This article is based on one of TSG’s most popular reports, the Directory of U.S. Merchant Acquirers, sponsored by FIS. Its contents are regularly cited by the media, and it is the ideal essential desk reference on the U.S. acquiring space.
The Directory of U.S. Merchant Acquirers, sponsored by FIS, is a report that details key business statistics on ~320 of the nation’s payment processing players that collectively process 90%+ of all card payment volume in the United States.
When looking at the data inside this report, a variety of merchant acquiring insights stand out:
- The top five players processed an estimated $6 trillion in card volume in 2021. All five of these players have a strong bank sales channel, as they are either bank-owned or have an exceedingly large set of bank partners/clients from other areas of their business. Over 90% of the volume represented in the directory is processed by the top twenty-five listed players.
- Square and Stripe continue to be fast-growing players and are approaching a top ten ranking based on card volume. Square and Stripe are currently ranked 11th and 12th, respectively. Both players have been around for less than 15 years.
- Adyen rose to a ranking of eighth based on card volume, continuing to swiftly pass industry incumbents rising from a ranking of 10th in the prior year. Adyen reported that North America was their strongest growing regional segment based on revenue.
- Only five of the players listed are estimated to serve more than one million merchants. Square is estimated to serve 400,000 more merchants than the player with the estimated next highest number of clients, albeit its merchant clients have a smaller than average size.
- Authorize.net (a Visa solution) is the payment gateway with the most partnerships among the acquirers listed, partnering with 38% of these players.
- Six of the top ten players listed had 20% or more growth in year-over-year card volume, transactions, and/or merchant clients in 2021. This is likely driven by many things, including a bounce-back post year one of the COVID-driven downturn in spending.
- 41% of the players listed sell Fiserv’s Clover point-of-sale products.
- 36% of the players have more than one sponsor bank relationship.
- California is the most common headquarters state for the top 25 players and throughout the ~320 acquirers listed within the directory.
General Commentary: Merchant Acquiring Insights
The merchant acquiring industry in 2021 demonstrated an atypical year characterized by total payment volume growth over double the usually observed annual growth. While having typically grown at a 10-year CAGR (compound annual growth rate) of ~9% since 2011, the combined U.S. total payment volume (TPV) of Visa and Mastercard grew a combined average of 23.5% from 2020 to 2021. This is in comparison to a YoY growth rate of only 3.2% from 2019 to 2020. This atypical growth in volume is likely a result of the continued recovery from the COVID-19 pandemic.
As the U.S. payment networks reported anomalous growth, this was also represented by several entities within the merchant acquiring community. Notably, entities such as FIS, Elavon, Adyen, Square, Stripe, Shopify, Toast, and Shift4 are examples of merchant acquirers and payment facilitators that had an uptick in YoY volume that was estimated to have exceeded the combined average U.S. TPV growth of 23.5% reported by Visa and Mastercard from 2020 to 2021.
eCommerce had continued to be a major growth space for payments players as merchants collectively began to transition to online commerce during the height of the COVID-19 pandemic. However, pandemic-related growth of eCommerce may be starting to show signs of slowing. Looking at the most recent Department of Commerce figures, non-adjusted Q4 2021 eCommerce sales were estimated to grow only 9.2% YoY from Q4 2020 compared to 31.9% from Q4 2019 to Q4 2020. Additionally, this slowing of growth led to a lesser percentage of total quarterly sales coming from eCommerce, with only 14.5% of total sales originating online in Q4 2021 vs.15.2% in Q4 2020.
While the recent slowing of eCommerce growth has especially affected high growth payment entities on Wall Street in the cases of companies such as Shopify and PayPal, these entities still grew at much higher rates than legacy incumbents from a payment volume perspective. Entities such as Adyen, Toast, and Shift4 all specifically achieved YoY U.S. payment volume growth estimated to be around four times the TPV growth of major U.S. payment networks.
If you have any questions or would like to learn more about this report or related items, please feel free to reach out to The Strawhecker Group’s Market Intelligence team at MI@thestrawgroup.com.
Note: All entities acknowledged within this article and most represented within the referenced companion report are believed to own a portfolio of merchant accounts or hold a strategic interest in the management of their merchants’ internal payment processing functions, to the extent that they merit inclusion as a “merchant acquirer.” Ex. Square possesses multiple service provider registrations through Visa, including as a payment facilitator and as a registered ISO.