The payments industry has witnessed a significant transformation in the recent years. From handling bundles of cash to using plastic as the preferred payments methods, the payments industry has come a long way. The payment processing industry plays a key role in processing and handling of debit and credit card transactions for organizations. They collect sales information, receive authorizations for transactions, collect funds from the bank, and send payment to the organization. The card payment industry is particularly given a big push by governments across the world with a view to promote cashless payments and mobile wallet. Additionally, rapid growth in the e-commerce sector has led to high penetration of online payment systems in the e-commerce industry, owing to the convenience offered by such payment systems.
Since cards are becoming the preferred means of payment, the future looks very bright. Industry analysts from SpendEdge estimate the market to grow at an impressive rate of over 6% annually. One of the main reason behind this remarkable growth is the rise in adoption of POS terminals, mobile wallets, and mPOS in the retail sector. Also, in the future, we may see suppliers of payment processing providing fingerprint scanning systems, allowing merchants to accept payments with the use of fingerprint scanner.
Technological innovations in the market
Contactless RFID credit cards can be considered to be the most significant technological innovation in this market. It allows payment of transactions without any physical contact between the card and the terminal. Contactless RFID credit cards are faster than chip-based and signature credit cards when it comes to processing, convenience, and security. Also, to strengthen the card payment ecosystem, payments processing companies have started to implement EMV technology. In this technology, a microchip is used instead of a magnetic stripe, which provides stronger security; thus, resulting in a reduction of fraudulent activities.
The pricing landscape
So how do these payments processing organization make money? Such companies either employ a transaction-based pricing model or flat-fee pricing. Transaction-based pricing provides transparency in pricing as the charges are based on the cost of each transaction. It also helps buyers in optimizing their expenses. However, in flat-fee pricing, any additional charges are not included, and a fixed fee is set per transaction. This also helps the buying organization in estimating their procurement budget.
The use of electronic payments requires merchants to comply with regulatory standards associated with data protection in terms of cardholder information. For instance, buyers need to comply with PCI DSS to ensure data security for cardholder information. This, in turn, increases merchants’ costs related to the adoption of electronic payments. Also, there has been an increase in the acceptance of infrastructure for electronic payments such as POS terminals within emerging economies. However, the utilization is low due to the lack of interoperability among networks. For instance, as of 2016, around 6 million POS terminals were deployed in Brazil, but the utilization of these POS terminals is low due to the lack of interoperability among networks, restricting the use of electronic payments.
Read more about the market landscape in the payments processing market along with technological innovations, procurement best practices, category management, and pricing models in SpendEdge’s upcoming report on the global payments processing market.