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The payment-facilitator model isn’t likely to slow down any time soon. A new report predicts payment volume made via payment facilitators will top $4 trillion annually by 2025.
Payment facilitators enable merchants to process payments under the banner of an organization that manages the payment connections and liability without requiring them to obtain a traditional merchant account. PayPal Holdings Inc. and Square Inc. are among the forerunners of the model, adopting it when it was called aggregation.
But now so many organizations have adopted it—especially among specialized software developers that want more control over the payment channel—that its growth is quickening. The number of payment facilitators is forecast to grow from 1,244 in 2020 to 2,381 in five years, according to the “Payment Facilitator Global Opportunity Analysis and Industry Forecast 2018-2025” report from Infinicept, a Denver firm that advises payment facilitators.
The report, compiled on behalf of Infinicept by AZ Payments Group, a Mesa, Ariz.-based research firm, forecasts that global payment volume for the PF model will have a 28.4% compounded annual growth rate from 2018 through 2025. In 2020, the estimated volume is $1.21 trillion. It will be fueled by an increased number of payment facilitators and an expansion of the customer bases of current providers, the report says.
Consumers will have an important role in this growth, says Rick Oglesby, AZ Payments founder and president. “Lots of cash-and-check-based payments are the target for PFs offering integrated software and payments packages,” Oglesby says. “There are also some new models for traditional verticals. For example, telemedicine is growing rapidly due to Covid-19, which is beneficial to telemedicine-enabling ISVs [independent software vendors]. The rapid adoption by consumers leads to rapid growth for PF and electronic payments in the segment.”
This growth may also impact the traditional merchant account and other merchant-services models.
“We see a lot of conversions from traditional ISV models where the ISV refers merchants to a payment processor for a revenue share to the PF model where the ISV essentially launches a proprietary payment product and hires a processor as an outsource vendor in the background,” Oglesby says. “We’re also seeing a lot of PF in emerging verticals. Being a PF helps companies pursue new verticals because they are not tethered to the legacy risk models of payment processors that are configured to meet the needs of traditional merchant populations.”
Often, a payment facilitator can board a merchant quicker than if the merchant applied for a traditional merchant account. The model also is adaptable to online customer acquisition.
