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Payment Gateways: The Backbone of Holiday Spending 

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Somehow, the fourth holiday spending season since the onset of the global COVID-19 pandemic is upon us – and a lot has changed. We’ve seen a substantial shift (and subsequent regression to the mean) in eCommerce transactions as a proportion of total spending; omnichannel evolved from a buzzword to a cost of doing business; buy Now, Pay Later (BNPL) continues to ingrain itself as a payment method with staying power; and Aunt Sarah’s pumpkin pie has eclipsed the annual viewing of Die Hard as the highlight of the holiday season.   

Looking at preliminary Black Friday metrics, consumer spending again increased year-over-year (YoY) despite fears of a widespread economic downturn. In fact, TSG found in a recent study that one in five consumers plan to spend more this holiday season, thanks in part to the convenience of modern payment technology.

While sources noted physical foot traffic increased more than two percent this Black Friday, the true benefactor of Black Friday was eCommerce, as retailers continue to blend Black Friday and Cyber Monday into a holiday weekend of marketed savings. A record $9.8B in sales were recorded through eCommerce channels this Black Friday, reflecting an increase of 7.5% YoY*. Mobile devices accounted for an estimated 54% of this eCommerce traffic (superseding desktop purchasing), and Shopify reported an increase in Black Friday spending of 22% YoY across its hosted eCommerce stores. On Cyber Monday, consumers spent $12.4B online, up nearly ten percent compared to last year, according to Adobe Analytics.

To facilitate this record-breaking online spend, countless unseen back-office payment gateways ensure that the global virtual payment infrastructure runs smoothly regardless of consumer purchase method. In a competitive space where a 99.999% gateway uptime is considered table stakes (using TSG’s Global Experience Monitoring platform, North American gateways were measured to be accessible 99.974% of the time Thanksgiving week), several overlooked metrics are used to differentiate across the vast market and determine the strength of payment gateways. API accessibility, automated onboarding, iOS and Android support, reporting capabilities, and supported payment methods (especially with the increased prominence of BNPL, which grew online orders 72% Thanksgiving week compared to the prior week) are some of the criteria that can be evaluated to parse out an increasingly fragmented market.

Using TSG’s newest Payment Gateway Directory, sponsored by MCAG, various key insights and trends can be uncovered when looking at the unique data points of 125 leading global payment gateways. Read on for gateway trends that will continue to be prevalent in 2024.  

Key Insights 
  • Geographic Focus – 43% of gateways represented within the Directory are considered to have global reach or have stated functionality and client base on at least two continents. Looking at individual regions, North America was the most prevalent geographic service area of focus, followed by Europe, the Caribbean, Latin America, and APAC. This proportion was the same as 2022, despite increasing the number of gateways represented to 125 this year.
  • Focus Verticals – Retail was again the most common industry across represented gateways, registering as a specific focus for 84%. Other notable focus verticals included Eating & Drinking Places (54%), Healthcare (50%), Entertainment & Recreation (49%), and Hospitality (49%).
  • Emerging Payment Method Support – 22% of gateways indicated native support to facilitate BNPL transactions, up from 19% in 2022. Support of merchant cryptocurrency transactions increased from 9% in 2021 and 13% in 2022 to 14% in 2023. 
  • Setup Fees and Monthly Costs – 23% of gateways have evidence of charging gateway setup fees in at least some cases, and 54% of gateways charge a monthly fee.
  • Reporting – Virtually all gateways (97%) maintained some sort of online reporting/dashboard functionality. However, only 91% of the total represented gateways offer APIs that can allow merchants and integrators to query reporting data on demand.
  • Client Target Type – The most targeted client type by gateways were merchants, with 83% of gateways targeting merchant clients. Software companies were the next most targeted client type, with 74% of gateways designing and selling their solutions with software providers in mind.
  • Corporate Structure – Nearly 69% of gateways represented in the Directory were determined to be owned privately. While this isn’t indicative of where total gross gateway volume lies, it indicates substantial room for global acquisition, partnership, and investment opportunities in the payment gateway space. 
  • API Accessibility – Similar to last year, 66% of gateways stated that their APIs and developer centers were fully public compared to 18%, where the APIs and developer centers were inaccessible. The remaining 16% of gateways were considered to have Quasi-Public or gateways with developer centers and APIs that are accessible but require additional approval (granting of sandbox account or completion of API access forms) to access.

Everything You Need to Know About Gateways in One Place 

TSG’s Payment Gateway Directory, sponsored by MCAG, is the largest compiled resource on gateways, including 120+ payment gateway providers, from large international players to regional startups; covering 6,000+ data points.  

Visit TSGShop to preview and purchase a company-wide edition today. Already a subscriber to eReports? Sign in here to download your copy. 

* TechCrunch