Many businesses now accept forms of payment beyond cash, including credit and debit cards. Providing various payment options can help keep your business competitive. This article analyzes the largest payment processors in 2024 with essential information to assist your business in selecting the most suitable credit card processing service.
What Is a Payment Processor?
A payment processor is a service provider that handles the technical aspects of transactions between a customer and a business, particularly when credit or debit cards are involved. It acts as an intermediary, facilitating the transfer of payment information between the customer’s bank (often called the issuing bank) and the merchant’s (the acquiring bank).
Payment processors are vital for businesses as they facilitate accepting various payment options, such as credit cards, digital payments, and mobile payments. By partnering with merchant acquirers, they help set up merchant accounts, enabling businesses to accept payments from customers globally.
Payment processors play a crucial role in managing transaction fees. They determine and apply fees to each transaction, which affects merchants’ total cost. Payment processors also ensure the swift and secure transfer of funds, maintaining efficient payment processing.
Additionally, payment processors offer critical merchant services to enhance business operations. These include fraud protection, data analytics, and integrating e-commerce systems. They also focus on securing transactions by encrypting sensitive payment information and complying with security standards like PCI-DSS to safeguard against fraud and data breaches.
In 2023, the U.S. payment processing market was valued at over $2 trillion, highlighting the country’s significant role and scale of electronic transactions.
The market is expected to grow annually from 5% to 7% in the coming years. This growth is driven by the increasing preference for electronic payments and the changing demands of consumers and businesses. This trend underscores the growing importance of payment processors in the evolving digital commerce landscape.
How Does Payment Processing Work?
Here’s a breakdown of how payment processing operates:
- Transaction Initiation: A customer initiates a payment by entering their card details at checkout, whether online, on a mobile device, or at a physical point-of-sale terminal.
- Payment Gateway: The card information is securely transmitted through a payment gateway, which encrypts and forwards the data to the payment processor.
- Authorization: The payment processor relays the transaction details to the card network (e.g., Visa, Mastercard) and the cardholder’s bank. The bank checks for sufficient funds or credit and assesses potential fraud risks.
- Approval/Decline: The issuing bank replies with an approval or a decline message. This message travels via card networks to the payment processors and is forwarded to the merchant through the gateway.
- Transaction Settlement: When a transaction is approved, the processor manages the movement of funds from the customer’s bank account to the merchant’s. The settlement of funds usually occurs within a few days, but some systems can process these transfers immediately.
Largest Payment Processors in 2024
The following overview highlights a few major payment processors, but numerous other options are worth exploring. In recent years, digital payment platforms such as Apple Pay and Google Pay have seen substantial growth in their market share.
Moreover, financial entities like the Federal Reserve Bank and Bank of America hold prominent positions in the payment processing sector.
1. PayPal
In the first quarter of 2024, PayPal processed 6.5 billion transactions, marking an 11% increase from the same period in 2023. This rise in transactions underscores PayPal’s expanding role in the payment processing sector. Additionally, PayPal’s total payment volume for this quarter was $403.9 billion, up 14% from the previous year, demonstrating its robust market presence and broad adoption by consumers and businesses worldwide.
Several factors contribute to PayPal’s leading position, including its easy-to-use platform, secure transaction methods, and capability to handle payments in multiple currencies. Its buyer protection policies are also vital in sustaining customer trust. These features, combined with its wide acceptance on numerous online platforms, have made PayPal a preferred and reliable choice for millions of users globally.
For transactions in the U.S. and Canada, there is a fee of 2.9% plus $0.30 per transaction. International transactions incur a fee of 4.4% plus additional charges.
2. J.P. Morgan Payments
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In 2022, J.P. Morgan Payments’ merchant acquiring business processed over $2 trillion globally, marking the highest total it has settled in a single year. This was supported by processing nearly 350 million transactions daily, with peak periods handling over 5,000 transactions per second. The business is active in over 160 countries and handles over 120 currencies, positioning it as a significant entity in global payment processing. J.P. Morgan Payments provides services to major corporations through Chase Payment Solutions, including PayPal, Macy’s, and DoorDash, and small enterprises.
The firm’s payment solutions cover online and app-based transactions, offer embedded banking services, and help businesses streamline payment systems. Its 2022 acquisition of Renovite significantly enhanced its global merchant acquiring capabilities. J.P. Morgan is also increasing its presence in the Asia-Pacific region, delivering merchant acquiring services in several markets such as Australia, Japan, and India.
3. Fiserv
Fiserv, headquartered in Wisconsin, is a top financial technology firm notable for its payment processing and wide-ranging financial services. In 2021, Fiserv processed the most card-based transactions in the U.S., handling over 2 billion more than its closest competitor, Chase. Its growth strategy prominently features acquisitions, such as the purchase of First Data, a significant player in merchant acquiring in the U.S. First Data’s Clover platform, which facilitates point-of-sale payments, is now a crucial component of Fiserv’s product lineup.
In 2022, Fiserv posted revenues of $17.7 billion, a 9% increase from the previous year. This rise largely stemmed from its merchant services and payment processing operations, with the Clover platform alone recording a 23% jump in revenue. The company also expanded its market share by acquiring Pineapple Payments and Merchant One, enhancing its payment processing capabilities for small to medium-sized businesses (SMBs) and integrated software vendors (ISVs).
Fiserv is essential as a backend service provider for leading financial institutions like Citi, Santander, and SunTrust, managing a significant volume of their transactions. The company employs advanced analytics and data to support businesses in making well-informed decisions and prioritizing security and operational efficiency in its services. Fiserv is focused on sustaining growth by innovating in payment technology and forming strategic partnerships.
4. Stripe
Stripe is a versatile payment processing platform popular with developers for its comprehensive API and straightforward documentation. It supports a variety of payment methods, including credit and debit cards, Apple Pay, Google Pay, and some cryptocurrencies, across more than 135 currencies. This range of options and its API-first design are highly valued by online retailers and developers who require integrated, tailored payment systems for their services. In 2023, Stripe announced that it had processed over $1 trillion in total payment volume, marking a 25% increase from the previous year, as detailed in its annual letter.
Stripe extends its offerings beyond mere transaction processing. It provides capabilities for online invoicing, subscription management, automation of accounting tasks, tax calculations, fraud detection, and even access to financing. The platform includes advanced tools like Radar for machine learning-powered fraud protection and Connect for managing payouts to third-party service providers or contractors. Stripe’s API also facilitates the handling of subscriptions, refunds, and real-time reporting, which are essential for businesses handling high volumes of transactions.
Stripe’s pricing is based on a pay-as-you-go model, charging 2.9% + $0.30 for each online transaction and 2.7% + $0.05 for transactions via Stripe Terminal. It imposes no monthly or annual fees, offering a cost-effective option for businesses of all sizes. Companies with large transaction volumes may negotiate custom pricing.
Known for its adaptability and developer-centric features, Stripe is highly recommended for businesses prioritizing online transactions and seeking flexible payment solutions. Nevertheless, businesses without in-house technical skills might require professional developers to maximize the benefits of Stripe’s API.
5. Square
Initially recognized for its in-person POS systems, Square now also provides a robust online payment solution, making it well-suited for physical and online businesses. As of 2023, Square supports 4 million sellers and processes $210 billion in transactions annually. Square allows for secure payment acceptance through multiple methods, such as contactless cards, ACH bank transfers, Apple Pay, Google Pay, and digital wallets.
The platform enables businesses to handle pickup and delivery options through their online store, which are manageable via the Square dashboard. It integrates with delivery services like DoorDash and allows businesses to adjust delivery times, fees, and order processes. Additionally, Square supports sales through social media platforms like Facebook and Instagram, facilitating direct customer engagement and broadening a business’s online presence.
Square’s invoicing feature lets businesses send invoices, collect payments with adjustable terms, and manage subscriptions. It includes a “buy now, pay later” (BNPL) service through Afterpay, which lets customers make installments while the merchant gets paid in full upfront—appealing to younger customers. Merchants can activate this feature directly from their dashboard. Square charges 2.9% + $0.30 for online transactions and 2.6% + $0.10 for in-person transactions, offering competitive rates for small to medium-sized enterprises.
6. Worldpay
Worldpay is a major player in payment processing, allowing businesses to accept various payment types, including credit and debit cards, digital wallets, and online transactions. It has a significant role in cross-border payment solutions and processes over 40 billion transactions yearly, managing over $1.7 trillion in payment volume across 146 countries and 135 currencies. This positions it as a reliable partner for businesses aiming to improve payment systems, particularly for international operations.
When a customer completes a purchase, Worldpay securely processes the payment details and ensures the transfer of funds from the customer to the merchant’s account, promoting a smooth transaction. The platform focuses on speed and security, offering assurance for both businesses and consumers. It includes advanced fraud protection tools and real-time analytics that assist businesses in managing risks and enhancing revenue.
Worldpay is a division of FIS, a financial technology company. It has seen periods of independent operation following various mergers and acquisitions. Established by NatWest in 1989 and later acquired by Vantiv, Worldpay expanded through strategic mergers. However, FIS has encountered challenges with its acquisition strategy, unlike its competitor, Fiserv, which has achieved more immediate financial benefits from its acquisition of First Data.
The platform is recognized for its dependability and is praised as one of the best-performing payment gateways with quick transaction speeds.
7. Wells Fargo
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Wells Fargo provides merchant acquiring services through its Wells Fargo Merchant Services division, allowing businesses to accept various payment types, such as credit and debit card transactions. However, Wells Fargo’s role in payment processing is somewhat indirect as it collaborates with Fiserv, formerly First Data, to handle the backend technical aspects of transaction processing. This arrangement means that while Wells Fargo offers merchant-facing services, Fiserv manages the complex transaction processing details.
This structure enables Wells Fargo to deliver comprehensive merchant services. However, it may lead to higher costs than those charged by dedicated payment processors since using a third-party processor like Fiserv adds extra fees. Despite the potential for higher costs, Wells Fargo benefits from its extensive banking network, which offers integrated merchant services with other financial products. This integration can be highly convenient for businesses seeking combined banking and payment solutions. Wells Fargo processes over 50 million transactions daily, utilizing Fiserv’s sophisticated infrastructure to handle these transactions in real-time.
The partnership between Wells Fargo and Fiserv has been long-standing and will end in 2025. After the conclusion of their joint venture, Fiserv will continue to provide processing services to Wells Fargo’s merchants under a new agreement, ensuring continuity of service. Additionally, Wells Fargo has started to offer simplified, flat-rate pricing for small businesses, aiming to make its merchant services more accessible to this market segment.
8. Stax
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Stax is a payment processing company that offers solutions both online and in person. It uses a subscription-based model with interchange-plus pricing. Since its founding in 2014, Stax has supported over 30,000 customers and processed more than $30 billion in transactions. The company aims to provide a flexible, multi-channel platform that allows businesses to handle payments and invoicing from a single dashboard.
The service enables businesses to accept various payment types and includes features like customizable smart terminals, mobile readers, and support for contactless payments, QR codes, and payment buttons. It also offers real-time reporting features to help businesses monitor deposits, payment activity, and sales trends across different channels.
Stax has three main subscription plans based on the volume of transactions: the Growth plan at $99 per month for businesses processing up to $150,000 per year, the Pro plan at $159 per month for those processing between $150,000 and $250,000 annually, and the Ultimate plan at $199 per month for higher volumes. For businesses with even larger transaction volumes, Stax provides custom quotes. Additionally, the service includes 24/7 customer support and compatibility with over 150 software partners, including major e-commerce platforms and accounting software like QuickBooks.
How to Select the Right Payment Processor?
When choosing a payment processor, consider several key aspects to ensure it meets your business requirements and effectively controls costs.
- Fee Structure: Payment processors typically impose various fees, such as setup fees, monthly maintenance fees, and transaction fees. Determining if the fee structure suits your business model is crucial, especially if you process a high volume of transactions. Consider additional costs like chargeback, gateway, and currency conversion fees, especially if your business accepts international payments.
- International Payments: If you serve international customers, verify that the processor supports multiple currencies and offers competitive fees for cross-border transactions. Some processors provide better support for global operations with extensive currency options and more affordable fees for international transactions.
- Payment Methods: Ensure that your chosen processor supports a variety of payment methods, including credit and debit cards, digital wallets, and mobile payments like Apple Pay or Google Pay. A broader range of payment options allows you to accommodate different customer preferences.
- Security and Compliance: Adherence to PCI DSS standards and robust encryption are vital for protecting customer information. Consider the processor’s fraud detection and chargeback management capabilities to protect your business from unauthorized transactions.
- Equipment Costs: You might need credit card terminals or POS systems for physical store transactions. Some processors provide flexible acquisition options, such as leasing or buying equipment.
- Integration: The processor should integrate well with your current e-commerce platform or POS system to avoid disruptions and ensure smooth transactions. Check the compatibility of the processor’s APIs or plugins with your systems.
- Customer Support: Opt for a processor that provides dependable customer service and is available 24/7 through various phone, email, or live chat channels. Quick and effective support is crucial for resolving payment issues swiftly to minimize any impact on your business operations.
Conclusion
Payment processors are essential for businesses looking to expand their payment options beyond cash. They offer services that handle card transactions, fraud protection, and more. As the digital payment landscape evolves, choosing a processor that aligns with your business’s needs is essential. Key factors include fee structures, international payment support, security measures, and integration capabilities.
Whether considering significant players like PayPal and Stripe or more niche platforms like Stax, carefully evaluating these elements can help optimize your transaction processes and enhance overall efficiency.
Frequently Asked Questions
What are the key considerations when choosing a payment processor for a small to medium-sized business in 2024?
When choosing a payment processor, focus on fees, supported payment methods, and security. Compare pricing models like interchange-plus for transparency, as Payment Depot and Stax offer. Ensure the processor supports credit cards and digital wallets and is PCI DSS compliant for security.
How do payment processors like PayPal and Stripe compare in terms of global reach and functionality?
PayPal is user-friendly and widely used for domestic and international transactions but has higher fees for global payments. Stripe is developer-friendly with an API-first approach, supports over 135 currencies, and offers advanced features like fraud detection and subscription management, making it ideal for online businesses.
What makes subscription-based payment processors like Stax appealing for businesses with predictable transaction volumes?
Stax offers predictable monthly pricing with no per-transaction fees, making it cost-effective for businesses with steady transaction volumes. Starting at $99 monthly, Stax provides wholesale interchange rates and covers all major payment methods, ideal for avoiding fluctuating fees.