The global payments and processing industry is heating up.
Following the recent all-stock “merger of equals” deal between Global Payments and Total System Services, which created a $40 billion company, the fintech industry is poised for further growth and consolidation as consumers, vendors, brands and suppliers search for more payment options, flexibility and choice.
In the retail and fashion space, the explosive growth of e-commerce coupled with a push by direct-to-consumer brands is fueling a fintech frenzy. At every possible point of transaction, there seems to be a payments and/or solutions platform or app ready to help. At one tier are consumer apps and solutions (Apple Pay, Alipay, Samsung Pay, Google Wallet, etc.) focused on transactions and which are supported by payment methods (Visa, Mastercard, Paypal, American Express, etc.).
There’s also a tier of business-to-business-to-consumer platforms that offer a selling option for brands and payment flexibility for consumers (Klarna, Affirm, Afterpay, etc.). Then there are b-to-b solutions that are helping to drive global commerce and facilitate cross-border transactions (Payoneer, Adyen, etc.). And there are also peer-to-peer apps and platforms to send cash to friends and family (and the plumber who just fixed your sink) such as Venmo, Paypal, Square Cash, Zelle, Google Wallet and even Facebook Messenger.
Peeking under the hood of these platforms reveals a variety of technologies, including those used in blockchain and cryptocurrency, along with artificial intelligence, machine-learning, chatbots and good old-fashioned data analytics. The playing field is as broad as it is deep and fintech solutions are popping up like mushrooms after a heavy rain. According to CB Insights, fintech investments in the U.S. alone totaled $11.9 billion last year. Driving that growth is a global payments industry experiencing double-digit growth.
According to a recent report from McKinsey & Co., global payments generated 11 percent growth in 2017, topping $1.9 trillion in annual global revenue, making it the best single year of growth in the past five years within McKinsey’s decades-long research. Within five years, global revenues are expected to approach the $3 trillion threshold.
Largely driven by the Asia Pacific corridor and China’s fast-growing market, global payments is a force accelerated by growing electronic transactions, increasing mobile, web and social commerce scraping at consumer wallets, as well as increasing cross-border commerce activity. Even traditional financial institutions are looking into ways to refresh their brand identities and services with hopes to attract the next generation of consumers while staying competitive with the crop of new fintech stars.
Steering the wheel toward the global digitization of payments and financial technology services, leaders are merging and playing (or rather paying) up their strengths, alongside the growth trajectory of the payments category.
Some established payment technology players are acquiring fintech start-ups at a blistering pace. The main players include Apple, Samsung, Google, Mastercard, Visa and PayPal Holdings Inc. (which acquired fintech start-up iZettle for about $2.2 billion last fall), as well as Ingenico Group (the French-based global payment leader with more than 30 years in the industry).
Other notables include First Data Corp. (the Atlanta-based POS and merchant services provider that merged with 35-year-old technology services provider Fiserv in January in a $22 billion transaction); Cayan (ranked as one of the largest merchant acquirers in the U.S., purchased by TSYS in December 2017 for around $1 billion), and Worldpay Inc. (Fidelity National Information Services Inc., a global player in financial services technology, revealed in March it would acquire Worldpay for around $33.5 billion).
But while many of these titans are digging their enterprise heels into the ground and joining forces, fintech start-ups are a legion so intrepid that it’s impossible to ignore (and sometimes to differentiate them).
The Impact of Mobile
By 2022, mobile commerce is expected to account for 70 percent of digital commerce sales, according to McKinsey’s report. Digital commerce covers all consumer remote point-of-sale transactions, including online or mobile (apps and web sites) channels as well as in-store digital wallets, wherein China leads at the storefront with 40 percent of in-person spending already occurring on mobile digital wallets such as Alipay and WeChat Pay. Globally, top providers include Android Pay, Apple Pay and Samsung Pay.
Consumer-facing payment apps include the Millennial-friendly, PayPal-owned Venmo, which was founded in 2009, as well as PayPal, Square Cash and competitors such as Zelle.
At the POS, San Francisco-based Square (founded by Twitter’s Jack Dorsey) is a financial and merchant services aggregator and mobile payment provider (often easily recognized by its “square” card reader that plugs into mobile devices and allows even small independent vendors to transact seamlessly), while Verifone is another omnichannel solution with POS devices aimed at streamlining the checkout.