Credit Card Industry in 2021: Market Analysis and Trends in Payment Processing

• Credit card processing companies will continue to be a key driver in the payments ecosystem, with credit card payments set to remain the largest in-store payment type by volume.
• We’ve compiled a list of the top credit card processing companies in 2020.
• Do you work in the Payments & Commerce industry? Get business insights on the latest tech innovations, market trends, and your competitors with data-driven research.

Credit card processing companies will continue to be a key driver in the payments ecosystem, with credit card payments set to remain the largest in-store payment type by volume – forecasted to reach $1.82 trillion in annual volume by 2024. 

Credit Card Processing Industry Overview

Whenever consumers tap or swipe their credit card, payment data is sent through a complex web of stakeholders-including card networks, issuers, and gateways-that help complete the transaction. Credit card processors are responsible for carefully and securely transmitting this data. 

There are two types of credit card processors: 

• Front-end processors: Make sure customers’ funds are sufficient for a transaction by routing transactions from merchants to the cardholder’s bank to gain authorization
• Back-end processors: Accept settlements from front-end processors and move the money to the merchants’ issuing bank

Credit Card Market Stats: Size & Growth

Credit cards are a US payments ecosystem staple, and their prominence has only been growing for the past few years. Credit cards comprised 23.6% of US consumers’ total transactions on average in 2019-up slightly over 2018. That usage translated into volume, with the four major networks hitting nearly $4 trillion in volume in 2019-up 8.7% from the previous year, per The Nilson Report. And the ongoing rewards rat race-which sweetened the deal for both existing credit users and new applicants-plus new products that might reach customers previously averse to credit, combined with less strict lending guidelines, encouraged usage as well.

Despite the aforementioned overall uptick in card spending, credit cards will likely take a hit from customers looking to limit the debt they’re incurring amid the ongoing pandemic: Mastercard, for example, saw US credit volume plunge 12% in Q3 2020, compared with 4% US combined credit and debit growth, which aligns with the results of major issuers. Further, customers have less of an incentive to spend with credit cards. Rewards do still give customers some impetus to spend on credit, since their importance as a savings tool has magnified this year.

Credit Card Industry Trends

Looking ahead, there are two clear trends that will evolve within the credit card industry: rewards and mobile payment technology.

Seventy-five percent of consumers have a rewards program attached to their most preferred credit card. According to a Insider Intelligence survey, three of the top four factors cited as the most important in choosing a primary card were related to rewards. Notably, among millennial respondents, all three top features were related to rewards.

Insider Intelligence highlights three reward trends we can expect in the coming years: 

• Flexible rewards (the ability of consumers to choose what kinds of rewards they receive)
• Bonus rewards for e-commerce
• Bonus rewards for shopping locally

Additionally, the rise of mobile payments and the successful launch of Apple Card will massively shake up the way consumers use credit cards. 

Following the 2019 launch of the Apple Card, Apple CEO Tim Cook announced that Apple Pay’s transaction volume and revenue more than doubled on an annual basis. He also compared Apple Pay’s volume growth to that of PayPal’s, noting that Apple Pay is growing four times faster. 

A lot of Apple Card’s success can be tied to its cash back offerings – users receive 2% cash back on all purchases via the mobile wallet and 3% back on Apple Pay transactions with select merchants.

And the early success of Apple Card will likely accelerate consumer demand for more digital and mobile payment solutions. 

The rise of Gen Z and millennial consumers is forcing merchants to adopt mobile point-of-sale (mPOS) solutions, which accept mobile wallets, contactless payments, and other digtial-native products that catch the eyes of these younger, tech-savvy generations.  For example, over half of Gen Zers use digital wallets at least once a month for purchasing and about 75% use a digital payment app. 

And as this cohort’s buying power continues to grow, Insider Intelligence expects there to be 16.6 million mPOS terminals in the US by 2024, and mobile in-store payments are projected to drive forward at a 23.9% compound annual growth rate (CAGR) to hit $262.6 billion by 2024. 

From mobile wallets to retail apps, younger consumers are looking to make purchases in the most efficient and convenient way possible, and payment processing firms are responding to their demands. 

In fact, Insider Intelligence recently reported that Fiserv, Samsung, and Visa partnered to create a mPOS solution that successfully accepts a PIN-based contactless transaction on a mobile device. The solution allows merchants to accept contactless transactions on a mobile device without additional hardware.

Major Card Processing Companies

TSYS, or Total System Services, is the third-biggest payment processor in the US credit card issuer market. It provides services to over 3.5 million small and medium sized business (SMB) merchant locations and more than 1,300 financial institutions (FIs) across more than 100 countries. In 2019 the processing company was acquired by Global Payments for $21.5 billion, and the two companies expect at least $300 million of annual run-rate cost synergies.

Fiserv provides FIs with services including payments and risk and compliance in over 100 countries. In 2019 Fiserv acquired First Data for $22 billion and the combined entity expects $500 million in revenue synergies over a five-year period.

Elavon is the fourth-largest merchant acquirer in Europe – and it’s the seventh-largest in the US. The payment solution provider is a subsidiary of US Bancorp and offers features like processing online and in-store payments. In 2019 Elavon acquired payments gateway Sage Pay to help grow its market share in the UK and Ireland. 

This is just a sampling of some of the top card processing companies around the world. Insider Intelligence has compiled a more robust list of the top credit card processing companies in 2021.

Credit Card Industry Analysis and Reports

In addition to credit card processing, Insider Intelligence publishes a wealth of research reports, charts, forecasts, and analysis of the Payments & Commerce industry. You can learn more about accessing all of this content here. 

And here are some related Payments & Commerce reports that might interest you:

1. Payments Ecosystem, which examines the payments ecosystem today, its growth drivers, and where the industry is headed.

2. The Online Grocery Report, which looks back at how online grocery adoption was progressing prior to the coronavirus pandemic to understand the state of the industry before the shopping method became vital to many consumers.