as a relatively inexpensive payment option.calculationless than $1 in fees. ACH was created as a way for banks to digitally process paper check payments, but has since gone more digital with online ACHUnderstanding27.9% of all transactions by volume in Q3 2020, according to the National Association of Automated Clearing Houses (NACHA). ACH is booming, not only in traditional check-based segments like bill payment, direct payments, and deposits, but also for digital P2P transactions and online money transfers.
mobile payment processing
Mobile payment processing allows merchants to sell products and accept card payments from their preferred mobile device. Mobile point-of-sale (POS) solutions like Square offer businesses a more affordable and mobile payment acceptance option than traditional offerings.
The pandemic has accelerated the adoption of mobile POS platforms as Americans seek retailers that offer contactless services, leading to an acceleration in user and transaction value growth. In-store mobile payment app usage hit a milestone in 2021, reaching 101.2 million among Americans 14 and older. This comes after a 29.0% annual growth in 2020. Usage is now on track to surpass half of all smartphone users by 2025.
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Electronic check payment processing
An eCheck is a digital version of a paper check that can be used to make an online payment. Information received from the online payment processing center is processed via the ACH network. To use an electronic check, consumers must provide a checking account number, sort code, and account name.
Checks, already falling in popularity, saw an even sharper decline during the pandemic as users replaced paper with digital apps and businesses migrated to digital accounting platforms, payroll cards and ACH payments.
Payment processing for merchants
Merchant payment providers allow merchants to accept credit cards, debit cards, and other forms of payment from consumers. While merchant acquirers facilitate payment transactions, merchant processors such as Fiserv and Global Payments are responsible for the secure transmission of data related to those transactions and for providing varying degrees of administrative support.
The pandemic helped accelerate PayPal's growth as merchants trusted the company to facilitate transactions during a shift toEcommerceit's himassumptiondigital and contactless payments. The total payment volume from PayPal (TPV) in the first quarter of 2021popped up46% YoY on a constant currency basis to reach $285 billion19%YoY in the first quarter of 2020.
PaypalDataplans to change some of the fees it charges US merchants for its payment services. Raising merchant fees can help PayPal fund its own products and continue to grow sales, and lowering other fees can make PayPal more competitive against companies like Square and Visa, which offer their own payment processing services.
Beginning in August 2021, PayPal will change its fee structure so that merchants will pay $3.98 in fees for a $100 transaction, up from $3.20 previously. Increasing those trading fees could help PayPal fund its own products and continue to grow revenue, which grew 29% year over year. While this shift could turn merchants away from PayPal, the retail and payment solutions PayPal offers likely outweigh the risks.
Contactless payment processing
Contactless payment processing occurs when credit cards, debit cards, key fobs, smart cards, or mobile devices use Radio Frequency Identification (RFID) or Near Field Communication (NFC) to make secure payments.
Contactless payments have been around since the 1990s, but few merchants and retailers used the technology back then. Since then it has spread to many banks, credit card companies, merchants and retailers around the world.
The use of contactless payments has been particularly popular during the pandemic as employees and customers try to avoid unnecessary physical interactions. About 60% of US dealers nowacceptcontactless payments, which not only give consumers more ways to pay for goods and services, but can also help drive adoption.
electronic payment processing
Electronic payment processing, or Electronic Funds Transfer (EFT), is the process of transferring money from one bank account to another without manual conversion. Businesses must have access to a payment platform like venmo or paypal to accept payments online.
With payment hardware manufacturers and software providers not processing payments themselves, the shift to electronic payments combined with technological innovation continues to blur the lines between hardware and software. This is forcing stakeholders to reconsider their strategies and their role in the payment processing ecosystem.
Ecommerce Payment Processing
E-commerce credit card processing refers to all purchases made online. Payment gateways such as Adyen and Stripe act as a gateway through which e-commerce merchants connect with acquirers and perform a similar function as in-store payment terminals.
In the last two years, e-commerce sales have increased. Notably, online retail sales soared to $794.50 billion in 2020 as smartphone spending surged amid the pandemic. While in-store purchases will regain some of their share as the pandemic subsides, the events of 2020 have accelerated the shift to e-commercetwo or three years.
payment processing industry
The payments industry has seen a transformation as businesses and consumers move away from cash and checks and toward digital payments. Cards still dominate traditional retail, but the use of mobile wallets like Apple Pay has increased.
Digital peer-to-peer (P2P) applications like Venmo have become a part of everyday life for users of all generations. Even providers in larger industries traditionally dominated by cash and checks are diversifying to find new volumes.
inner intelligencePayment ecosystem reporthighlights how rising fraud, low revenue and growing demand for white-label payment capabilities from unconventional players could lead to change in the years to come.
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Advance payment:digital payments,Over
Not only has digital-payments penetration increased to 89 percent in 2022, but the share of respondents who report using two or more forms of digital payments has grown even more rapidly—from 51 percent in 2021 to 62 percent.How do you explain payment processing? ›
Payment processing is how businesses complete credit card and debit card transactions. Payment processing services expedite card transactions, and payment gateways securely transmit data so money from a customer's issuing bank can be transferred to a merchant's account. All of this happens in seconds.Who is the largest payment processing company? ›
Chase Paymentech, the payment processing arm of the largest bank in the U.S., authorizes and processes payments in more than 130 currencies. And like its peers, it offers analytics, fraud detection, and security solutions.
Payments-as-a-service and Banking-as-a-service models are increasing in demand, especially as businesses are looking to offer financial services solutions to their clients to amplify their loyalty. For instance, creating a digital wallet to make a marketplace ecosystem more stick to buyers and sellers.What are the newest form of payments? ›
This method of waving is way faster and more convenient than inserting a card. Contactless payments are also faster and more secure than the PIN technology as it transfers the encrypted data to the point-of-sale device instantaneously.
Payment processors help businesses determine the best mix of payment alternatives to serve your customers. From direct bank transfers to pre-paid cards, gift cards to buy-now, pay-later options, payment processors help you maintain happy customers by letting them pay the way they want.What are the different types of payment processors? ›
- Wise (formerly Transferwise)
- 5 Considerations when Selecting a Payment Processor. ...
- Select a partner, not a vendor. ...
- Check integration options. ...
- Check pricing. ...
- Check which payment methods are supported. ...
- Get Recommendations.
Credit and debit card payments are the most common payment type. Credit card companies, including Visa, Mastercard, American Express, and Discover, extend credit to purchasers; they cover the purchase price, and customers pay their card balance every month.What is the best payment processing? ›
- Best Overall for Small Businesses: Square.
- Lowest Card Processing Rates: Payment Depot.
- Best for Online and In-App Payments: Stripe.
- Best for Fast-Growing Businesses: Helcim.
- Best for High-Volume Sellers: Stax.
- Best Low-Volume Rates: National Processing.
- Processing options: Many merchants use PayPal as a credit card processing company, but it also integrates with mobile wallet accounts like Apple Pay and Google Pay. ...
- Fees: PayPal maintains a vast fee schedule with different rates for different payment types.
- Stripe: Best overall payment gateway.
- Adyen: Best omnichannel option.
- Helcim: Best interchange plus pricing for businesses of all sizes.
- PayPal: Best for doing everything in one place.
- Square: Best if you also have a storefront.
- Braintree: Best to accept a variety of payment types.
Consider your customers
The most common payment method is through electronic credit and debit cards. Use of Paywave and other tap-and-go accounts has grown quickly. Most in-store credit card transactions are now contactless. Privacy of payments – some payment methods are more private than others.
There are two types of financing: equity financing and debt financing.What is the future of the payments industry? ›
The payments industry is poised for significant growth over the coming five years; we expect an average annual revenue growth rate of 9 percent, exceeding the already-healthy prepandemic long-term trajectory of 6 to 7 percent.What are the recent trends in financing companies? ›
- Open banking will dominate the future.
- Cloud-native systems will replace legacy alternatives.
- Artificial intelligence (AI) and machine learning (ML) will increase in importance.
- Cybersecurity continues as a top priority.
- Debit cards.
- Credit cards.
- Mobile payments.
- Electronic bank transfers.
Modern payment systems use cash-substitutes as compared to traditional payment systems. This includes debit cards, credit cards, electronic funds transfers, direct credits, direct debits, internet banking and e-commerce payment systems.What are three 3 forms of transfer payments? ›
Government transfer payments include Social Security benefits, unemployment insurance benefits, and welfare payments. Taxes are considered transfer payments. Governments also receive transfer payments in the form of fees, fines, and donations from businesses and persons.How can I improve my payment processing? ›
- Look Beyond Credit Cards. Payment systems aren't just about taking credit and debit cards. ...
- Manage Customer Data. ...
- Understand and Reduce Fraud. ...
- Keep Your System Updated. ...
- Work With the Right Partner.
They work in the background to ensure each transaction is processed securely and lets the card network know about it. Similar to networks, credit card processors make money from a percentage of each transaction made between a cardholder and a merchant.Is ACH a payment processor? ›
What is ACH Payment Processing? ACH payment processing is electronically making a bank transfer between the payer's and the payee's bank accounts through the Automated Clearing House network of U.S. financial institutions, regulated by Nacha.What are examples of payment services? ›
A payment service provider (PSP) refers to a third-party company that provides payment services to businesses that accept online payment methods. These methods may include credit cards, debit cards, e-wallets, cash cards, bank transfers, and much more. Examples of PSPs include Amazon Pay, PayPal, Stripe, and Square.What is the worlds biggest payment platform? ›
1. PayPal. Paypal is an eCommerce payments platform designed to help people and companies to send and receive payments without providing financial information.What is the main risk faced by the payment system? ›
Risks in payment systems refer to the possibility of payments being incomplete. The impact can be measured in terms of damaging value or level of confidence in payment systems.What are the top challenges you have with payments? ›
- Data security & cyber incidents. ...
- Regulatory compliance & changes in legislation. ...
- Cross-border payments. ...
- Mobile & tech expertise. ...
- Personalisation of services.
There are three components to the current account – the 'trade balance', 'primary income balance' and 'secondary income balance'. In economic analysis or commentary, most attention is usually given to the trade balance, which records the difference between the value of our exports and imports of goods and services.What is the most commonly used method of payment in the United States? ›
Both online and offline, credit cards are the most common payment method in Canada and the United States, with debit cards being the second most popular method in the latter country.What are the payments trends for 2023? ›
RTP, open banking payments, and security are the key priorities for this year. If 2021 was focused on growth and scale, and 2022 saw cost-cutting and survival as key objectives, then 2023 is a year to aim for stability.Will there be a plus up payment in 2022? ›
Letter 6475: Through March 2022, we'll send this letter confirming the total amount of the third Economic Impact Payment and any plus-up payments you received for tax year 2021. You will need the total payment information from your online account or your letter to accurately calculate your Recovery Rebate Credit.
If your birth date is on the 1st-10th: Second Wednesday of each month. If your birth date is on the 11th-20th: Third Wednesday of each month. If your birth date is on 21st-31st: Fourth Wednesday of each month.What is the future of digital payments? ›
Digital marketing firm Juniper Research has predicted that the use of QR codes for electronic payments in the US will increase by 240% from 2020-2025. In fact, the collective total of mobile payments surpassed $13tn last year, with most of that figure coming from QR code payments on the WeChat and Alipay apps in China.