Financial Transaction Processing
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
Recent Developments
Dec 17, 2024 - Digital Wallet Use Increases
- Digital wallet penetration among Americans is approaching 90%, according to professional services firm McKinsey. A majority of Americans now use their digital wallets more frequently than traditional payment methods, according to Forbes. The most widely used digital wallet is PayPal, used by 40% of digital wallet holders, followed by Apple Pay at 28%, and Venmo at 22%. Apple Pay is the preferred choice among consumers who use their digital wallet for purchases five or more times a month, while those who use their wallet just once a month tend to favor Venmo and Cash App Pay.
- 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 10 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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