The North American market for third party processing (TPP) services continues to perform well despite the global recession, with 2008 sales at $62 billion based on exceptionally strong growth during the past five years, and with 9%-10% average annual gains forecast through 2013. Seeking to offset the impact of lower employment figures in the payroll space and reductions in consumer use of credit in the payment space, third party processors continue to bank on the ongoing move from paper to electronic processing while waiting for government stimulus initiatives to kick in, especially in the healthcare arena. During the down economy major TPPs are also promoting new technologies to give their businesses a boost, working to increase revenues from existing clients, and tapping into related growth areas such as human resources outsourcing in the payroll space and mobile transactions in the payment space. At the same time, the market continues to see competitive upheaval, including Heartland’s 2008 purchase of the TPP business of Alliance Data Systems, and Fidelity National’s 2009 acquisition of Metavante in the payment market; and Emdeon’s 2008 emergence as an independent company and McKesson’s purchases of Per-Se (2007) and RelayHealth (2008) in the healthcare space.


This fully updated report critically and quantitatively assesses the market for data and payment-related transaction outsourcing. The report focuses particularly on three key segments—electronic payment processing, payroll processing, and healthcare transaction processing—with separate chapters tracing the service trends, market trends and competitive strategies driving market growth and competition within each of these industry segments. The report also examines third party processing as it relates to the Internet, as well as the development and expansion of Internet processing applications. In addition, it identifies and assesses the economic drivers and regulatory changes shaping each segment of the industry, as well as the trend whereby major competitors are adopting technologies and leveraging their massive infrastructures to expand beyond their traditional core businesses. Helping to illustrate these trends are competitive profiles of leading market participants including payroll processors Automatic Data Processing, Inc. (ADP), Paychex and Ceridian; payment processors First Data Corp., Fiserv and TSYS; and healthcare transaction processors Emdeon Corp., SSI Group and Availity.



About Author



Marigny Research Group, Inc. (MRG) is a producer of customized private-label market research reports, offering services including title development, research, market analysis, writing, editing, proofreading, desktop production, and marketing support, with a network of market research professionals that extends across the United States. Since 1986 MRG has authored more than 200 reports published under the Packaged Facts imprint, covering consumer packaged goods, demographic, retail, and financial markets. Within these and other areas, MRG has developed complete report lines, most recently focusing on the burgeoning market for pet products and services.

Table Of Contents

Chapter 1: Executive Overview

Scope and Methodology

Market Definition

Report Methodology

Market Overview

Market to Near $100 Billion in Next Five Years

Figure 1-1: North American Market for Third Party Processing, 2004-2013 (in billions of dollars)

Figure 1-2: Share of North American Market for Third Party Processing: By Segment, 2004, 2008 and 2013 (percent)

Major Companies Lead, But Plenty of Smaller Players

Little Competitive Overlap

A Move to the Web

A Period of Retrenchment

Impact of Recession—Moving Forward

Payroll Processing

The Basics of Payroll Processing

Payroll TPP Revenues Top $30 Billion in 2008

Market Penetration at Less Than Half

Negative Employment Trends

Payroll TPP Organizations Growing in Number

Figure 1-3: Number of Payroll Processing Establishments, 2002-2008

The Market Leaders

Scope of Payroll Processing Expanding

Looking Ahead

Payment Processing

Overview of Services

Double-Digit Growth Continues But Tempers

Credit Card Cutbacks, Shift to Debit

Figure 1-4: Annual Percentage Change in Revolving Consumer Credit, 2004-2008

Bank Mergers Could Mean Smaller TPP Market

Competitive Landscape

Pool of Competitors Consolidates Further

Looking Ahead

Healthcare Transaction Processing

Overview of Services

Healthcare Transaction TPP Charting Steady Growth

Increasing Costs a Major Concern in Healthcare Business

Healthcare System Turns to TPPs for Cost Efficiencies

Upheaval Among Market Kingpins

Moving to Electronic Fund Transfer

Looking Ahead




Chapter 2: Payroll Processing

Introduction

The Basics of Payroll Processing

The Rationale for Payroll Outsourcing

Drawbacks to Payroll Outsourcing

Market Trends

Market Sizing Methodology

Payroll TPP Revenues Top $30 Billion in 2008

Figure 2-1: Revenues for Firms Providing Payroll Services, 2003-2007 (in millions of dollars)

Table 2-1: North American Market for Payroll Third Party Processing, 2004-2008 (in billions of dollars)

Potential Client Base Over 5 Million Strong

Table 2-2: Number of Firms, Establishments, Employees and Annual Payroll of U.S. Employer Firms, 2006

Market Penetration Less Than 50% of Potential Market

Negative Employment Trends Bad News for the Industry

Table 2-3: Number of Employees on Non-Farm Payrolls, 2003-2008

Table 2-4: Annual Percentage Change in Non-Farm Employment by Month, 2003-2009

ADP National Employment Report Also Paints Negative Picture

Avenues for Growth

Small Business Health Another Key Barometer

Projected Market Growth

Table 2-5: Projected North American Market for Payroll Third Party Processing, 2008-2013 (in billions of dollars)

Competitive Overview

Core Payroll TPP Services

Payroll TPP Organizations Growing in Number

Figure 2-2: Number of Payroll Processing Establishments, 2002-2008

Plenty of Small Firms, But Largest Ones Dominate

Table 2-6: Payroll Services Enterprises: By Employment Size and Annual Payroll, 2006 (number and dollars)

The Market Leaders

Table 2-7: Leading Payroll Third Party Processors, 2008 (in millions of dollars)

Other TPPs in the Payroll Space

The Role of Business Process Outsourcers (BPOs) and Human Resources Outsourcers (HROs)

The Role of Application Service Outsourcers (ASOs)

The Rise of Professional Employer Organizations (PEOs)

Competitor Profile: Automatic Data Processing, Inc. (ADP)

The World’s Largest Payroll/Tax Filing Processor

Figure 2-3: ADP Revenues, 2006-2008 (in millions of dollars)

Growth and Outlook

New Offerings Point to In-House Strategy

Competitor Profile: Paychex, Inc.

Building a Big Business on a Small Business

Figure 2-4: Paychex Revenues, 2006-2008 (in millions of dollars)

Payroll Is Key to Paychex’s Success

A Unique Business Culture

Small Businesses’ Problems Pose Problems for Paychex

Competitor Profile: Ceridian

Payroll Is Just the Beginning

Figure 2-5: Ceridian Revenues, 2006-2008 (in millions of dollars)

Payroll and Payment Kept Separate

Wellness and the Web

Marketing and Service Trends

Scope of Payroll Processing Expanding

Move to the Web

SurePayroll Exclusively Online-Based

Ultimate Software and UltiPro

Banks Pushing into TPP Payroll Market Through Proprietary Online Platforms

“Branded Payroll” Appeals to Accountants

Accountants as TPPs

CompuPay Hones in on CPAs

Increasing Interest in Payroll Cards

Table 2-8: Payroll Costs for Unbanked Consumers (in dollars)

Payroll Cards Not a Sure Thing for TPPs

An Attractive Market for PEOs

Looking Ahead

Deploying Technology and Allocating Resources

Waiting Out the Downturn

Branding Options at the Small Business Level

More Companies Vying for Business

Table 2-9: Number of U.S. Companies Providing Payroll Processing Services, 2002-2012

The Effect of Foreign Outsourcing

Payroll Cards’ Expanding Niche

Evolving Payroll Methods




Chapter 3: Payment Processing

Introduction

Overview of Third Party Payment Processing

The Appeal of Non-Cash Transactions

Credit Card Processing

Debit Transaction Processing

Consumers Increasingly Prefer Electronic Payments

Table 3-1: Distribution of Number of Non-cash Payments, 2003-2006 (percent)

Table 3-2: Number of Non-cash Payments, 2003-2006 (in billions)

Size of the Electronic Transaction Market

Figure 3-1: Estimated Number of U.S. Credit/Debit Transactions Among Top Four Card Issuers, 2008 (in billions)

Trends in Transaction Fees

Fee Structure

Variance in Fees

How the Discount Rate Is Divided

Market Trends

Double-Digit Growth Continues But Tempers Under Market Pressures

Table 3-3: North American Market for Third Party Payment Processing, 2004-2008 (in billions of dollars)

Healthy Growth in Credit and Debit Transactions

Table 3-4: Number of Electronic Payment Transactions by Type, 2003 vs. 2006 (in billions)

Gift Cards: A Growth Area

Table 3-5: Projected Growth in U.S. Gift Card Volume, 2007-2012 (in billions of dollars)

Credit Card Cutbacks, Shift to Debit

Figure 3-2: Annual Percentage Change in Revolving Consumer Credit, 2004-2008

Bank Mergers Could Mean Smaller TPP Market

Public Backlash Against Credit Card Industry

High Interchange Rates May Hurt TPPs

The PIN- vs. Signature-Based Debit Tug-of-War

Healthy Growth Through 2013

Table 3-6: Projected North American Market for Third Party Payment Processing, 2008-2013 (in billions of dollars)

Competitive Overview

Competitive Landscape

Table 3-7: Revenues of Leading Third Party Payment Processing Companies, 2005-2008 (in millions of dollars)

Pool of Competitors Consolidates Further

Across the Border

Online Payment Providers

Table 3-8: Fee Structure for PayPal and Google Checkout, March 2009 (dollars and percent)

Companies Moving into Cell Phone Payment Processing

Future of Biometrics More Uncertain Than Ever

Competitor Profile: First Data Corp

A Market Goliath

Figure 3-3: First Data Revenues, 2005-2008 (in millions of dollars)

Company Background

KKR Takes Over First Data

Split from Chase Paymentech, Partnership with Bank of America

Consolidation, Cost-Cutting and Acquisitions

New Payment Options

Competitor Profile: Fiserv, Inc

The Largest Nonbank Check Processor

Figure 3-4: Fiserv Revenues, 2005-2008 (in millions of dollars)

Popular with Smaller Clients

Acquisitions and Sales

Adventures in Technology

Competitor Profile: Total System Services, Inc. (TSYS)

Newly Independent

Figure 3-5: TSYS Revenues, 2005-2008 (in millions of dollars)

Shifting Customers

International Outreach

TSYS Enters N>Gen

Competitor Briefs

Alliance Data Systems Corp

Fidelity National Information Services, Inc.

Figure 3-6: Fidelity National Information Services Revenues, 2005-2008 (in millions of dollars)

Global Payments, Inc.

Figure 3-7: Global Payments Revenues, 2005-2008 (in millions of dollars)

Heartland Payment Systems, Inc.

Figure 3-8: Heartland Payment Systems Revenues, 2005-2008 (in millions of dollars)

Metavante Technologies

Figure 3-9: Metavante Technologies Revenues, 2005-2008 (in millions of dollars)

Looking Ahead

TPPs Aiming for Reinvention

Mobile Banking and Payments

Contactless/RFID Payments




Chapter 4: Healthcare Transaction Processing

Introduction

The Basics of Healthcare Transaction Processing

Core Healthcare Transaction TPP Services

The Health Insurance Portability and Accountability Act

Market Trends

Healthcare Transaction TPP Charting Steady Growth

Table 4-1: North American Market for Healthcare Transaction Third Party Processing, 2004-2008 (in billions of dollars)

Increasing Costs a Major Concern in Healthcare Business

Healthcare System Turns to TPPs for Cost Efficiencies

U.S. Medicare Leads in Electronic Processing

Table 4-2: Electronic Media Claims Rates for Medicare Carriers, 2000-2007 (number and percent)

Private Sector Lags in Electronic Processing

Figure 4-1: Electronic vs. Paper Based Transactions, 2009 (percent)

Table 4-3: Paper vs. Electronic Billing and Payment Transactions, 2009 (percent)

Obstacles to Electronic Transaction Adoption

Seeking Industry Standards

Market Growth to Pick Up Steam

Table 4-4: Projected North American Market for Healthcare Transaction Third Party Processing, 2008-2013 (in billions of dollars)

Competitive Overview

Market Involves Myriad Participants

Market Leaders and Competitive Upheaval

McKesson Acquires Per-Se and RelayHealth

MedAvant Regroups as Capario

Third Party Administrators (TPAs) Manage Healthcare Programs

Competitor Profile: Emdeon Corp.

A Newly Independent Company Looking to Go Public

Emdeon’s Range of Services

Eager for Growth

A Strong Voice for the TPP Industry

Changes in Industry May Challenge Emdeon’s Lead

Competitor Profile: The SSI Group, Inc.

A Stalwart Among Healthcare TPPs

Services and Offerings

A Partnership Strategy

Competitor Profile: Availity

A Web-Based Portal for Physicians

Expansion Beyond Florida

Growing Its Services

Marketing and Service Trends

Expanding Existing Networks

Speeding Up Provider Cash Flow

Shift from Clearinghouse Model to Web-Based Systems

Moving to Electronic Fund Transfer

Closing the Transaction Loop Will Help Lower Costs

Creating Standards for Patient ID Cards

Consumer-Driven Healthcare, Debit Use Will Spur More TPP

Combining ID Cards and Debit

Industry Must Comply with HIPAA Regulations

Looking Ahead

Federal Support Likely Means Bright Future for Healthcare IT Firms

U.S. Healthcare Costs Expected to Rise Substantially

Table 4-5: Healthcare Spending by U.S. Consumers and Businesses, 2003-2018 (dollars and percent)

Greater Consumer Involvement in Own Healthcare Necessitates More Flexible TPP

A Whole New Universe of Transactions

Electronic Medical Records Promise Efficiency, Savings and Improved Care

EMRs in Early Stages of Adoption

Government Incentives Will Spur EMRs




Appendix: Company Addresses

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