Payments companies are hot. Square has a $3.25 billion valuation. Braintree just sold to PayPal for $800 million and Stripe is probably worth even more. The venerable PayPal was 40% of eBay’s revenues last year and remains its growth engine.
Square is supposedly on a trajectory to process about $15 billion in transactions this year and Braintree about $12 billion. PayPal processed $145 billion last year.
Yet if you step back, these companies’ big valuations come from implementing a relatively thin layer between the modern world and the underlying credit card and/or banking systems. They’re still just on-ramps for the big boys.
Big boys could brush them aside, so someone should brush aside the big boys…
Dream of getting big enough to clear transactions themselves
“A billion dollars isn’t cool. You know what’s cool? A trillion dollars…”
VISA and Mastercard last year together processed about $7.5 trillion worth of transactions and were paid (revenue) $17.8 billion for their efforts. This number significantly understates total transaction costs because there are issuers and processors in the mix who also get their vig. If you estimate 3% average fees for all those credit card transactions, there is another $200 billion in additional fees going to various players in the credit card ecosystem. The much lauded innovators in payments are part of that ecosystem.
Lot of money to put back in consumers’ hands.
Without looking up any reports…
VISA – $3.9 trillion
$10.42 billion rev
http://www.scribd.com/doc/123462673/VISA-2012-Annual-Report
Mastercard
$3.647 trillion
$7.39 billion rev
Paypal –
2012 – $145b tx, $5.6b,