BPC, a global leader in payment solutions, has released a comprehensive report in collaboration with Arkwright Consulting, detailing the evolution of the card processing market, the ecosystem involved in facilitating and managing card-based transactions, such as credit, debit, and prepaid card payments

“Next-Generation Card Processing” highlights the trends reshaping the card processing industry and the rapid rise of challenger processors. The report provides an analysis of past and present market trends, emerging technologies driving growth in the industry, and the growing market share of challenger processors.

Challenger processors outperforming incumbents

According to the report, new card processing models, 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, thanks to 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.

This remarkable growth is also reflected in processing volumes, with challengers achieving a compound annual growth rate (CAGR) of 35%, while market share expanded from 2.6% in 2021 to 4.0% 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.

Technological innovation is a key driver

A primary driver of growth for challenger processors is their ability to offer highly scalable, flexible, and technologically advanced platforms. 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.

Additionally, it is highlighted 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.

Shifting market dynamics in card processing

There has been a significant shift in the card processing industry, transitioning away from legacy bank-centered models to cloud-native infrastructure that is flexible, scalable and efficient. As challenger processors continue to dominate new client acquisitions and increase their market share, they are reshaping the card processing industry. Their ability to provide seamless integrations and highly customizable payments products is enabling innovation in financial services, empowering banks, fintechs and other non-bank entities to quickly launch new products to customers.

The card processing industry is at the forefront of the growing payments landscape. Those that invest in innovative technologies, customer-centric services and modernised infrastructure are best positioned to make their mark and establish themselves as a major player. 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.

Commenting on the report, BPC’s SVP Sales Europe Peter Theunis said: “At BPC, we are always looking forward, aiming to help financial institutions, fintechs, 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.”