The North American market for third party processing (TPP) services continues to perform well despite the global recession, with 2008 sales at $62 billion based on exceptionally strong growth during the past five years, and with 9%-10% average annual gains forecast through 2013. Seeking to offset the impact of lower employment figures in the payroll space and reductions in consumer use of credit in the payment space, third party processors continue to bank on the ongoing move from paper to electronic processing while waiting for government stimulus initiatives to kick in, especially in the healthcare arena. During the down economy major TPPs are also promoting new technologies to give their businesses a boost, working to increase revenues from existing clients, and tapping into related growth areas such as human resources outsourcing in the payroll space and mobile transactions in the payment space. At the same time, the market continues to see competitive upheaval, including Heartland’s 2008 purchase of the TPP business of Alliance Data Systems, and Fidelity National’s 2009 acquisition of Metavante in the payment market; and Emdeon’s 2008 emergence as an independent company and McKesson’s purchases of Per-Se (2007) and RelayHealth (2008) in the healthcare space.
This fully updated report critically and quantitatively assesses the market for data and payment-related transaction outsourcing. The report focuses particularly on three key segments—electronic payment processing, payroll processing, and healthcare transaction processing—with separate chapters tracing the service trends, market trends and competitive strategies driving market growth and competition within each of these industry segments. The report also examines third party processing as it relates to the Internet, as well as the development and expansion of Internet processing applications. In addition, it identifies and assesses the economic drivers and regulatory changes shaping each segment of the industry, as well as the trend whereby major competitors are adopting technologies and leveraging their massive infrastructures to expand beyond their traditional core businesses. Helping to illustrate these trends are competitive profiles of leading market participants including payroll processors Automatic Data Processing, Inc. (ADP), Paychex and Ceridian; payment processors First Data Corp., Fiserv and TSYS; and healthcare transaction processors Emdeon Corp., SSI Group and Availity.
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Market Insights: A Selection From The Report
Mergers and acquisitions have reduced the number of large third party processors and there may not be too much more room for further consolidation. Meanwhile, big bank mergers have shrunk the pool of card-issuing clients while pushing more payment processing functions in house. Industry watchers believe that many banks may eventually tire of the headaches and expense of payment processing, but in the short term at least, TPPs face a shrinking market for their services along with a U.S. population that is buying fewer goods.
Accordingly, Packaged Facts believes large TPPs will continue looking for unexplored opportunities in international markets while waiting out the economic downturn at home. First Data and Global Payments already have an international focus, while TSYS has long made clear its international ambitions. Furthermore, with initiatives like Fiserv’s Fiserv 2.0 and TSYS’s n>gen, TPPs will continue to tout their technological abilities and to develop new services. At the other end of the spectrum, poor economic conditions are also squeezing ISOs (Independent Service Organizations), which are fighting over a smaller pool of business as their customers consolidate or close up shop.
At the same time, the third party processing industry believes the future of payments resides in the cell phone. A Fiserv-sponsored survey found that the number of respondents who would be interested in using mobile banking jumped from 49% in 2006 to 75% in 2008. The young adult demographic responded even more emphatically, at 83% (American Banker, September 9, 2008). The rise of so-called smart phones like the iPhone and the Blackberry Storm, which have larger screens and better Internet access than typical cell phones, is expected to drive the category. Accordingly, the big TPPs have been developing their own cell phone initiatives by partnering with lesser-known, often international tech firms. Fiserv Mobile Pay is using technology from M-Com of New Zealand, Metavante has entered into a venture with Monitise of the United Kingdom, and Fidelity National’s partner is mFoundry, Inc. So far these services tend to be focusing on providing Internet banking—tasks like transferring funds and checking balances—through a mobile phone’s Internet browser.In the News
Third Party Processors Parlay Technology into Market Growth
New York, August 13, 2009 — Despite a sluggish economy that has slashed jobs and dampened credit card usage, the third party processing (TPP) market grew by more than 11% in 2008, to reach $61.9 billion, and is poised to jump 57% through 2013, according to The North American Market for Third Party Payroll, Payment and Health Care Transaction Processing, 3rd Edition by leading market research publisher Packaged Facts.
Third party processors are outside organizations that process and manage transactions between sellers and buyers. Corporate functions contracted out to these third parties are usually “back office” or non-revenue generating activities: payroll, human resources, customer service, accounting, payables and receivables, record keeping and transaction processing.
Seeking to offset the impact of lower employment figures in the payroll space and reductions in consumer use of credit in the payment space, third party processors continue to bank on the ongoing move from paper to electronic processing. Major TPPs are also promoting new technologies to give their businesses a boost, working to increase revenues from existing clients, and tapping into related growth areas such as human resources outsourcing and mobile transactions.
Healthcare TPPs are counting on a boost from Uncle Sam to maintain growth. “The federal government’s massive stimulus package allocates a portion to healthcare IT,” notes Tatjana Meerman, publisher of Packaged Facts. “Additionally, the drive for healthcare reform is helping to train public attention on using technology to streamline healthcare for patients and providers, a shift that won’t come overnight but is likely.”
The North American Market for Third Party Payroll, Payment and Health Care Transaction Processing, 3rd Edition assesses the market for data and payment-related transaction outsourcing. The report focuses on three key segments—electronic payment processing, payroll processing, and healthcare transaction processing—with separate chapters tracing the service trends, market trends and competitive strategies driving market growth and competition within each of these industry segments.
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