According to the latest data from the Federal Reserve, the total volume of payments in the United States is approximately $1.6 quadrillion. This figure encompasses various financial transactions, including company acquisitions, stock sales, and consumer payments, making it challenging to quantify the total addressable market for B2B payments or track shifts between different payment instruments.
This analysis was conducted by Hugh Thomas, Lead Commercial & Enterprise Payments Analyst at Javelin Strategy & Research, in his report from the Commercial Payments Factbook. His work focuses on examining the commercial payments market, identifying growth rates for individual products, and detailing how financial institutions can better serve business customers.
Defining the Addressable Market
The Federal Reserve data indicated that out of the total reported volume (from 2021), $1.4 quadrillion was attributed to wire transfers. These transactions, while necessary for high-value, low-volume payments, typically do not drive growth in financial institutions’ treasury businesses.
“Wires are more about executing events that aren’t necessarily payment-focused,” Thomas stated. “For example, they’re used when a stock is traded and funds need to be moved quickly.” He further explained that such transactions don’t contribute significantly to the addressable market in wholesale payments due to their nature.
By excluding wire transfers, $200 trillion remains as the total payment value. After subtracting customer payments, the total addressable market for commercial payments is estimated at approximately $175 trillion. A significant portion of these transactions involves ACH credit transfers, where initiators push funds to payees, and ACH debits, which allow payers to pull funds from accounts, such as in bill pays or loan payments.
“Checks still have a substantial presence in B2B payments,” Thomas noted. “This is because they’ve become an exception solution. Between 2015 and 2024, check average transaction sizes nearly doubled while the number of transactions fell by almost half.” He explained that checks are primarily used when ACH credit transfers or direct debits aren’t feasible due to setup issues or cost.
Water Finding Its Level
The decline of paper checks has led some to speculate that real-time payments through FedNow or the RTP network might gain prominence. However, the existing financial infrastructure in the U.S. has been sufficient for commercial use cases so far. Despite this, Same Day ACH transactions have seen substantial growth due to an increase in transaction limits, accounting for only about 3% of total ACH.
Card-based payments are less prevalent in B2B contexts, representing under 2% of the total value despite their widespread use among consumers. Given that B2B spending is roughly ten times larger than consumer payments, commercial payments present a significant opportunity for card companies like Visa and Mastercard.
The study identified growth in various types of commercial cards, such as fleet, prepaid, and small-business credit. Additionally, there has been notable growth in small-business debit as more firms recognize the value and cost-effectiveness of this payment method for paying suppliers.
Virtual cards are another promising area, with their potential use cases expected to surpass those of purchasing cards within two years. These virtual card solutions promise enhanced security, reliability, and automation, potentially accelerating working capital.
The 5 Sectors
The report analyzed B2B spending across five sectors: wholesaling, manufacturing, retail, healthcare, and social assistance instruction. While manufacturing accounts for about a third of all spending, healthcare significantly impacts the total due to its multiplier effect.
“Healthcare is complex,” Thomas explained. “Insurance payments, doctor visits, and subsequent payments create a large ripple effect within the industry.” This detailed breakdown helps financial institutions understand which sectors are more likely to benefit from specific solutions or strategies.
A Resource at Your Fingertips
The study provides essential insights into the total addressable market, dominant payment types, and sector-specific details, which can guide financial institutions in crafting their business customer strategies. Identifying industries with high days payable outstanding can assist organizations in improving cash management.
For instance, businesses with longer DPOs might benefit from supply chain finance or other expedited payment solutions. The report aids providers in targeting the right industries and emphasizing appropriate solutions when discussing market trends and sector percentages with their bosses or clients.