The global online payment gateway ecosystem consists of various global, regional, and local service providers that are evolving to enhance their market position. Moreover, intense competition and rapid advances in technology to cope with the security concerns are key factors that aid the market growth. The service providers compete based on cost, efficiency, security, and reliability of the services to sustain in the market. It is important for the service providers to provide cost-efficient and secure online payment gateway, to maintain their market position and gain a competitive advantage.
Vendors in the online payment gateway market are focusing towards improving their services and expanding geographically into the under-developed and developing economies. PayPal Holdings, Inc., Visa, Inc., First Data Corp., Naspers Ltd., and Global Payments, Inc. are the major companies in the market, which compete in terms of customization, reliability, price, and technology. Their primary focus is on the development of improved online payment gateways for faster and secure transaction processes. Although international players are dominating the market, regional and foreign players such as PagBrasil, and CASHU with small market shares also have a prominent presence here. The major players may strengthen their presence worldwide through acquisition of local and regional players for expanding their services in those regions during the forecast period. The improvement of the global economic scenario combined with technological advancement in the emerging economies like Brazil, Argentina, and other under-developed countries, is likely to fuel the market growth, thereby making it an ideal time to expand online payment gateway market geographically and increase the global market share.
PayPal Holdings, Inc. is one of the prominent players in the online payment gateway market, holding 9.57% share. PayPal provides businesses with a platform enabling various methods of payment for transactions. This has enabled PayPal to gain a competitive advantage in the online payment market in terms of service and user accessibility, and hence, is leading the online payment gateway market. Moreover, PayPal focuses on expanding its market reach by partnering with local banks and attract customers to use their services. PayPal has also started offering customers with attractive offers and cashback using advertisements on different media platforms.
Visa, Inc. held a share of 8.66% in 2017. Visa is completely into commerce and has a huge network of consumers, merchants, financial institutions, businesses, strategic partners, and government entities. To provide its customers with an efficient online payment platform, the company has acquired Authorize.Net, a payment gateway that allows e-commerce providers to accept payments through credit cards and electronic checks directly on their site.
First Data Corp. held a share of 7.44% in 2017. First Data’s strategic acquisitions has enabled the expansion of its market reach to the countries of Asia-Pacific. Moreover, partnerships with e-commerce companies have provided First Data with a network full of retailers and financial institutions, enabling it to penetrate in the online payment gateway market.
Naspers Ltd. held a share of 5.5% in 2017. Naspers acquired PayU to provide its users with a secure, anti-fraud payment platform. Recently, PayU launched a new platform, PayUnow, for small and medium businesses (SMBs). This new platform is expected to enable offline businesses to create an online identity with their own business page, where they can accept digital payments directly into their bank accounts.
Global Payments, Inc. held a share of 5.09% in 2017, providing its services across a variety of channels to merchants and partners in countries throughout North America, Europe, the Asia-Pacific, and South America. Acquisition of Realex Payments, one of Europe's largest and fastest growing payment gateways, has enabled Global Payments to provide omnichannel solutions that combine gateway services, payment service provisioning and merchant acquiring across Europe.
The service providers with better technical and financial resources focus on innovation to develop highly secure payment platforms that enable users with easy-to-understand user interface to stay competitive in the market. Therefore, service providers must innovate and make use of new technologies to stay abreast of the emerging technologies that could affect the continuing competitiveness of their services in the market.
Michael Porter’s five forces model gives a framework that models the global online payment gateway market, which is influenced by five forces. The strategic business managers, trying to create an edge over competitive firms in the global online payment gateway market can utilize this model to better comprehend the industry connection in which the firm operates. The components of each of the forces and the degree or impact of each component in the context of the global online payment gateway market have been broken down and analyzed.
Threat of New Entrants
Owing to high technical complexities such as unusual card activities and fraud chargebacks that arise during the processing of payments have desisted the entry of new players in the online payment gateway market. Hence, the new entrants present a moderate threat to the major stakeholders of the online payment gateway market.
Bargaining Power of Suppliers
In online payment gateway market, the providers of payment gateways are businesses offering end-to-end solutions thereby, creating a monopoly in the online payment gateway market. Additionally, the market is regulated by the authorities, which assist the companies in increasing their market presence and provide them higher leverage.
Bargaining Power of Buyers
The buyers usually do not have control over the cost of solutions and services. Although buyers drive the market, they are dependent on the already established firms. However, the buyers dictate the specification and type of solution required, which makes their bargaining power high.
Threat of Substitutes
Since there exist several opportunities in the securing user data and providing them with user-friendly interfaces for online payments, it is very likely that they would be substituted by any other fast emerging technology. Hence, the threat of substitutes is moderate.
Intensity of Rivalry
There is an intense competition among the existing players in the online payment gateway market, with service providers investing heavily and using extensive research and development to make advancement in payment processing services, resulting the rivalry in the market being moderate-high.
