The financial technology (fintech) sector has seen a serious surge in growth over the past decade, with a number of exciting start-ups rapidly revolutionising how we manage, move and even invest money. Some of them like Wise, Stripe and Klarna have already become household names.
In particular, it is the payment startups that have established themselves as ubiquitous fixtures in the modern financial world and won over legions of users by offering innovative, low cost solutions to meet the evolving needs of consumers and businesses.
In 2024, the payment startup landscape continues to shift and evolve, with new players entering the market, tired players exiting it, and some established ones expanding their scope and services.
In today’s post we are going to examine the key trends shaping the industry right now.
How Do We Define a Payment “Startup”?
A payment startup is a “young” fintech company that typically focuses on developing technology that enables seamless, secure, and efficient payment transactions We really should state here that there is no strictly agreed criteria as to when a business ceases to be a “start up”, and that this may be reflected in some the firms we have included in this post.
According to some estimates, the number of payment startups in the US exceeded 2,000 in 2023 and they collectively processed over $4 trillion in transactions last year.
Types of payments
As you know, payment startups facilitate a wide range of payment types, catering to different needs including merchant payments, credit payments, P2P payments, and money transfers. Each category has its own unique characteristics and serves a distinct purpose in the financial ecosystem and we will take a closer look at each now.
Merchant Payments
The market for merchant payment apps has seen some serious growth in the last decade and is projected to continue to expand. As of 2024, the global digital payments market (which includes merchant payment apps) is valued at approximately USD $111.2 billion, and is expected to grow to a whopping USD $193.7 billion by 2028.
PayPal and Stripe are two of the most prominent players in this space. PayPal (in case it needs introduction) was established in 1998 and quickly grew to become one of the most widely used online payment systems in the world. Today Paypal has some 426 million users and has handled a payment volume of $1.52 trillion since its inception.
Stripe, on the other hand, was founded in 2010 and has quickly become a favourite among startups and online traders due to its lower fees, developer-friendly API and robust features. While Stripe does allow payment in more than 153 currencies, they only allow card payments which means they do not offer consumers their own local payment method. Stripe also has a higher failure rate than some others in the space.
Other notable payment startups in the merchant space include Square (founded in 2009 by Twitter’s Jack Dorsey now part of The Block Group) which is renowned for its user-friendly interface. The start-up presently has 56 million personal, and 4 million businesses uses, and processes payments worth US $228 billion each year.
| Company | No. of Users | Value of Transactions in USD (2023) |
| Venmo | 75 million | 68 billion |
| Zelle | 120 million | 2.9 billion |
| Cash App | 57 million | ? |
Credit Payments
Credit payment apps provide consumers with the ability to make purchases on credit, allowing them to pay for goods and services over time.
There have even been criticisms that online credit apps do not exercise the same due diligence as other credit providers. Indeed, much of the sector still remains unregulated and when the British FCA began consultations on regulation, some of the biggest players threatened to quit the UK market if they were subjected to any “heavy-handed” regulation.
Other critics have alleged that the true ‘cost of credit’ is ill explained at the point of sale and maintain that while this model has proven quite popular among shoppers, it also comes with potential downsides, such as the risk of accumulating debt. Indeed, Bloomberg’s personal finance reporter Pauilina Cachero said in an interview with slate.com;
“BNPL firms like to advertise themselves as risk-free credit options. But it’s only free if you follow all the rules. Many consumers complained to the Consumer Financial Protection Bureau that these BNPL firms aren’t disclosing the costly hidden fees and interest rates that can be incurred when someone falls behind on payments.”
Still, despite these concerns, the BNPL market has seen some substantial growth and in the 2023 holiday season, Americans spent USD $16.6 billion on BNPL purchases (a 14% YoY volume increase) compared to $48 billion on regular credit cardsover the same festive period.
Swedish credit-app Klarna, (founded in 2005) is now established as the leading player in the “buy now, pay later” (BNPL) space and last year managed 2.5 million transactions per day, enabling consumers to split their purchases into interest-free instalments. The firm’s market value reached $46 billion in 2023 and ahead of its forthcoming IPO, the firm has even launched a (controversial) subscription model which affords paying members cheaper credit.
The BNPL story is not all about Klarna though. Afterpay (who were acquired by Square/Block in 2021) have attracted over 13 million users although 2021 saw it post a pre-tax loss of USD $76.2 million and the firm only just finally broke even in 2023.
Silicon Valley based Affirm was originally founded back in 2012 and today has 18 million users in 25 countries worldwide. Affirm began 2024 in fine form as YoY revenue for Q1 jumped by 37% to USD $497 million.
H3 P2P & B2B Payments
P2P payments are commonly used for splitting bills, sharing expenses, or sending money to friends and family. P2P typically works by connecting a users bank account via a cellphone number meaning users can send money to anybody in your contacts.
Venmo (a subsidiary of PayPal) was one of the most popular P2P payment apps in the US with over 75 million registered users.
However another up and coming challenger is Zelle who now have over 120 million users all engaging the app an average of 5 times per month. In 2023 alone, Zelle handled 2.9 billion different transactions worth a total of USD $806 billion.
Neo-banks like Monzo and Revolut in the UK, also have P2P capability and many high street banks are fast trying to roll out P2P functions into their mobile banking apps to try and keep up. The global P2P lending market was valued USD $5.07 billion in 2022 and It is predicted that by 2027, the per-user value of P2P apps will exceed $2k annually.
| Company | No. of Users | Value of Transactions in USD (2023) |
| Venmo | 75 million | $68 billion |
| Zelle | 120 million | $2.9 billion |
| Cash App | 57 million | $? |
Bill.com is one leading B2B payment startup that offers cloud-based software to automate the accounts payable and receivable processes. The platform allows businesses to manage their invoices, payments, and approvals digitally, reducing the need for manual paperwork. Bill.com recently posted 2024 Q2 revenue of $318.5million, an increase of 22% year-over-year.
While Bill.com leads the pack with a market cap of $6.2 billion, notable players in the B2B payment space, and Veem (800k account holders and over $10 billion sent via the service) include Tipalti, which focuses on global payments and compliance.
Many high street business banks are also now integrating bits of B2B payment technology into their online apps in a bid to aid customer retention.
International Money Transfers
Money transfer companies enable both individuals and businesses to send money across borders and across currencies often at much lower costs and infinitely faster speeds compared to traditional banks. These startups leverage technology and global networks, to offer competitive exchange rates, transparent fees, and highly user-friendly platforms.
According to Visual Capitalist, the combined volume for the international payment was estimated at some $150 trillion in 2022.
This market was traditionally dominated for decades by high street banks, and specialists like Western Union who charged high fees and offered poor foreign currency exchange rates. This made the space especially vulnerable to competition from fintech startups who, as the graphs shown on TopMoneyCompare’s International Money Transfer Report make clear, have begun denting the legacy providers market share.
For example in 2022 Wise reported transferring $105 billion, Moneycorp transfers over £40 billion annually, Currencies Direct reported handling £10 billion and OFX reported a turnover of A$33.6 billion.
Euronet Worldwide, (owner of XE), processed $125 billion in 2022 although it is unclear whether this figure includes POS transactions. Next AirWallex has reported processing volumes of $80 billion, and Remitly reported a turnover of $24 billion. Finally, B2B payment company Payoneer reports annual transfers of $16 billion.
Overall, the ‘non-bank’ market share is estimated at over $600 billion annually. Furthermore some money transfer companies are now branching into debit cards, credit cards and multi currency accounts. Wise was even listed on the London Stock Exchange in July 2023. The company has announced plans to further expand its international presence, and there are rumours that it intends to apply for a full banking licence in the coming years.
Meanwhile, the legacy money transfer providers are losing ground. While Western Union does not publicly disclose its transfer volumes, its top-line revenue of $4.5 billion suggests an estimated annual volume of approximately $150 billion. MoneyGram, once a serious player, now reports a more humble $41 billion in annual transfers.
Summary
In 2024, the state of the payment startup space is very exciting to investors, industry insiders and day to day users. These companies are transforming the way we conduct financial transactions, offering solutions that are faster, cheaper, more convenient, and (in many cases) even more secure than traditional methods.
As technology continues to advance and consumer preferences evolve, we can expect to see even more groundbreaking developments in the payment startup landscape. The full range of scope for use of these payment solutions is enormous. For example, wider integration could help law enforcement to detect criminal enterprises and for tax authorities to reduce mistakes, avoidance and evasion – in fact, HMRC (The UK’s Tax Authority) has stated its intention for tax to be fully digital by 2026 although it is now clear that this date is going to be pushed back by some years.
