KEY POINTS:

  • Digital payments volume is blossoming worldwide, enabling firms to branch into new services. Connected devices are becoming the payments tools of choice among consumers and merchants alike, seeding digital payments volume growth. Increasingly, firms that enable digital payments are deepening their relationships into more use cases on both sides of the counter.
  • As payments companies break into new services like lending, omnichannel payments, or POS financing, they’re tapping into a wellspring of revenue. For example, Stripe specialized in online or mobile payments processing but has expanded to offer an in-store terminal and is reportedly testing merchant financing. Across the industry, incumbent and upstart firms alike are rapidly building, buying, and partnering to grow new revenue generators.  
  • The global interchange squeeze is poised to accelerate the rush to value-added services. Payments firms have been on the losing end of regulatory and legal challenges to payments fees in the US, Canada, and other countries. With interchange changes slashing the revenue of payments firms by the billions, winners in the new payments value chain will depend on cost efficiencies and revenue diversification.
  • To understand the shakeup in payments, it’s necessary to first grasp the traditional payments value chain. The channels and front-end methods that customers use to make payments are evolving, but [...]