Financial Transaction Processing


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Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 3,500 financial transaction processing companies provide payment processing, reserve and liquidity, and check or other financial instrument clearinghouse services. As intermediaries between buyers and sellers, clearinghouses validate, settle, and finalize financial transactions. Payment service providers (PSP) act as middlemen between banks, merchants, and card networks and aggregate credit card and other forms of electronic payment processing for tens of thousands of small to medium-sized businesses. Peer-to-peer (P2P) payment systems, which include money transfer applications, allow users to send money directly to another user through a linked bank account.

Extensive Regulation and Oversight

Because financial transaction processing deals directly with money and private accounts, the industry is subject to extensive regulation and oversight by government and other organizations.

Industry Concentration and Competition

The payment processing industry is highly competitive and dominated by large companies.

Industry size & Structure

The average financial transaction processing services provider operates out of a single location, employs about 40 workers, and generates about $30 million annually.

    • The financial transaction processing industry consists of about 3,500 firms that employ about 134,000 workers and generate over $100 billion annually.
    • The industry is concentrated; the top 50 companies account for over 85% of industry revenue.
    • Automated Clearing House (ACH) operators include the Federal Reserve, the Reserve Banks, and the Electronics Payment Network (EPN). The EPN is part of The Clearing House (TCH), which is owned and operated by the world’s largest commercial banks. THC also owns the Clearing House Interbank Payment System (CHIPS), the primary clearinghouse in the US for large banking transactions.
    • Owned by the Depository Trust & Clearing Corporation (DTCC), the National Securities Clearing Corporation (NSCC) clears nearly all corporate equity and bond trades in the US. The Options Clearing Corporation (OCC) specializes in equity derivatives clearing for 20 exchanges and trading platforms.
    • Large companies with payment processing and/or peer-to-peer (P2P) payment operations include PayPal (Venmo), Block (Cash App, Square), Stripe, and Fiserv.
                              Industry Forecast
                              Financial Transaction Processing Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Nov 14, 2024 - FBI Sends Fraudulent Emergency Data Request Alert
                              • The FBI is alerting companies that cybercriminals are using compromised US and foreign government email addresses to send fraudulent emergency data requests. The Hackers are looking to gain access to the companies’ holdings of their customers’ personally identifying information, the FBI said. An investigating authority may make an emergency data request in cases involving imminent harm or death. Such requests bypass the official review process and don’t require the requestor to supply any court-approved documents.
                              • About a third of B2B transactions continue to use cash and checks despite the availability of digital alternatives, according to financial media platform Tearsheet. The persistence of traditional methods, even with established options like ACH and the growing adoption of virtual cards, indicates both challenges and opportunities in the modernization of B2B financial operations. Top reasons for using checks include familiarity/comfort with the process, more control over the timing of payments, and easy record keeping, according to Tearsheet.
                              • About 51% of US consumers use Peer-to-Peer (P2P) apps to send money, according to financial transaction processing news site PYMNTS. P2P payment has been dominated by FinTech players like Venmo and Zelle, but consumers are increasingly expecting their primary financial institutions to offer P2P capabilities, according to PYMNTS. The appeal is clear: convenience, speed, and the added security of dealing with a trusted financial partner. Banks that fail to provide P2P services risk losing customers to FinTech disruptors, according to PYMNTS.
                              • Financial transaction processing industry employment decreased slightly while average wages for nonsupervisory employees increased significantly during the first nine months of 2024, according to the US Bureau of Labor Statistics. Financial transaction processing industry sales are forecast to grow at a 1.66% compounded annual rate from 2024 to 2028, slower than the growth of the overall economy.
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