Credit Card Processing

The US credit card processing industry includes fewer than 500 companies with combined annual revenue under $10 billion. Major companies include First Data Corporation, Total System Services, Global Payments, and Bank of America's BA Merchant Services. The industry is highly concentrated: the top four companies account for 40 percent of industry revenue.

COMPETITIVE LANDSCAPE

Demand is driven by consumer spending. The profitability of individual companies depends on efficient operations, as services are sold largely based on cost. Large companies have big economies of scale in processing and can provide more services; small companies can compete by specializing in industries and providing custom services. The business is highly automated and capital-intensive: average annual revenue per employee is about $225,000.

PRODUCTS, OPERATIONS & TECHNOLOGY

Processors provide transaction services to banks that issue credit cards and to merchants that accept credit card payments. Merchant products include authorizing, capturing, and settling merchants’ credit and debit card transactions, and handling chargebacks. Chargebacks occur when a consumer disputes a charge and charges it back to the merchant. Processors also sell or lease point-of-sale (POS) terminals. Card issuer products include transaction authorization and posting, statement generation and printing, and card embossing.

Large processors such as First Data Corporation and Total System Services provide services to both sides of the transaction. Small processors typically offer either merchant or card issuing services, and may specialize in particular vertical markets such as credit unions or retail cards. For every ...