Challenger card processing models are significantly outperforming incumbents, according to a new report by BPC, the global payment solutions provider, produced in partnership with Arkwright Consulting.
According to the BPC report, ‘Next-Generation Card Processing‘, new card processors, driven by technological innovation and the growing influence of non-bank entities like retailers and gig economy platforms, are gaining significant momentum.
A sample of 10 challenger processors showed growth rates four times higher than the overall card processing market, driven by an API-first, cloud-native approach to payments infrastructure. Between 2021 and 2024, challengers secured 127 new client contracts, compared to just 26 secured by incumbents – highlighting a significant disparity between the two.
This growth is also reflected in processing volumes, with challengers achieving a compound annual growth rate (CAGR) of 35 per cent, while market share expanded from 2.6 per cent in 2021 to four per cent by 2024. These results emphasise the growing importance of non-bank entities seeking card processing services, including retailers, gig platforms, and fintechs that need agility and scalability not offered by incumbent processors.
The data comes from BPC’s new report which aims to detail the evolution of the card processing market, the ecosystem involved in facilitating and managing card-based transactions.
The report highlights that new entrants to the market are embracing cloud-native technologies that provide seamless integration, faster updates, and enhanced security measures. This enables the challengers to meet the needs of a diverse range of customers, from scaling fintechs to established financial institutions.
BPC also adds that challengers are leveraging innovative technologies to serve non-traditional banking customers, such as retailers, gig ticketing platforms, and fintech companies, which are seeking processing services that are adaptable, quick to market and customisable in an ever-changing payments landscape.
Leaving legacy bank-centred models behind
As challenger processors continue to dominate new client acquisitions and increase their market share, they are leaving legacy bank-centred models far behind. Challenger processors’ ability to provide highly customisable payment products is enabling innovation in financial services, empowering banks, fintechs and other non-bank entities to quickly launch new products to customers.
Next-Generation Card Processing highlights that the expansion of the market share for challenger processors is likely to continue, combining open APIs, regulatory enablement and advanced technical features to deliver a compelling proposition to banks and non-bank entities.
Peter Theunis, SVP of sales, Europe at BPC, commented on the report looking at processors: “At BPC, we are always looking forward, aiming to help financial institutions, fintechs, and SMEs to drive innovation through our next-generation platform. We recognise the importance of shifting towards cloud-native payments infrastructures and API-first integrations, enabling banks and non-bank entities to quickly launch new products across a wide range.
“By focusing on providing a future-proven platform and services, we aim to foster innovation and deliverance of exceptional digital experiences to our customers. The rapid growth of challenger processors demonstrates that banks and fintechs value flexibility, scalability and technical innovation above all else when selecting their card processing partner.”
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