What is payments industry

The issuer does the hard work of getting a credit card into the hands of the consumer in the first place. Then the rest is roughly evenly split between the acquirer and credit card brand. Payment processing has been evolving over the past two decades.

There are several payment processing trends that are ongoing and will have a significant impact on the industry over time. The key trends we see are the growth of eCommerce, the prevalence of mobile devices, open banking , and digital currency i.

Clearly Payments will continue to leverage these trends to build a better experience for merchants and reduce the cost of payment processing. If you have any questions or insight for us on this post, please email us at info clearlypayments. Privacy Policy. Clearly Payments is a payment processor in Canada.

The Interac name and logo are trademarks of Interac Inc Canada. Bank National Association Canadian Branch. How Payments Work. Credit card and payment processing industry overview. Payment processing market size. Merchants are the customers in payment processing.

The payment processing value chain. Issuing bank or c redit card issuer. Card brand or credit card network or card association. Acquirer or payment processor or underwriter. Service provider or merchant service provider or payment processor. The breakup of revenue in payment processing. When you look at it on a macro level, there is an interesting movement where large players are consolidating. The idea is to have a platform working across multiple industry verticals across multiple countries.

It is quite clear to see that a lot of the incumbents are merging in order to get footholds in new markets and with new customer groups, taking ownership in a larger share of the value chain. The underlying reasoning behind this is that payments is a volumes game. You need volume to stay cost-competitive, and you also need a lot of different services to stay relevant to your customers. Consumers are increasingly engaging with payments in more and more different ways, and are looking for increased convenience even in the business space.

Businesses are starting to think and act like consumers- convenience, being smart and trendy are increasingly playing a role. When you look at the fact that so many of the big players are increasingly reaching out to startups, it is a sign that incumbents realize they have to do something they haven't done before: consumerize themselves.

They have to be convenient in a different way than previously. Technologies are enabling companies to bring convenience to businesses and consumers. Banks, both big and small, increasingly see the value of partnerships, especially with the Fintechs to drive differentiation and exploit new technologies faster.

We already see banks making investments in many Fintechs. This trend will gain further momentum and especially the big banks will also acquire key Fintechs.

I do think they will be able to, at least for the next years, remain competitive. The most surprising development has been the steady dis-intermediation of the well-established business models and products.

For example, as global schemes invest in issuer centric services, their relations with processors has come under stress. We also see many bank-led P2P payment ecosystems which challenge both the global card schemes and local processors who served these banks for decades.

The "loosening up" of these well-oiled and well-established business models will create space for new players, innovations and also disruptions. At the same time, the resilience of the existing banking and payments platforms is also noteworthy. The resilience of these old structures has really surprised me. No one has really been able to create that disruption that we are talking about: we haven't really seen the Uber of the banking space yet.

The way that the shift has gone in the payments industry, you see the big players taking a larger interest in the wider ecosystem of their customers. Banks are building services for the benefit of their customers. For example: how do you help an e-commerce merchant sell more to his clients, how do you help him improve his website, how do you help him with his collections of outstanding payments, how do you help him connect to his suppliers in a more efficient manner, how do you help consumers across their life cycles with their different investment and lending needs?

You not only present them to the services that you offer but also connect them to others. This extension of the value chain- that has really changed. These are things that were far away from what a bank or a payment service provider thought about just 3 years ago. Based in Haifa, Israel, Sonarax is a startup that enables two devices to transfer data via ultrasonic sound waves.

The technology is used for mobile nearby communication applications by banks and payments providers. This allows for transactions, positioning, triggering, identification and authentication to occur even when other networks are not available. Currently he is the CEO of Sonarax, but has an impressive background working with a variety of payment startups and Fintech corporations.

Read more for a macro-level look at insights into the industry. There are a lot of things that are happening right now in terms of allowing people to use their mobile devices or other types of devices, as a payment instrument and this goes beyond simply purchasing on an e-commerce site. The current trend demonstrates a rising use of mobile use for money transfers, peer-to-peer payments, peer-to-group payments, person to SMBs and micro-merchants where the payee wishes to remain anonymous and or when the merchant does not have a credit card processing device, and using a smartphone for unattended POS such as vending machines.

I clearly see the persistence of a tradeoff balancing act between the desire for a fantastic frictionless user experience and industry security requirements. Strong authentication can reduce repudiation and friendly fraud, but at the same time it can also kill all impulsive purchases.

So there is a trade-off between a smooth, easy to use experience, and keeping security and assurance as a part of the transaction. I believe that sonic data transfer solves this without compromise.

Many of the authentication schemes are moving towards easy but secure systems, all of which require strong authentication scheme. For example, biometrics as a first factor is a popular solution. However, this still leaves the need for the second authentication to verify the device being used.

One technology solves this, using an ultrasonic authentication. We were able to do this with The Nets Group in Denmark for example. What we did with Nets, was to equip their old vending machines with the ability to have mobile payments. Customers were able to approach the machine and pay at the machine without touching it, using a mobile app.

Using cash to pay for goods and services is much less popular than it used to be. Online shopping, credit and debit card transactions, and the increased popularity of peer-to-peer P2P payment apps are on the rise as consumers all around the globe embrace mobile and digital forms of payment over cash.

Notably, a study conducted by Harvard Business School in collaboration with the financial services provider, Square, reported that in the U. In addition, point-of-banking technology—also known as a cashless ATM system— is becoming popular for many small-to-medium-sized businesses that cannot get a traditional business bank account that allows them to accept credit card payments.

Merchants benefit from this technology by not having to keep large amounts of cash on the premises, and customers enjoy having a convenient alternative to checks and cash. Electronic Funds Transfer or EFT is a broad term that describes the process of electronically moving funds between accounts over a network. There are several types of EFT transactions, including ACH transactions e-checks , wire transfers, direct deposits, direct debits, ATM withdrawals, and online bill payments made with credit or debit cards.

An EFT can be a scheduled transaction—such as when paying a bill with a credit card—or a real-time transaction, such as an in-store purchase made with a debit card. Because no paper checks are involved, EFT transactions are a fast and convenient way to make purchases and process payments. EFT payments are growing in popularity across most demographics. Peer-to-peer P2P apps such as Zelle, Venmo, and Cash App are especially popular with younger consumers as a way to manage day-to-day purchases, and Automated Clearing House ACH transfers are seeing increased usage for recurring payments.

The mPOS trend is also poised to have a big impact on the payments hardware and software industries. This solution allows merchants to accept contactless transactions on a mobile device without additional hardware. In , issuing banks began requiring businesses in the U. As a result, most merchants in the U. Today, all POS terminals that support EMV technology have contactless capabilities built in, and most major retailers, such as CVS pharmacies and Target stores, can accept contactless payments.

Fiserv, Samsung, and Visa recently partnered to create an mPOS solution that successfully accepts a PIN-based contactless transaction on a mobile device. Customer preference will increasingly drive the trend toward contactless cards because they provide a quicker, frictionless, tap-and-go checkout process. Mobile shopping, e-commerce use, and the purchasing of products with voice recognition technology have all increased dramatically. As part of the Internet of Things IoT , smart speakers have become more and more popular as home automation systems have expanded.

A Capgemini survey of Western Europe and the U. The technology is not meant to be used for complex commands, and is best suited for small orders. As more and more consumers embrace digital payment methods, the need for secure payment processing takes center stage. For example, 3D Secure 2. It supports a wide range of e-commerce, in-app, mobile wallet, and MOTO mail order telephone order payments. Advances in biometric technology are also changing the way consumers view payment processing security issues.

Market research studies show that consumers believe that biometric screening methods, such as fingerprint scanners and voice and facial recognition systems, are easier to use than other identity verification methods, and that biometric methods are more secure than PINs or passwords.

SRC technology uses robust tokenization to replace card data and protect cardholder information and is designed to be used with a variety of remote checkout environments and devices such as laptops, tablets and PCs, and smartphones.

As payment processing technology continues to improve, expect to see more innovative and user-friendly security solutions in the future. Real-time payment technology enables instantaneous money transfer between banks and banking systems.

There are currently two real-time payment systems in the U. The RTP network, launched by The Clearing House in , is a payments system that all federally insured depository institutions can use to clear and settle payments in real time. Its network serves as a platform that allows banks and other financial institutions to create and deliver new innovative products and services to their customers.

RTP technology was designed to facilitate payments across all payment categories, including business-to-business B2B , business-to-consumer B2C , consumer-to-business C2B , peer-to-peer P2P , government-to-citizen G2C , and account-to-account A2A transactions. The service, expected to go live in or , will incorporate clearing functionality into the process of settling payments. This functionality enables banks and financial institutions to exchange the debit and credit information needed to process payments and notify customers whether the payments were successful.