What Does the Credit Card Sector Look Like?

CIO Review Europe | Thursday, October 21, 2021

Soon the credit card industry will see two distinct trends emerge: rewards and mobile payment technology.

FREMONT, CA: Credit card processing firms will remain a prominent player in the payments ecosystem. Credit card payments are predicted to remain the most popular in-store payment method by volume, with annual volume expected to reach 1.82 trillion dollars by 2024.

Overview of the Credit Card Processing Industry

Payment data is transferred via a complicated web of stakeholders—including card networks, issuers, and gateways—every time a consumer taps or swipes their credit card to help complete the transaction. Credit card processors are in charge of transferring this information securely and adequately.

Credit card processors are divided into two categories:

Front-end processors: Verify that clients have enough money to complete a transaction by forwarding transactions from merchants to the cardholder's bank for authorization.

Back-End Processors: Accept settlements from front-end processors and transfer the funds to the merchants' issuing bank.

Credit Card Market Stats: Size and Growth

Credit cards are a mainstay of the U.S. payments network, and their importance has only grown in recent years. In 2019, credit cards accounted for 23.6 percent of total transactions for US consumers, up slightly from 2018. According to one report, this utilization translated into volume, with the four largest networks reaching approximately four trillion dollars in volume in 2019, up 8.7 percent from the previous year. Also encouraging usage was the continuous rewards race, which sweetened the deal for existing credit users and new applicants, as well as new products that might reach customers who were previously resistant to credit, along with looser lending limits.

Trends in the Credit Card Industry

Looking ahead, the credit card industry will see two distinct trends emerge: rewards and mobile payment technology. Seventy-five percent of people have a rewards program linked to their favorite credit card. According to a survey, three of the top four variables regarded as the most significant in choosing a primary card were related to incentives. Notably, all three top attributes were tied to rewards among millennial responders.

In the upcoming years, one might expect the following reward trends:

- Flexible remuneration (the ability of consumers to choose what kinds of rewards they receive).

- Bonus points if one shops locally.

- Bonuses for e-commerce purchases.

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