Online Payment Processing Software Developers
Business for Sale Industry Economics
2005 - 2019
2019 - 2025
The Online Payment Processing Software Developers market grew at a quick rate during the five years to 2019, owing mostly to customers’ preference for online shopping outlets over conventional brick-and-mortar establishments. This change in demand has been assisted by the present five-year increase in the number of mobile internet connections.
Demand for industry services has increased as a growing proportion of services are done online, since online payment processing is closely related to the usage of online retail and auction sites. Additionally, rising disposable income per capita is likely to encourage customers to spend more online, boosting demand for industry services.
Over the next five years, the industry’s revenue is predicted to expand at a yearly rate of 8.4 percent to $23.3 billion, including a 6.0 percent rise this year alone.
The industry’s rapid revenue growth has resulted in strong profit margins for some of the industry’s largest companies and attracted a huge number of new entrants. The number of industry operators increased at an annualized rate of 7.0 percent during the five years to 2019 and is predicted to continue growing at a slower annualized pace of 5.4 percent during the five years to 2024.
Several acquisitions have occurred, including eBay’s purchase of Zong, a provider of mobile payment platforms, PayPal’s purchase of Braintree, and Google’s 2015 purchase of Softcard (previously Isis Mobile Wallet). Over the next five years, acquisition activity is projected to grow, somewhat dampening the flood of market newcomers.
Mobile payment processing solutions are likely to become a significant component of the business during the next five years. Small companies and merchants will be able to accept payments through their mobile phones using these solutions.
Although this new technology has already established a foothold in some industries, it will gain traction in the next five years as developers improve their user interfaces, consumers gain comfort with the new technology, and industry players demonstrate that it is more efficient and convenient than the numerous alternatives.
In the long run, the industry will work to construct a payment-as-a-platform model, a system that would establish an all-encompassing layer that would integrate diverse payment modalities. These two new product categories will contribute to the industry’s sustained high revenue growth, with sales predicted to increase at an annualized rate of 3.4 percent during the five years to 2024, reaching $27.6 billion.
The Online Payment Processing Software Developers sector grew at a fast clip during the five years to 2019, owing to the rapidly developing online marketplace and consumers’ growing comfort level with online shopping. These changes have occurred in tandem with an increase in per capita disposable income, which has allowed customers to buy a greater variety of things online, needing the services of industry operators. As a consequence, sector revenue is predicted to expand at an average rate of 8.4 percent to $23.3 billion over the next five years, including a 6.0 percent gain in 2019.
The development of high-speed internet connections throughout the United States has resulted in the exponential growth of e-commerce, or the buying and selling of products and services through the internet, during the last decade. E-commerce has various benefits over conventional brick-and-mortar stores, including the ability to shop from home, a more convenient method of comparing costs, and the ability for customers to more easily acquire and trade uncommon products.
As a result of these reasons, operators in the e-commerce business attempted to design a payment mechanism that was safe and easy enough to be accepted by the majority of customers. PayPal, run by PayPal Holdings Inc. (PayPal Holdings), was the first online payment processing system to achieve widespread adoption. PayPal Holdings continues to be the industry leader.
Because they work in tandem, demand for online payment processing software companies’ services fluctuates in lockstep with the success of the e-commerce shops they serve. To that aim, e-commerce shops have grown by leaps and bounds in the last five years.
The economic slump aided in the movement of demand away from brick-and-mortar shops and toward online merchants, as internet merchants avoided paying for storefront real estate and in-store workers. This trend toward online buying has not abated as the economy has recovered, and greater online shopping has benefited this business since operators often receive a portion of each transaction.
Although this market has grown rapidly over the last five years to 2019, it is moving away from its early days, when new adoption generated the majority of revenue growth. Nonetheless, the growing number of mobile internet connections – defined as the total number of users who own a broadband internet-capable device and a subscription that includes a data plan – has fueled revenue growth.
Smartphone penetration has been extraordinarily high over the last five years, with the number of mobile internet connections expanding at an annualized rate of 6.5 percent during the five years through 2019. However, the growth rate has dropped in recent years, falling from over 50.0 percent immediately previous to the era to a projected 2.3 percent in 2019.
Due to the industry’s quick growth, the number of operators has increased significantly during the five years to 2019. The number of industry operators climbed by an annualized 7.0 percent to 901 throughout the period. The industry’s high average profit margin, projected at 10.7 percent of sales in 2019, has attracted a torrent of new participants, with low entry barriers allowing them to enter readily.
Profitability has started to suffer as a result of this trend, with profit margins falling slightly from 13.4 percent of industry sales in 2018 to 10.7 percent in 2019. The industry’s major players are typically multinational e-commerce, technology, and banking companies such as PayPal Holdings, Alphabet Inc. (Google), and Visa Inc., all of which have invested heavily in developing successful large-scale payment processing systems targeted at their already massive user base.
However, the sector has attracted a great number of small-scale businesses that specialize in certain markets. Successful small-scale operators are frequently acquired by industry giants in order to obtain patents; for example, eBay acquired Zong prior to the period in order to sell their mobile payment platform via PayPal, while Google, which already operates in the industry through Google Wallet, acquired Softcard (previously Isis) in February 2015.
Despite these purchases, the number of operators entering the business far outnumbers those departing. Employment has grown in lockstep with corporate trends, expanding by an average of 6.5 percent to 39,280 people over the last five years.
The most significant challenge for industry operators has been persuading the typical consumer and company that their payment systems are secure and dependable. A payment processing platform must be accessible at all times and capable of properly protecting critical financial identification information against theft. A large online payment processing company has not suffered a big security breach in the last five years, which has resulted in strong revenue growth.
However, platforms often face dependability issues; for example, despite the fact that PayPal Holdings controls the most popular of these services, the firm is often chastised for the platform’s poor performance and customer support response times. Nonetheless, these complaints have had no impact on PayPal use. These issues are anticipated to be resolved in due course, optimizing the user experience.
The Online Payment Processing Software Developers business is predicted to expand for another five years, though at a somewhat slower pace than in the previous era. Over the five years to 2024, the industry’s sales is predicted to expand at an annualized rate of 3.4 percent to $27.6 billion. During the time, per capita disposable income is predicted to expand at an annualized rate of 0.7 percent, encouraging customers to spend more at online retailers.
Online retail development, in turn, will fuel industry revenue growth, since operators earn the majority of their income by charging a tiny percentage charge on all transactions. Continued revenue growth will attract additional operators. As a consequence, during the five years to 2024, the number of industry operators is predicted to expand at an annualized rate of 5.4 percent to 1,173.
Additionally, employment in the sector is predicted to develop in lockstep with business development, expanding by an annualized 4.2 percent to 48,357 workers during the same time. Profit margins in the sector are predicted to modestly drop from 10.7 percent of sales in 2019 to 10.4 percent in 2024 as a consequence of greater competition from new and current operators.
Mobile payment systems, which presently account for a small portion of this industry’s operations, will dramatically expand their market share during the next five years to 2024. A mobile payment platform allows retailers to charge clients using a mobile phone’s credit or debit card reader.
The service is especially appealing to small businesses and retailers since it is free or cheap to use and serves as a payment point for a mobile workforce, such as taxi firms. Consumer acceptance, however, has trailed industry expansion, and industry operators will need to demonstrate that their offering is superior to the plethora of alternatives supplied by internal and external competition.
The most significant obstacle for emerging mobile payment solutions will be overcoming consumer anxiety about security and privacy breaches. Consumers must have confidence that swiping their banking cards on a merchant’s mobile phone will not jeopardize the security of their account information, either with the merchant or with a third party. However, as mobile payment systems acquire traction, customer confidence in this new service offering is projected to grow, just as internet payment processing did during the recession.
Increased adoption of these platforms will result in significant revenue increases for the industry. Additionally, the new service will assist boost average industry profit margins over the next five years, but businesses are expected to compete on pricing and reduce their take rates, or the proportion of transactions paid as a fee.
Over the five years to 2024, organizations outside the business, notably credit card firms, will pose a threat to the rapid expansion of online payment processing platforms. PayPal and other firms established a foothold in the business over the last decade by providing the security of an intermediary in online transactions.
Consumers felt secure creating a single account with the payment processing platform, exchanging their credit card or bank account information, and then utilizing that account to conduct financial transactions online. Alternatively, the customer might share their credit card or bank account information with any business from whom they intended to buy.
This trend, however, has begun to reverse, owing mostly to the decrease in credit card processing costs. As a consequence, retailers save money by allowing just direct credit card payments and refusing to take payment through payment processing systems.
Additionally, since the internet’s birth, credit card firms have significantly enhanced their online fraud-prevention capabilities. As a result, payment methods that do not need an intermediary will divert users away from online payment processing platforms. This change will impede revenue growth but is unlikely to jeopardize the industry’s performance significantly.
Operators in the Wireless Telecommunications Carriers business are also vying for a piece of this lucrative pie. In February 2015, Alphabet Inc. bought Softcard, a joint venture involving AT&T, T-Mobile, and Verizon. Softcard is a free mobile application that utilizes near-field communication (NFC) technology to allow users to pay and save at participating merchants using their smartphone devices.
The digital wallet is PIN-protected and may be remotely frozen, and each payment is assigned a unique transaction ID. After 18 months of testing in Utah and Texas, the service was released throughout the United States in 2013. It is supported by card issuers American Express, Chase, Capital One, and Barclaycard, as well as makers of PoS (point of sale) terminals Verifone, Ingenico, Vivotech, and Equinox. Additionally, Apple Pay enables users of the iPhone 6 and subsequent iPhones to pay in stores and within apps.
Transactions are authorized using a one-time unique number generated by the software to validate each transaction, rather than the security code on the back of a credit card, which is validated using a touch ID. These applications are projected to gain momentum in the future years, creating external competition while also promoting the digital wallet’s appeal.
Payment-as-a-platform will be the next significant product development in response to the proliferation of mobile payment systems (PaaP). Similar to the cloud-based notion of software-as-a-service (SaaS, or software distributed over the internet), PaaP establishes a unified layer that integrates diverse payment systems and other online payment methods.
Thus, PaaP would allow users worldwide to access a range of local, regional, and global payment choices (e.g., prepaid cards, local banks, and payment processing platforms) through a single interface. PaaP is unlikely to acquire broad adoption for a lengthy period of time since customers will be unwilling to embrace another mode of payment. However, the Online Payment Processing Software Developers business is likely to be well-positioned to create and publish such a system.
Near Field Communication (NFC)-enabled devices store and encrypt sensitive data, therefore providing a safe platform for transactions. However, only roughly 5% of all mobile phones in 2011 were NFC-enabled. By 2017, this figure had increased to around 46.0 percent, as all major phone manufacturers introduced NFC-enabled smartphones to their lineups.
Due to the fact that mobile payment systems are one of the most potential applications for this technology, industry participants are projected to engage in research and development to improve NFC over the next five years, until 2024.
This sector is composed of enterprises principally involved in the development of software for online payment processing. Merchants may use online payments processing software to approve, settle, and monitor credit card and electronic check transactions. The Online Payment Processing Software Developers sector is well entrenched in its development period.
Industry value-added, which is a proxy for an industry’s contribution to the entire economy, is expected to expand at an annualized rate of 5.2 percent over the next decade, until 2024. By contrast, the US GDP is predicted to grow at an annualized rate of 2.1 percent during the same time. The sector began in the late 1990s and has been quickly increasing since then.
A large portion of this rise has been attributed to customers’ growing preference for internet shops over conventional brick-and-mortar merchants. As the popularity of online shops has grown, so has the need for secure, dependable ways of payment between and among customers and companies. Increased demand has resulted in a flood of new enterprises entering the business.
As a result, despite acquisition activity by the sector’s main players, the number of industry firms is predicted to expand at an annualized 6.2 percent over the next decade to 2024. Finally, the next five years will see fast growth in mobile internet payment processing, a technology that is still in its infancy in terms of mainstream use.