Credit card industry in 2023: market analysis and trends in payment processing (2024)

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Credit card industry in 2023: market analysis and trends in payment processing (1)

Credit card industry in 2023: market analysis and trends in payment processing (2)

Insider Intelligence|January 24, 2023

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  • Regulatory scrutiny and product innovation will broaden consumer payment choice, intensifying competition among providers.
  • To preserve their standing among consumers and merchants, incumbents must face down threats to core revenue drivers and monetize new ones. Leveraging media will be a key strategy to win over customers.
  • 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, as credit card usage accounted for over a third (36.3%) of in-store retail transactions last year.

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: They 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: They 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 although their prominence fell at the start of the pandemic, tides turned by late 2021—JPMorgan Chase posted 19.8% growth across the two years ending in Q3 2021, while Wells Fargo’s credit card point-of-sale volume rose 29.9% over the same period.

Although debit stole favor from credit as consumers looked to limit financial risk early in the pandemic, borrowing is on the rise again. Gains should continue in 2022, leading issuers and fintechs to fine-tune incentives and launch new products.

As debit, credit, and prepaid cards go head-to-head-to-head, in-store credit spending growth will stabilize. This will pull credit’s share of in-store retail transaction value to over a third (36.3%). Consumers’ lasting embrace of ecommerce will push online credit card usage past $500 billion for the first time. However, this payment method’s share of digital retail transactions and card transactions will decrease slightly, partly due to consumers’ rising preference for debit.

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Looking ahead, a rise in nonessential spending will lead to a heated competitive landscape among issuers, necessitating a trend toward greater cardholder rewards.

With pandemic restrictions easing, customers are resuming more recreational purchases—especially in travel and entertainment (T&E), which is critical for credit card volume. Amex’s T&E billed business was up 124% annually in Q3 2021, though it remained below pre-pandemic levels.

However, despite increased spending, credit card behavior is changing. Customers have been paying down debt at record levels—balances were $123 billion lower in Q3 2021 versus the end of 2019, per the New York Fed. But as pandemic relief efforts end, consumer behavior is inching closer to pre-pandemic trends, which might shift issuers’ strategies around fees and consumer engagement.

Given the uptick in credit usage, issuers will be pressured into making their products more compelling. Over a quarter of US consumers applied for a new credit card in the 12 months prior to October 2021—up from 15.7% in October 2020 and on par with pre-pandemic levels, per New York Fed data. Issuers will leverage this trend to grow spending and attract customers in the coming year, and they’ll focus on two areas: expanding perks and adding new cards.

Issuers’ greater agility around rewards offerings—a determining factor in card choice—will boost their cards’ appeal and drive repeat usage. After pivoting rewards options to meet pandemic-driven spending changes, issuers returned to travel perks, added new lifestyle benefits, and moved toward ecommerce in 2021—trends that will continue this year.

But benefits beyond simple rewards will dominate card program innovation. Providers will broaden their focus and sharpen benefits in new areas, including payment flexibility, exclusive member experiences, and access to financial management tools.

2020’s unprecedented wave of new cards delivering feature-based value propositions will continue. Some cards, like Citi Custom Cash, will tailor rewards programs to consumers’ top spending categories. Others will offer top-dollar perks for lower-than-usual fees. This will intensify competition and could trigger another rewards rat race. It may also make it harder for all but the largest players to make a profit off cards that provide true value to consumers.

Issuers will also debut cards and services geared toward users new to credit. Fifty-three million US adults lack traditional credit scores, and more have subprime scores that exclude them from the ecosystem. Though this group comes with risk, issuers—many of which joined a credit access initiative in 2021—may extend their push to reach these customers. They’ll use secured cards, like U.S. Bank’s new suite, or other credit-building tools, like Wells Fargo Reflect, to turn risky borrowers into reliable clients. They may also imitate Amex’s deal with Nova Credit by forging partnerships to capture invisible but likely creditworthy segments, such as immigrants.

Major card processing companies

TSYS, or Total System Services, is one of the biggest payment processors 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 2022.

Credit card industry in 2023: market analysis and trends in payment processing (3)

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Categories: Financial Services

Editor's Picks

As an enthusiast deeply embedded in the Payments & Commerce industry, let me demonstrate my first-hand expertise on the topics discussed in the provided article. My knowledge extends across various aspects of the payments ecosystem, including credit card processing, market trends, and the competitive landscape among issuers.

The article highlights the evolving dynamics in the Payments & Commerce industry, emphasizing the role of credit card processing companies as key drivers in the payments ecosystem. Here's a breakdown of the concepts used in the article:

  1. Regulatory Scrutiny and Product Innovation:

    • The article mentions that regulatory scrutiny and product innovation are shaping the industry. This implies that regulatory changes and the introduction of new payment products are significant factors influencing market dynamics.
  2. Credit Card Processing Companies:

    • The focus on credit card processing companies underscores their pivotal role in facilitating transactions. Two types are highlighted:
      • Front-end processors: Responsible for routing transactions and gaining authorization.
      • Back-end processors: Accept settlements from front-end processors and transfer money to the merchants' issuing bank.
  3. Credit Card Market Statistics:

    • The statistics provided indicate the resilience of credit cards in the U.S. payments ecosystem. Despite initial setbacks during the pandemic, credit card usage has rebounded, with notable growth in credit card point-of-sale volume for major players like JPMorgan Chase and Wells Fargo.
  4. Debit vs. Credit vs. Prepaid Cards:

    • The article discusses the competition among debit, credit, and prepaid cards. It anticipates stabilization in in-store credit spending growth and highlights the increasing use of online credit cards, exceeding $500 billion for the first time.
  5. Consumer Behavior and Issuer Strategies:

    • Changes in consumer behavior, including increased spending on nonessential items, lead to a competitive landscape among issuers. The article predicts a trend towards greater cardholder rewards and emphasizes the need for issuers to make their products more compelling.
  6. Innovation in Card Programs:

    • Issuers are expected to focus on expanding perks and adding new cards, with a shift towards feature-based value propositions. This includes rewards beyond traditional perks, such as payment flexibility, exclusive member experiences, and access to financial management tools.
  7. New Cards for Users New to Credit:

    • The article discusses the introduction of cards and services targeting individuals new to credit. Issuers may leverage secured cards and credit-building tools to reach those without traditional credit scores.
  8. Major Card Processing Companies:

    • Notable players in the credit card processing industry are introduced, including TSYS, Fiserv, and Elavon. These companies play a crucial role in providing services to merchants and financial institutions, contributing to the overall payments landscape.

In conclusion, the article underscores the dynamic nature of the Payments & Commerce industry, where regulatory changes, technological innovations, and consumer behavior shifts drive competition and necessitate strategic adaptations by key players.

Credit card industry in 2023: market analysis and trends in payment processing (2024)

FAQs

What is the credit card market in 2023? ›

As debit, credit, and prepaid cards go head-to-head-to-head, in-store credit spending growth will stabilize. This will pull credit's share of in-store retail transaction value to over a third (36.3%). Consumers' lasting embrace of ecommerce will push online credit card usage past $500 billion for the first time.

How do credit card companies make the most profit from _______________ responses? ›

Credit card companies generate most of their income through interest charges, cardholder fees and transaction fees paid by businesses that accept credit cards.

What are the key success factors in the credit card industry? ›

There are various key success factors such as Service delivery (customer service), technology, product range and design, convenience and flexibility, Cost of services, better trained personnel, Leadership , pricing, location, distribution channels, volume of sales, image and reputation, marketing effectiveness, ...

What is the outlook for the credit card market? ›

Main Credit Card Industry Trends. Interest Rates: The average interest rate for new credit card offers is 22.89%, as of Q1 2024, up from 22.05% in Q1 2023. The average interest rate for existing accounts being assessed finance charges is 22.63%, as of Q1 2024, up from 20.92% in Q1 2023.

What are the new rules for credit cards in 2023? ›

These rules include requiring OTP for card activation after 30 days of inactivity, obtaining cardholders' consent for credit limit adjustments, simplifying interest calculations, excluding unpaid charges and taxes from interest calculations, and enforcing credit card tokenization for secure transactions online and in- ...

Is the credit card market growing? ›

According to the latest research, the global Credit Card market size was valued at USD 106337.33 million in 2022 and is expected to expand at a CAGR of 2.84% during the forecast period, reaching USD 125772.91 million by 2028.

Who is the biggest money maker for credit card companies? ›

Interest. The majority of revenue for mass-market credit card issuers comes from interest payments, according to the Consumer Financial Protection Bureau.

What strategies do credit card companies use? ›

Introductory low APR rates– One of the most common credit card tricks is to lure new customers in with low APR rates that eventually increase significantly after you've created a purchase history and habit of use. Low interest rates often carry with them hidden fees and high penalties for late payments.

How do credit card companies make money on 0%? ›

Credit card companies make money not only from interest but also from merchant swipe fees, called interchange when purchases are made. Consumers who opt for a 0% transfer should understand that the interest-free period is only for a limited time.

What are the three C's of credit cards? ›

The factors that determine your credit score are called The Three C's of Credit – Character, Capital and Capacity.

What is the biggest factor affecting your credit card? ›

Payment History: 35%

Your payment history carries the most weight in factors that affect your credit score, because it reveals whether you have a history of repaying funds that are loaned to you.

What are the five C's of credit scoring factors? ›

Called the five Cs of credit, they include capacity, capital, conditions, character, and collateral. There is no regulatory standard that requires the use of the five Cs of credit, but the majority of lenders review most of this information prior to allowing a borrower to take on debt.

What is Mastercard market trends? ›

Market Trends provides a simple, curated view of reliable insights – all in one platform. Explore industry insights, competitive intelligence and technology trends from around the globe.

Who dominates the credit card market? ›

Networks by Purchase Volume

In terms of purchasing volume, Visa is the clear leader with more than $2.09 trillion through the first 3 quarters of 2022 (up from $2 trillion for the entirety of 2021). Mastercard is the second-closest competitor with $967 billion.

Which bank is the market leader in credit cards? ›

HDFC Bank leads credit card market

India's largest private bank, HDFC Bank continued to lead the race in credit cards market with a 20 per cent share. SBI Cards, ICICI Bank and Axis Bank followed the list with 19 per cent, 17 per cent and 14 per cent market share respectively in January, 2024.

Are credit card rates going up in 2023? ›

Over the last 10 years, average APR on credit cards assessed interest have almost doubled from 12.9 percent in late 2013 to 22.8 percent in 2023 — the highest level recorded since the Federal Reserve began collecting this data in 1994.

What are the credit union trends for 2023? ›

Membership declined 2.7 percent, while net worth increased 3.8 percent. The number of federally insured credit unions with at least $100 million but less than $500 million in assets declined to 1,066 in the first quarter of 2023 from 1,084 in the first quarter of 2022.

How large is the credit card market? ›

What is the global market size of Credit Card Market? Global Credit Card Market size was valued at USD 489.4 billion in 2021 and is poised to grow from USD 521.8 billion in 2022 to USD 961.2 billion by 2030, growing at a CAGR of 7.78% in the forecast period (2023-2030).

What is the average APR for a credit card in 2023? ›

That's up from the fourth quarter of 2023, when the average was 21.47%, and is the highest APR since the Fed began tracking in 1994. Meanwhile, the average for accounts accruing interest fell to 22.63% — a slight decrease from 22.75% in the fourth quarter.

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