New payment service providers are sweeping the globe
James Mackreides says it's time for investors to get on board.
In 2010, according to JPMorgan's 2021 report "Payments are Eating the World," the quickest way to transfer money from New York to London on the same day was to take a flight from JFK to Heathrow and deliver it yourself. Less than ten years later, a new generation of payment companies made it possible for customers to complete the same transaction in any currency, at almost no cost, in a matter of seconds, and to any location in the world.
The extent to which the global payments industry has evolved over the last 15 years is beyond words. According to the McKinseys Global 2025 Payments Report, the payments industry is the most valuable component of the financial services sector, with £2.5 trillion in revenue and £2.5 trillion in value flows, supported by 3.6 trillion transactions annually worldwide. And those figures are increasing by the second.
Global payments revenues were still recovering from the pandemic when the JPMorgans report was released; between 2019 and 2021, they had dropped from £1.8 trillion to £1.7 trillion. But since then, volumes have increased to £2.5 trillion, mostly due to growth in Latin America and Europe, the Middle East, and Africa (EMEA), where volumes have increased at a double-digit annual rate.
In the past, the major banks and a few network operatorsmostly MasterCard and Visadominated the market. However, as the JPMorgans report foresaw five years ago, payment providers have begun to "eat the world" as customers demand more and new platforms compete for market share.
Payment providers are more than just your adaptable friend.
The entire global payments industry has completely changed over the last 20 years. Approximately two-thirds of all transactions in the US and the UK were made with cash back in the mid-2000s. Larger transactions required bank transfers or checks, which took several days to complete. The Faster Payments Service's launch in May 2008 was one of the UK's most significant innovations. Even on weekends and holidays, the service enables real-time payments of up to £1 million in less than 90 seconds. In the UK, the service has largely supplanted the outdated Bacs, Swift, and Chaps systems for smaller transactions (but not for larger transactions).
Bacs (owned by Pay, a separate nonprofit organization). UK) was first made available in the UK in the 1960s as a quicker and less expensive substitute for checks. Even though the system is out of date, it is still useful for routine direct debits because payments can take up to three days to process. Introduced in 1973, Swift (The Society for Worldwide Interbank Financial Telecommunication) continues to be the world standard for international payments, which normally arrive within an hour but can take up to five days. Currently, 75% of payments on the Swift network reach beneficiary banks within ten minutes. The network covers 11,000 banks and foreign institutions in 200 countries, with nearly 60 million transactions going through the system every day. The Faster Payments Service is more similar to the extensive worldwide networks run by companies like Visa and MasterCard, which are the contemporary consumer counterparts of Bacs and Swift networks.
MasterCard was established in 1966 as Interbank, a cooperative of regional banks created to rival BankAmericard, while Visa was established by Bank of America (BofA) in 1958 as the BankAmericard credit card program. Both networks were established with the straightforward objective of offering quicker payment options than cash or checks for minor transactions. The credit networks, which are frequently referred to as the rails that support the global payment system, are Visa and MasterCard. The Visa or MasterCard logo appears on nearly every plastic card issued (apart from in China) because banks issue cards that function on these networks. The name of the bank or card issuer is typically shown along with the logo, which indicates the payment network that handles payments rather than the card issuer. Bank-to-bank and international transactions are still handled by systems like Bacs, Swift, and local internal payment networks, even though Visa and MasterCard enable this payment network on cards.
The acquirer/processor function is the next crucial step in the procedure. Fiserv, Global Payments, and Worldpaythe latter of which is nearing the completion of a mergerare three of the major participants in this market. In the past, these have been the preferred service providers for the hardware (card readers) and the bank's back-end connection. They assist mid- to large-scale companies in managing relationships with all other stakeholders and completing crucial payment processes. Clover, a cloud-based Android point-of-sale (POS) and business management system, is Fiservs' customer-facing software. When a customer swipes or scans their card, this system reads it and transmits the information to the Visa network via Fiserv. Visa checks with the user's bank to see if the requested account has sufficient funds or credit. The Clover terminal acknowledges the sale and prints a receipt if the response is in the affirmative. The message is then sent back to Fiserv via the Visa network. The entire procedure takes milliseconds.
Because they have the scale, worldwide logistics, hardware, and software support that would be nearly impossible to build from the ground up, these companies have developed systems and economies of scale that can handle enormous numbers of transactions worldwide.
American Express was the first company to revolutionize payments.
The American Express Company.
However, American Express is the only truly innovative payment company. Since its establishment, American Express has operated as a fully integrated payment service. It was established in 1850 to address the increasing need for transportation throughout the US's quickly growing regions. In a world where cross-country, let alone international, payments were essentially unheard of, customers began to trust the company with managing their money and valuables because of its reputation and nationwide network.
In response to the demand, American Express (Amex) launched American Express Money Orders and Travelers Cheques in the late 1800s, which swiftly spread throughout the world as new currencies. Interestingly, traveler's checks merely updated an antiquated concept. They were created in the 1200s by the Knights Templar, who used coded letters of credit to create a safe way for pilgrims to deposit money in Europe and withdraw it in the Holy Land. When American Express introduced the American Express Card in 1958often referred to as the first real credit cardit oversaw yet another significant change in the payment landscape.
The fact that Amex is both a network and a credit providerthat is, a bank or a closed-loop provider that handles the entire customer relationshipis what makes it unique. Amex's balance sheet is several times larger than that of its competitors, Visa and MasterCard, because it records the assets and liabilities of its customers. With an annual fee of roughly 2.5 percent to 3.5 percent for card and network processing fees, as opposed to 1 percent to 3 percent for Visa and MasterCard transactions, it has also consistently targeted wealthier clients. Benefits like reward programs, travel insurance, and a worldwide concierge service come with that additional expense. The average yearly expenditure on American Express cards in the United States is 2.9 times that of cards on other networks, whereas the average annual expenditure on American Express cards issued outside of the United States is four times that of cards on those other networks abroad.
But when compared to Visa and MasterCard, Amex is very small. Since the end of 2019, 99 percent of establishments in the US that accept credit cards have accepted Amex. The penetration rate is much lower abroad. Although the company has increased the number of merchant locations that accept Amex by almost five times since 2017 to 160 million, there are still significant gaps, particularly with smaller, local retailers.
American Express is currently focusing on the next phase of expansion. In order to enable travelers and tourists to make cross-border purchases, the company partnered with Alipay, China's open platform for payments and digital services, early last year. Additionally, the organization was the first foreign payment network authorized to process Chinese yuan transactions in China's mainland. Last year, the business collaborated with Coinbase to introduce the Coinbase One Card on the American Express Network. This card enables users to pay their credit card bills in Bitcoin and other cryptocurrencies and offers unlimited cash back in Bitcoin of between 2 and 4 percent of purchases, depending on assets held on the Coinbase platform.
One of the best illustrations of the strength of the global payments sector is American Express. Over the course of the last 200 years, the group has revolutionized daily payments by removing barriers, expediting payments, and changing the relationship between credit and network providers and the final consumer by providing advantages and quality service. However, a new generation of companies is emerging and becoming more and more integrated into the global economy.
The new kids on the block are PayPal and Venmo.
On a smartphone, the Venmo logo is displayed alongside the Paypal logo.
In the world of global finance, invisible payments that are integrated into the software we use for work and shopping are replacing the days of swiping cards and giving out cash. Payment providers are following American Express's lead and changing their business models from increasingly commoditized payment services to value-added services. Payments have advanced past the starter and are now well into the main course, if they were beginning to "eat the world" five years ago.
PayPal was among the first businesses to enter the current, internet-first era. When the internet opened up a new market for small businesses and consumer-to-consumer payments, PayPal's internal payment networkwhich was founded in the late 1990sbecame the preferred platform for using the nascent auction site eBay. Early in the new millennium, the company was bought by the auction platform.
The front-of-house software of PayPal, which is integrated with the processor that manages the network and back-end tasks, is one of its benefits. Money transferred between PayPal wallets never has to go through an external network like American Express, MasterCard, or Visa. In order to assist companies in managing their transactions, accounting, and cash flow (through working capital loans), the company has added tools over time. Additionally, it has helped to simplify the customer experience; PayPal's "buy it now" option has become the industry standard for a quick and safe checkout.
Since splitting off from eBay in 2015, PayPal has quickly grown by acquiring iZettle (for physical store hardware), Xoom (for international transfers), Honey (for shopping discounts), and Venmo (via the Braintree acquisition). Venmo is sometimes used as a verb ("to Venmo") due to its immense popularity in the United States. Using a username or a QR code, users can use their personal wallet in the Venmo app to pay friends or small businesses. Similar to PayPal, money deposited on the platform stays on the Venmo ledger, with the business keeping a tiny portion of every transaction. Users can withdraw funds into their account using a Visa or MasterCard, or they can transfer funds from their bank. Transactions using Visa or MasterCard incur higher fees.
In actuality, PayPal was the pioneer of the next wave of online, integrated, global payment systems created to enable consumers and small enterprises to transfer money swiftly and affordably across borders. Additionally, it eliminated the need for small businesses to engage in negotiations with companies like Worldpay and Fiserv, which are simply too big to be interested in working with smaller companies.
BNPL schemes and digital wallets are becoming more popular.
The model that PayPal invented has been adopted by Stripe, Block (formerly sq\.), SumUp, and Adyen. Because of its ease of use, Stripe has established itself as one of the most valuable private companies in the world. A developer can set up a checkout page in minutes using its "seven lines of code" model without ever having to speak with a salesperson. Additionally, it emerged at a crucial juncture in the evolution of the internet. Shopify, Lyft, Airbnb, and other gig economy and entrepreneurial apps that split payments between the platform, buyers, and sellers are all powered by Stripe.
PayPal should have had an advantage in this situation, but Stripes' straightforward user interface allowed it to gain market share. Additionally, the team has created the software that powers intricate subscriptions for businesses like Netflix, OpenAI, and Slack. This software manages features like "prorated" upgrades, "failed card" retries, and free trials. Additionally, the company has expanded into the real world with the Stripe Payments terminal for small businesses, which fulfills the same function as a platform like Clover. Additionally, the terminal streamlines accounting, forecasting, and payments for small businesses by connecting to the Stripe dashboard and accounting software.
For small and medium-sized businesses, the Blocks system is better suited for in-person, in-store transactions than Stripe. Conversely, Adyen works best for large businesses that require unified omnichannel (online/in-store) payment processing and more control. With flat fees, integrated business accounts, user-friendly card readers with 4G/Wi-Fi, and plug-and-play setup, SumUp is specifically targeted at small businesses, mobile vendors, coffee shops, boutiques, and pop-up stores. Shopify, an all-in-one e-commerce platform that gives anyone the tools to start, run, and expand an online business, is another company that has entered the market. Larger retailers are starting to take notice of it.
Stripe and Block entered the market at the same time that contactless and wallet payments were undergoing yet another revolution. More than 60% of international e-commerce transactions now take place through digital wallets like Apple Pay, Google Pay, and PayPal. In the US, Apple Pay currently accounts for about 49% of mobile wallet users. Digital wallets are software programs that replace physical cards and cash by storing payment details and facilitating safe transactions via mobile devices. Encryption and biometrics, like fingerprint and face ID scans, improve security. Convenience is the main selling point for both customers and companies. Bulky card terminals are not necessary for digital wallets. Companies only need printed QR codes or compatible devices. Particularly for SMEs, which make up at least 99.9% of all private-sector enterprises in the UK, digital wallets have accelerated the growth of digital payments. Buy-now-pay-later (BNPL) companies like Affirm and Klarna have only fueled the flames.
With more flexibility, BNPL providers are more like traditional bank credit card companies. With well-defined repayment terms, users can manage all payments through a single app, open accounts in minutes, and make payments using digital wallets. Offering BNPL as a payment option increases customer spending and transactions, according to research. Industry volumes have increased to £217 billion, a tenfold increase since 2019.
The top stocks of payment providers to purchase right now.
Customers and businesses now have more options than ever thanks to technology, which has created a whole new world of payment options. However, power in this enormous market is concentrated in the hands of a small number of key players, who appear to be in the best position to keep expanding as the number of payments that are made globally every second keeps rising.
The two most significant payment networks in the world, MasterCard (NYSE: MA) and Visa (NYSE: V), are the most desirable purchases for investors. In 2025, Visa saw a 10% increase in transaction volumes and generated £20 billion in net income on just £100 billion in assets, demonstrating the profitability of these companies. With £53 billion in assets, MasterCard reported operating income of £14 billion. The net margin for both businesses was approximately 50%.
Due to their continued growth, Block (NYSE: XYZ) and Klarna (NYSE: KLAR) also appear appealing. According to UBS, Klarnas has a £10 trillion total addressable market. The current payment volume through the Klarna platform would increase tenfold if the company could secure ten percent of that. In contrast, Block is just getting started. In the third quarter, the company's sq\. platform saw a 26% increase in transactions outside of the US.
In the UK, Paypoint (LSE: PAY) might be worth a look. Although Paypoint is small in comparison to companies like Block and Stripe, it has a strong hold on the UK convenience store market thanks to its technology, which helps consumers pay bills like council tax and small businesses handle payments. It has a 4.1 percent dividend yield and is very profitable.
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