Study Projects PF Explosion Next Year, To $58.4 Billion Transaction Volume

The number of payment facilitators—and the dollars they are expected to process—will both soar by the end of next year, from 450 PFs and $27 billion in transaction processing last year to 973 PFs and $58.4 billion in transaction processing next year, according to a PF market study finalized this week from Double Diamond Group. That transaction processing number is actually even more powerful as those figures excluded any transactions processed by industry powerhouses PayPal, Stripe and Square.

The study started by examining the SaaS B2B space—a roughly $33 billion market with 22,000 companies—and found that about 13,000 of those companies are positioned to benefit from the PF model. The study’s results were announced at the PF Day at ETA TRANSACT 2016.

“What we were stunned by was the sheer size of the opportunity and that it threatens to displace the entire payments market for small businesses,” said Double Diamond President Todd Ablowitz. “The PF model and what it does to enable software companies promises is what is promising to deliver that disruption.”

Rick Oglesby, a senior Double Diamond analyst who worked on the study, detailed the methodology used for the study.

“Our analysis is based upon our database is of more than 20,000 business services ISVs. We’ve built comprehensive profiles of the companies in the database, divided it into segments, software categories, and target business verticals. We’ve also prioritized the categories in terms of potential to process payments, and developed a method for prioritizing the individual companies based on their potential as payments partners,” Oglesby said. “We used the data in the database, supplemented it with outside data to describe an industry view in terms of growth and potential. Finally, we validated our results and assumptions with key industry stakeholders through interviews.”

The study found that today’s PF revenue space is highly concentrated with just a few key players. PayPal, for example, handles 75 percent of all PF dollars today, with Square and Stripe controlling another 18 percent combined. That means those three companies control a combined 93 percent of PF transactions.

But, Oglesby said, they are projecting that control to loosen up by next year. The study is projecting that PayPal’s share of the dollars will fall from that 75 percent to 65 percent, with Square and Stripe boosting their combined 18 percent share to a share of about 25 percent. Perhaps most critically, the study finds that “others” will grow from 7 percent to 9 percent by next year.

This results in a 70 percent average annual growth rate in that “others” category from 2013-2017.

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