Growing Payment Facilitator Market Creates Industry Opportunity: Report

The payment facilitator market is experiencing massive growth, a recent report said. The gross payment volume processed by all payment facilitators is expected to grow at a compound annual growth rate of 28.4% over the next five years, with the potential to reach over $4 trillion, according to the report, which was published by our partner Infinicept.

While this is obviously good for the companies that choose to become payment facilitators, the report also notes that other payment industry players, including the card networks, have embraced and are even investing in furthering that growth. But why?

As more merchants around the world gain the ability to accept credit cards, credit card usage globally is on the rise – good news for Visa and Mastercard.

At its core, the payment facilitator model is about providing a streamlined process for merchants to accept electronic payments. Early PFs such as PayPal and Square “pioneered a system that contains fewer hurdles and roadblocks for emerging merchants looking to process digital payments, setting the stage for software companies across all verticals to follow suit,” the report said.

Historically, the card networks – as well as processors and acquiring banks – had found it difficult to reach these emerging merchants. The up-front expenses, contractual obligations, and infrastructure needs of a system that was built for large enterprises did not translate well to small and micromerchants.

Card networks have found that they can better reach and more efficiently onboard more merchants through payment facilitators. They have acknowledged the importance of PFs in removing barriers for merchants as they pursue their own goals of bringing more people into the digital financial system. And they have reacted to that with their own initiatives to support payment facilitators.

But the opportunity isn’t limited to the card brands. Processors, acquirers and others in the payments ecosystem can also capture their own piece of the market opportunity by sponsoring payment facilitators and building products to support them.

Several large processors, including First Data (now Fiserv), Worldpay (now FIS) and Elavon have done just that, creating programs to help support payment facilitators with tools and services to help them get submerchants up and running and manage risk.

The Infinicept report provides a forecast with a range of potential outcomes, including what it describes as a scenario in which the networks and others “bullishly invest in the growth of payment facilitators.”

That investment drives the growth rate in the total number of payment facilitators up to 27.4% annually, which would lead to more than 4,200 payment facilitators globally by 2025. In this accelerated model, the gross payments volume processed by payment facilitators outside of the top four – PayPal, Square, Stripe and Shopify – could be as high as $1.9 trillion in that time.

What is clear is that, as the payment facilitator market grows and other industry players invest in supporting this expansion, embracing the model will drive more digital payments volume, which benefits the entire payments ecosystem.

View the full report here.