Although things like wire transfer by Western Union were launched in 1872 (surprisingly), first universal payment card was created in 1950 by Diners Club. (Before that personal credit for cars was offered by GM since 1919). First credit card was released by Amex in 1958. First ATM came into business in 1968.
More interestingly, Automated Clearing House is developed only in 1972 and in 1974, Electronics Payments Association is established.
And following charts the history of electronic payments since 1981:
Once the internet was developed and business started to move online, payments soon followed. In the image below, we can see that the first B2B electronic transaction was made in 1981. The first online payment made by a customer was in 1994, after the internet became available in 1991. Amazon, Google and PayPal were founded thereafter and the e-commerce world became much more accessible. Online payments were simple, easy and more secure. The arrival of the smartphone in 2007, meant that people had the ability to purchase online directly from their pockets without a PC. Payment trends were about to transform. This brought an increase in payment regulations.
Since 2007, smartphones opened up the world to more online payments. The mobile payment infrastructure has evolved:
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VISA, MASTERCARD
Visa is the largest company in the payments space. Following is the revenue for FY2024, and a snapshot of how it makes money:
It processed 233.8 billion transactions in Fiscal 2024 across a payments volume of $13.2 trillion. This compares to 159.4 billion transactions of MasterCard against a payments volume of $9.8 trillion.
Following is a snapshpot of VISA
The net revenue of $36 billion comes from the following sources:
Following here is a snapshot of Mastercard:
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Visa and Mastercard are 2 of the top 3 players in terms of number of transactions globally:
In 2023, the number of non-cash transactions reached 1.3 trillion globally, according to Capgemini. By 2027, it’s forecast to reach 2.3 trillion. That same year, modern payment methods such as account-to-account, digital wallets, QR-code payments and more are predicted to make up 30 per cent of all transactions. That’s a transformational shift.
Over the last 10 years, the number of transactions that are in the net of these payment service providers has increased as well - perhaps the no of transactions, and share of card transactions. See table below. Esp consider Union Pay's growth.
Here a wonder on just modern human life - the amount of things we live with (if one were to compare average volume of possessions in 1800 to today!) And here, it is not just the stock, but the number of transactions as well - the ease which cards provide for fractional payments perhaps increase the number of transactions as well. To look up total volume in dollar terms as well.
Following chart shows the number of transactions over time across geographies:
In terms of value of global payment flows, or dollar volume, it seems in 2020, there was $240 trillion of global payment flows.
Another chart from 2020:
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Here perhaps a closer look at the payments process itself. Following is the cycle, and an example set of companies in each space.
And yet, there have been changes in the last decade or so. Some of these include:
"New Fintech Players - The giants of technology have moved into the payments industry. Traditional players and banks are merging with technology companies to get even closer to their customers. Consumers favor this combination of big tech and banking because it saves them time and money while providing a sense of control over their finances. This growing appeal puts tech companies like Apple, Amazon, and others in a position to meet the demand that traditional finance entities may not be able to achieve on their own.
Digital Wallet on the Rise Digital wallets make it quick and easy to pay. They also don’t require a physical credit card for in-person transactions and they eliminate the process of keying in digits when shopping online. And in the case of peer-to-peer apps (P2P) such as Venmo or CashApp, two parties can complete a transaction almost instantaneously without the need to provide account details—all that’s needed is a name, email, or phone number.
In addition to credit and debit card transactions and peer-to-peer (P2P) payments, Automated Clearing House (ACH) transactions are on the rise as consumers and businesses around the globe embrace mobile and digital forms of payment over cash. Notably, the total digital transaction value is expected to show a compound annual growth rate (CAGR) of 13.10%, resulting in a projected total amount of $13.91 trillion by 2026.
Real-time payments are taking the speed of standard ACH payments a step further, offering instant fund disbursement and settlement. Real-time payments in the United States are exploding, with significant year- over-year growth of 69%—while 40 countries around the globe have real-time payment processing solutions in place. The U.S. currently has one real-time payment system, known as RTP® (Real-Time Payments), and another, FedNowSM, will launch in 2023.
The RTP network, launched by The Clearing House in 2017, is a payments system that all federally insured depository institutions can use to clear and settle payments in real-time. Its network serves as a platform that allows banks and other financial institutions to create and deliver innovative products and services to their customers. RTP technology was designed to facilitate payments across all payment categories, including business-to-business (B2B), business-to-consumer (B2C), consumer-to-business (C2B), peer-to-peer (P2P), government-to-citizen (G2C), and account-to-account (A2A) transactions.
FedNow is a real-time payment and settlement service for individuals and businesses that the Federal Reserve Bank is currently developing. The service will incorporate clearing functionality into the process of settling payments. This functionality enables banks and financial institutions to exchange the debit and credit information needed to process payments and notify customers whether the payments were successful."
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Perhaps here a moment to contemplate the changing business model:
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One would think that the new changes would affect companies like Visa and Mastercard. But from this brilliant analysis here, some notes:
NEW ENTRANTS RELY ON VISA. (and Mastercard) A few years ago, many predicted the payment industry would soon be “disrupted” to the detriment of Visa (and Mastercard). They were half right. Companies like Apple, Google, Amazon, Stripe, Square, PayPal (and PayPal-owned Venmo) did invent novel new ways to make and process payments. But rather than compete head-to-head with Visa and Mastercard, these companies chose to partner instead. Why? Because any would-be competitor would have to invest billions of dollars in networking infrastructure so that transactions can be processed in real-time and with practically zero failures. They would need to establish relationships—one by one—with 16,000 banks worldwide. They’d need to write complex software that works with each of those banks, as well as millions of payment terminals. And they would need to ensure compliance with thousands of financial laws and regulations from over 200 countries. Or they could just partner with Visa.
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In terms of value of global payment flows, or dollar volume, it seems in 2020, there was $240 trillion of global payment flows. Of this, as per JP Morgan $54 trillion can be looked at as follows:
1) Platforms - Super Apps - $ 36 trillion
Super apps offer this. They are a destination platform for consumers and merchants that aggregate a broad set of services, both lifestyle and financialbased, with the added value of embedded payment capabilities so that users can transact without leaving the app. This creates a frictionless experience for consumers, who can access and pay for a variety of different products and experiences with a simple tap or swipe of a finger.
2) Online $6.8 trillion
Ecommerce: According to Boston Consulting Group, $5 trillion in annual global retail sales
shifted from offline to online due to the pandemic,12 and the shift is likely here to
stay
Gig Economy: According to Mastercard®, the gig economy — characterized
by temporary, flexible jobs brokered by online platforms and
fulfilled by independent contractors or freelancers — reached
nearly $300 billion in gross transaction volumes in 2020, and
is projected to grow to $455 billion by 2023.2
The creator economy — where self-employed individuals, such as social media influencers or bloggers, directly monetize their creative content via online platforms — is worth $100 billion in 2021 and is growing rapidly. It is already one-third of the size of the gig economy, and over 50 million Americans now consider themselves to be creators. More than 2 million of them earned six-figure incomes in 2020, suggesting the growth of a new creator middle class. It is estimated that sponsored creators will have a combined wealth of $15 billion by 2022
Digital identity is an astounding $210 billion market that is
growing at 19% CAGR20 with 3,000-plus companies applying technologies
like AI and biometrics, as well as concepts such as self-sovereign identity.
In today’s economy, there are multiple forms of money, including traditional fiat currency (cash or commercial bank deposits), cryptocurrencies, stablecoins, tokens, central bank digital currencies (CBDCs) and “narrow money” such as Starbucks© or Amazon rewards
75 million blockchain wallet users globally. (as of July 2021). This used to 3.61 million in 2015.
CBDC - something to explore. According to the Atlantic Council Geoeconomics Center’s CBDC
tracker, 81 countries representing more than 90% of global GDP are now exploring some form of a CBDC. A year ago, that number was 35.CBDCs may provide streamlined settlements and give
governments the ability to send money directly to citizens, especially in times of crisis.
4) Embedded - $1.1 trillion
The number of connected wearable devices worldwide is expected to grow to over 1.1 billion in 2022
Neobanks are digital-only banks that operate without physical branches. Like
a personal bank branch on your smartphone, neobanks use APIs to bundle
products and services around a highly engaging and sometimes autonomous
customer experience. There are now 200-plus neobanks live globally that have collectively secured billions of dollars in funding to spend on marketing to achieve critical mass.45 Yet profitability remains elusive for many – most neobanks make money from debit card interchange fees. In the current interest rate environment, this is not a viable long-term plan. Neobanks are now shifting their priorities to streamline their cost structure. In October 2020, the U.K.’s Starling Bank became the first retail neobank to become profitable.
Embedded finance
enabled by BaaS could be worth $3.6 trillion by 2030.
5) Real Time - $5.3 trillion
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Then there is another approach to looking at global transactions. Following from McKinsey
In 2023, the global payments industry handled 3.4 trillion transactions, accounting for $1.8 quadrillion in value and a revenue pool of $2.4 trillion.
I cannot confirm the above value and volume number - still, following are the charts linked to it, talking about the fee generated - or the revenue pool in the payments space. For context again, Visa and Mastercard, which dominate a strong majority of market outside China in the card space have revenue of ~$36 billion and $28 billion respectively. Hence, the following includes revenue of players such as banks too:
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