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 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.
 

Chapter 1: Executive Overview

Scope & 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)