The Current State of Commercial Payments Market
The latest available data from the Federal Reserve indicates that there were approximately $1.6 quadrillion in payments within the United States alone. However, this figure encompasses various types of transactions including financial economy activities like company acquisitions and stock sales alongside consumer payments. As a result, accurately quantifying the total addressable market for B2B payments—let alone assessing share shifts among different payment methods—poses significant challenges.
Undertaking such analysis was precisely the objective of Hugh Thomas, Lead Commercial & Enterprise Payments Analyst at Javelin Strategy & Research, as detailed in the Commercial Payments Factbook. His comprehensive report delves into the commercial payments market, identifies growth rates by product, and offers insights on how financial institutions can engage with business customers.
Defining the Addressable Market
Roughly $1.4 quadrillion of the total volume of payments reported by the Federal Reserve (as of 2021) pertains to wire transfers. Despite their widespread use, these transactions are not typically seen as drivers for growth in the payments sector.
According to Thomas, “Wires tend to be used at the end of events that aren’t necessarily payment-focused. They’re more about executing trades like stock sales.” These high-value, low-volume transactions don’t significantly contribute to financial institutions’ treasury businesses.
Excluding wire transfers, a substantial portion remains with $200 trillion in payments value. Subtracting consumer payments from the equation leaves approximately $175 trillion as the total addressable market for commercial payments.
A large share of these transactions involve ACH credit transfers where initiators push funds to payees. Another significant type is ACH debit, where payment mechanisms are arranged by payers with payees for services like bill payments or loan repayments.
Thomas noted that check payments still play a significant role despite their declining volume and average transaction size. They have become an exception solution used primarily when alternative methods like ACH credit transfers or direct debits aren’t viable due to setup, unwillingness, or cost.
Water Finding Its Level
The rise of real-time payments through FedNow or the RTP network hasn’t yet taken center stage in commercial use cases. This is partly because the established financial infrastructure has been sufficient for current needs.
However, there has been notable growth in Same Day ACH transactions, particularly since an increase in transaction limits a few years ago. Nonetheless, this mechanism accounts for only about 3% of total ACH activity.
In the B2B context, card payments remain minimal at less than 2% of total value despite their prevalence among consumer transactions. This represents a significant opportunity for card companies like Visa and Mastercard as they seek to expand into commercial markets.
Card-based solutions are growing in popularity, including types such as fleet cards, prepaid cards, and small-business credit cards. Additionally, there has been substantial growth in small-business debit cards as smaller enterprises recognize their utility in managing payments efficiently.
A particularly promising area is virtual cards which offer numerous benefits including enhanced security, automation, and working capital acceleration. Thomas predicts that virtual card spending could surpass purchasing card spend within the next two years, potentially becoming a significant growth engine.
The Five Sectors Dominating Real-Economy Spending
Research has identified five main sectors dominating real-economy spending: wholesaling, manufacturing, retail, healthcare, and social assistance. Despite manufacturing accounting for about one-third of all business spending, the healthcare sector’s impact is substantial due to its multiplier effect.
“Healthcare involves multiple layers such as insurance payments, copays, HMO reimbursements, and subsequent payroll processes,” Thomas explained. “This creates a significant multiplier effect on overall business spending.”
A Valuable Resource for Financial Institutions
Understanding the total addressable market, predominant payment types, and sector breakdowns is essential for financial institutions as they develop strategies to engage with business customers.
Determining slower-paying industries can help organizations optimize their cash management. For instance, identifying businesses with high days payable outstanding (DPO) could inform them about supply chain finance solutions or other methods to expedite payments from suppliers.
Given recent supply chain disruptions and uncertainties, many organizations are reevaluating their strategies, presenting opportunities for financial service providers to offer informed, industry-specific solutions. Thomas concluded that the document serves as a valuable reference, allowing business professionals to stay current on market trends and metrics relevant to 2025.