Payments Revenue Estimates (2016)
Estimated payments industry revenues were more than $16 billion in 2016. This puts the industry’s near-one-per cent contribution to the gross domestic product (GDP) slightly above crop production and arts and entertainment and just below the truck transportation and food services sectors.
We have estimated revenues for the major lines of business within the transaction portion of the payments industry, namely the Connection and Ledger layers. The largest revenue generators in payments are in the Ledger layer where account-based payment products reside:
The credit card business ($5.29 billion est. 2016 revenues) and retail account payments ($6.38 billion) are both dominated by major financial institutions;
Prepaid cards ($872 million including open and closed card revenues) and loyalty coalitions ($1.14 billion) complete the picture of Ledger Layer;
The players in the Connection Layer - Acquirers, processors and independent sales organizations (ISOs) ($1.94 billion) and the major payment networks ($789 million) - make up the remainder of the industry.
The Ledger Layer
To estimate gross revenues for retail payments (deposit accounts), Payments Canada research de-constructed personal and business package plans to account for the portion of package plan revenues where value is derived specifically from the payment. Similarly, analysis of credit card revenues focused on transaction-based revenues.
Open Loop prepaid card revenues are generated from reloadable (general purpose, payroll, travel cards) and single use (gift, incentive, rebate) prepaid accounts, and accrue to prepaid card issuers and program managers. Revenues are estimated $346 million for 2016.
Closed Loop prepaid card volumes include gift cards in a wide range of retail segments including movies, on-line purchases, coffee, electronics and books. This market represents $15.9 billion in value or approximately 2.7 per cent of Canadian retail sales and generates an estimated $525 million in revenue annually.
Loyalty points are increasingly being used as a currency, with cash-back programs the most direct example. Revenues are estimated at $1.14 billion annually, net of rewards paid out to consumers.
The Network Connection Layer
The Network Connection Layer, which enables acceptance of payment products includes acquirers, processors, ISOs and a mix of gateways, sub-processors and value-added resellers.
Core revenues reflect transaction processing fees, terminal rental and account and other fees such as gift/loyalty card programs, custom development and gateway operation and are estimated to generate over $1.5 billion in annual revenues.
ISOs and others have captured around 13 percent of Canadian market with estimated revenues of $376 million.
Canadian Payment Networks account for just under $790 million in gross revenue, net of incentives, based on transaction, foreign exchange and other account activities.