Payments: Market Sizing

To give you a sense of the market opportunity in electronic payments today, online transactions alone result in $63 billion in annual revenue for service providers (e.g. PayPal 1Q12 Revenue = $1.3 billion, 32% CAGR YoY). Revenue generated from offline electronic payments (e.g. credit card swiped at point-of-sale) amounted to 10x as much.

Just to clarify, this does not represent the amount of transaction throughput that is processed - that figure would be roughly 50x the revenue generated.

In terms of the opportunity for growth, 80% of global transactions today are still performed in cash (declining at 4% p.a.).

The key secular trends driving the electronification of payments (not profit, but rather the underlying transaction throughput) are increasing penetration (more consumers gaining access to electronic forms of payment), increasing acceptance (more merchants accepting electronic forms of payment) and decreasing average ticket size (electronic payments being used to purchase less expensive items).