The Latest Data on Payments in the United States
The latest available data from the Federal Reserve indicated that there were approximately $1.6 quadrillion in payments within the U.S. This figure encompasses financial transactions such as company acquisitions and stock sales, alongside consumer payments, making it challenging to quantify the total addressable market for B2B payments or shifts in payment instruments.
This task was undertaken by
Hugh Thomas: Lead Commercial & Enterprise Payments Analyst at Javelin Strategy & Research, as detailed in his Commercial Payments Factbook
His analysis delves into the commercial payments market, identifies growth rates on a product-by-product basis, and outlines how financial institutions can impact business customers.
Defining the Addressable Market
Out of the total volume of payments reported by the Federal Reserve (the most recent data was from 2021), around $1.4 quadrillion was attributed to wire transfers. While these are a foundational service for financial institutions, they typically do not act as growth drivers in payment solutions.
According to Thomas: “Wires are often used at the end of events that aren’t necessarily related to payments and don’t significantly influence treasury businesses. They’re more about executing high-value, low-volume transactions.”
Wire transfers were thus excluded from addressing the total addressable market in wholesale payments.
Once customer payments are factored out, approximately $200 trillion was identified as the total addressable market for commercial payments, with a significant portion attributed to ACH credit transfers and ACH debit transactions. Check payments made up a smaller share but have seen growth due to their role in exception management.
Water Finding Its Level
With the decline of paper checks, real-time payments through FedNow or RTP networks have not yet emerged as primary payment mechanisms despite the robust existing financial infrastructure for commercial use cases.
There has been some growth in Same Day ACH since transaction limits were increased, accounting for about 3% of total ACH transactions. Card-based B2B transactions remain minimal at less than 2%, but they represent a significant opportunity due to the vast scale of B2B spending compared to consumer payments.
Growth in small-business debit and virtual cards has been notable, offering effective and cost-efficient payment solutions for suppliers.
The Five Sectors
The study further segmented B2B spending across five sectors: wholesaling, manufacturing, retail, healthcare, and social assistance. Healthcare notably dominates because of its multiplier effect through insurance payments and other related transactions.
Identifying slower-paying industries can help financial institutions improve cash management strategies by recognizing sectors with higher days payable outstanding and focusing on bridging solutions to accelerate payment flows.
A Resource at Your Fingertips
This research provides essential insights for financial institutions aiming to develop strategies for business customers. Understanding the addressable market, predominant payment types, and sector breakdowns is crucial for identifying opportunities in sectors like manufacturing or healthcare where higher day sales outstanding indicate a need for faster payment solutions.
The document serves as a valuable resource for providers who can tailor their financial solutions based on industry-specific needs, addressing questions about market size, sector percentages, and other pertinent details relevant to specific industries.