- Conventionally, the market has viewed software as a distribution channel for payments (e.g., Ministry Brands, Government Brands, Therapy Brands, etc.). We think software is an execution layer than can optimize payments performance by increasing transaction conversion and reducing costs (“payment operations software”).
- Payment operations software is mission critical since digital payments channels are growing ~4–5x faster than traditional ISO/acquiring. Payment complexity is growing since ~75% of volume is marketplace-intermediated, ~30% is cross-border and card acceptance rates can be as low as 75%
- Our view is payment operations software is already increasing merchant power vs. modern processors: Adyen’s stock price dropped ~50% after indicating generalized pricing competition in Aug 17th, 2023’s earnings
- We segment the payment operations software market into orchestration and data intelligence (~$12B total funding), fraud and compliance orchestration and data (~$2.5B), and vertical-specific payment operations solutions (~$40B):
— Payment Orchestration/Data: We see a new generation of gateways, payment networks and tools powering commerce, including our portfolio company Pagos
— Fraud & Compliance Orchestration/Data: With $40B of fraud and $30B of chargebacks, the patchwork of point solutions isn’t working. New platforms are driving better decisions and new data bureaus are being built (e.g., in KYB/business verification)
— Vertical-Specific Solutions: e.g., healthcare, commerce, and travel & hospitality all have $1T+ of US payment volume and face unique challenges due to fragmentation and disparate data and software. We also map payments in 6 other large sectors of the economy.
- Reach out to us here if you’re building in the payments or fraud prevention space or a client looking for a solution here, we’re excited to connect the ecosystem.
Many businesses have been built on the idea of software as a distribution channel for payments (e.g., Ministry Brands, Government Brands, Therapy Brands, Community Brands, etc.). We think it can be even more valuable as an execution layer, solving the challenge of maximizing transaction conversion at the lowest possible cost, outlined in more detail below.
These challenges are far from solved today. Even after decades of payments innovations, in a $235B global payments market, B2B payments is ~50% cash or check based, certain economies operate with 50%+ cash (e.g., Morocco or Egypt), and certain industries remain grossly under-electronified (e.g., healthcare). For the electronic volume, authorization rates can be as low as 77% according to Visa.
Enter software. Like all other industries with workflow complexity and data proliferation, businesses are using orchestration and analytics to solve the problem. Multiple $100B+ industries have been created as a result, e.g., the A/P and A/R software space with market leaders such as Bill.com, AvidXchange, Mineral Tree and Coupa. We define payment operations technology below as the layer of software tools that sit in between the merchant and the payor, often embedding payments vendors within.
As we show in the two exhibits below, these challenges are made even more urgent by a shift in payments distribution from processor-led to software-led: software and e-commerce are growing ~4–5x faster than traditional distribution channels. E-commerce is growing in scale and complexity with ~75% of volume mediated through marketplaces and ~30% of volume cross-border.
Today, we are seeing increased competition among modern processors. In our view, this is substantially explained by payments optimization tools. Adyen’s ~50% stock price decline in the week after reporting first half earnings on Aug 17th, 2023 has cast a bright light on intensified competition amongst payments giants like PayPal, Stripe, and Adyen. Braintree and Stripe have opted to price aggressively to win market share (even “interchange minus”), but Adyen management maintains that its more functional platform warrants premium pricing. Adyen’s <1% volume churn in the first half of 2023 partially validates this claim. However, it is increasingly becoming difficult for Adyen to win new volume in a price-sensitive environment, especially for less complex US e-commerce transactions (23% YoY growth 1H23 vs. 52% YoY 1H22). The largest merchants in the world are using payments optimization tools to route between processors, increase authorization rates and reduce cost. We anticipate soft pricing continuing as adoption broadens.
In addition, the introduction of new payment schemes, e.g., FedNow in the US, continues to compound the need for payments optimization software. Orchestration intermediaries have the capability to route payments intelligently to increase conversion and reduce cost. This will be especially important since FedNow will take years to be ubiquitous: 57 institutions accept it and there are 8,000 banks and credit unions in the US.
III. Payments Orchestration, Data Intelligence & Tools Market Map
We define this space as technologies that improve payments performance via data intelligence, payment vendor integrations, routing and/or action tools. Benefits of these solutions include improved transaction conversion, reduced fraud/chargebacks, broader geographic and payment vendor reach, lower cost, and integration across multiple systems and payment flows. We segment this market into 10 key categories below with commentary to follow.
(1) Global Gateway: These orchestration businesses provide bundled payment and fraud vendor connectivity, intelligent routing and data intelligence. Primer, Gr4vy and Paydock primarily service the e-commerce industry, while PayEngine is designed for vertical market software vendors. Butter Payments specializes in mitigating payment failures, especially for subscription businesses. Payrails provides multiple APIs for a more flexible solution vs. bundled platforms / single API solutions.
(2) Regional / Emerging Markets Gateway: Regional gateways often specialize in emerging markets with low card acceptance and greater prevalence of cash or alternative payment methods.
- Latin America (“LATAM”) is a classic example, where alternate payments systems differ by country and card authorization is as low as 77%. Dlocal offered an initial solution with local acquiring services in each market. Recently orchestration-first solutions such as Malga, RetryPay, Yuno, and Tuna have emerged to solve the issues of routing, integrations and split payments for e-commerce businesses. Toku is specializing in improving authorization rates for subscription and software clients.
- In India, complexity has increased as the percentage of electronic transactions has grown from <5% to 35%+ in the past decade driven by UPI. In parallel, Reserve Bank of India intervention has reduced economics to acquirers by capping interchange rates at 0.4–0.9% and introducing domestic schemes such as RuPay. In response, Juspay has built an orchestration engine that manages the fragmented payment vendor landscape. Razorpay offers a gateway with one-click checkout capability and improves monetization through offering other business tools (e.g., banking, credit and payroll).
- Africa is a unique market with a population that has 80% mobile penetration but is 50% unbanked or underbanked. Revio and Flutterwave are aggregating mobile money, card and bank payment acceptance to drive conversion.
- Southeast Asia is also dominated by alternative payment methods including GCash, GrabPay, LinePay and others. Solutions such as HitPay and Opn are introducing orchestration and one-click checkout capability.
(3) One-click Checkout: Solutions in this category often provide embedded orchestration in addition to a faster checkout experience. Global players like Bolt aggregate millions of shopper payment credentials to increase conversion for merchants. In emerging markets where there are more payment types and card authorization rates are lower, one-click checkout can have an even stronger value proposition. Examples include nimbbl and Razorpay in India and Deuna in LATAM. nimbbl also enables online businesses to operate multiple payment aggregators by sitting between merchants and solutions such as Razorpay. Deuna also provides smart payment routing.
(4) Account-to-Account (A2A): A2A solutions create infrastructure to move funds directly from one bank account to another without intermediaries (i.e., card networks, payment processors). This is advantageous in terms of cost, settlement time, and transparency. A2A is more penetrated in regions with progressive open banking regulation, for example UK/EU, where Modulr, Token, Tell.Money, Volt and GoCardless are located. In LATAM, A2A payments is growing supported by central bank initiatives (e.g., BCB’s Pix in Brazil) with platforms such as Belvo and Prometeo enabling merchant acceptance. Link Money is working on building similar rails in the US. Highline specifically automates payments from payroll.
(5) Pay-in / Payout: These businesses develop payment networks accessible via API to facilitate payment collections from customers (pay-ins) and disbursements to recipients (payouts) in addition to complementary products/services. Marketplace business models require two-sided payment functionality e.g., splitting pay-ins, instant seller payouts, etc. Players such as Rapyd, Corefy and Paytrix use a combination of proprietary and third-party settlement networks to achieve global reach. Kora similarly provides pay-in / payout and instant settlements for Africa. Tazapay uniquely combines payments with embedded escrow protection and a treasury solution for India/SEA and is scaling globally. Liquido and WePayments address the nuances of payments in LATAM (e.g., cash pay-ins, PIX payouts).
(6) Domestic Payment Networks & Tools: Domestic disbursement networks enable execution across multiple tender types (ACH, checks, virtual cards) so customers don’t need to maintain a database of payee bank accounts. Orum and Checkbook exemplify this category of solutions. Moov also offers payment acceptance and storage as an all-in-one acquirer/processor. Interchecks has a dominant position in the online gaming market.
(7) Corporate & Treasury: These solutions focus on treasury and payment operations, leveraging bank integrations to enable data management, reconciliation and automation of workflows. In the US, Modern Treasury has built sophisticated APIs targeted toward high volume payments businesses (e.g., fintechs, e-commerce, marketplaces, etc.). Ledge and Nilus are building out-of-the-box solutions for finance teams. Payable, Numeral and Nomentia offer similar services in Europe. Ceviant focuses on Africa and offers foreign exchange services critical given fluctuating monetary policy (e.g., in Nigeria), in addition to treasury. Payall is building correspondent banking-as-a service, serving cross-border businesses. GuavaPay offers similar cross-border banking capability in addition to merchant acquiring. In LATAM, Kamino provides AR/AP automation in conjunction with bank account management for the SME market.
(8) Cross Border: These businesses orchestrate payments (most typically, payouts) across payment networks, currencies and tender types. MassPay has built a global payout orchestration platform with intelligent routing under a single KYB process. PayQuicker also offers intelligent routing and Trolley and Tremendous also focus on payouts. TabaPay has built unique payout and acceptance applications on top of traditional card rails.
(9) Data Intelligence & Tools: Businesses with in-house payment operations teams often require data and tools to increase authorization rates and reduce fraud/chargebacks. Tarsadia Investments portfolio company Pagos offers payments data intelligence via a no-code SaaS platform. Very Good Security, Basis Theory, and TokenEx enable clients to take control of their payments data via tokenization improving authorization rates, redundancy and lowering cost. Silverflow offers acquiring-as-service enabling companies to improve performance by bringing processing in-house.
(10) Payment Data Reconciliation: Simetrik, Datanomik and AutoRek automate reconciliations from various sources, such as payment gateways, banks, and merchant systems to ensure accuracy and completeness for reporting/compliance and fraud detection/prevention.
IV. Fraud & Compliance Orchestration and Data Market Map
We define fraud & compliance orchestration solutions as technologies that improve legitimate transaction conversion via data intelligence, fraud tool integrations, workflow optimization and/or action tools. The increasing sophistication of fraudsters, proliferation of tools and the growth of digital goods and services have driven the need for better orchestration. We segment this map into 5 categories below with commentary to follow.
(1) Global: Players in this subsegment offer bundled or unbundled solutions for transaction monitoring and client onboarding to manage fraud/compliance without disrupting the onboarding experience. Alloy’s solutions are unbundled and include the option to leverage customer data to better underwrite risk. In contrast, Sardine and Unit21 offer bundled solutions. Sardine also offers token on-ramp given its strength in the web3 market. SentiLink supplements its solution with a human-in-the-loop to drive insights and identify more fraud. Hawk:AI allows its customers to maintain customizable risk ratings in addition to transaction monitoring and onboarding solutions. FrankieOne focuses on customer onboarding and connects to 350+ vendors through its API.
(2) Regional / Emerging Markets: New digital economies (e.g., India, LATAM, Southeast Asia) are experiencing 20–40% growth in their fraud solutions markets given the supply-demand gap. Bureau offers a bundled orchestration solution for India/SEA, MENA and other emerging markets, aiming to build an alternate credit bureau via aggregating verified identities. Monnai is aiming to solve the challenge using alternate data and analytics (e.g., income patterns, spending patterns, behavior, etc.) leveraging more than 350 contextual insights. Zenpli focuses on identity decisioning for LatAm.
(3) Business Verification: Business verification is uniquely challenging because ultimate beneficial owners can be hard to trace and 50% of new businesses fail within the first 5 years. Middesk is solving this problem focusing on the US market and Trébol is focusing on LATAM. Ballerine and Gatenox feature tailored orchestration solutions for SMBs and web3, respectively. KYP enables financial services and enterprise clients evaluate the risk of merchants and other counterparties.
(4) Chargeback Insurance / Management: Chargebacks cost merchants more than $20B in 2021 mainly driven by friendly fraud. Signifyd, Forter, and Riskified are ecommerce-focused chargeback management and/or insurance players, working to mitigate chargebacks between merchants and their customers. nSure.ai focuses on higher risk verticals, e.g., digital goods and services that require instant decisioning. Justt automates chargeback mitigation across multiple verticals including ecommerce, gaming, crypto, etc.
(5) Onboarding / KYC: The friction caused by multiple identity verification tools used repeatedly is known to us all. Orchestration tools offer a single, easy user flow, often storing profiles to quicken onboarding for known customers. Portabl and Footprint both offer centralized identity storage, while Instnt and Truvity decentralize their databases to build trust. Strise also integrates continuous KYC into its solution.
V. Vertical-Specific Payment Operations Solutions Market Map
Unique workflow, data and/or integration needs often demand an industry-specific payment operations solution. We illustrate with 9 verticals below, outlining the scale of the opportunity and unique payment challenges in each.
Below is a market map of payment operations solutions in each vertical with commentary to follow.
(1) Healthcare: Today’s healthcare system is deeply fragmented with 400–500 payors and ~860k doctors, causing payment friction amongst all key stakeholders. On the payor-provider side, submitting and paying claims is a complex, inefficient process with physician practices spending ~$30B on billing costs annually and only ~60% of claims getting paid electronically. On the provider-patient side, patient collections for practices continues to be a challenge with a ~75% patient payable collections rate. Cedar and Phreesia optimize patient collections by creating smoother electronic patient payment experiences. inboxhealth integrates billing communications with electronic payments to further enhance collections. Paytient and PayZen focus on patient affordability to improve collection rates, creating health payment accounts and AI-driven individualized payment plans, respectively. hihealth improves the claims process by facilitating direct reimbursement through private health insurance and issuing payment cards that pull from insurers and/or patient funds when required for co-pays, uncovered balances, etc. Zelis does both payor-provider and patient-provider payments, linking all three stakeholders in one system to process claims digitally and drive administrative cost savings. Echo increases adoption of electronic payor-provider payments by connecting payors to a network of electronic payment providers and vendors. Nitra supports practices by offering back-office management tools and a healthcare-specific credit card to extend larger lines than traditional credit providers. Mercantile takes a different approach by offering small practices a card that aggregates purchasing power to drive savings.
(2) Retail/Commerce: Retail/commerce businesses must be able to accept multiple payment methods both in-store and online, ideally embedded within their core operating software. Research from CustomerThink suggests that 50% of customers will cancel their orders if they cannot pay with their preferred method. The most well-established players in this space, e.g. Block and Shopify, offer an ecosystem of POS and e-commerce solutions to manage stores and convert more sales. In India, where digital payment adoption is only 30% — 35%, Pine Labs enables offline and online digital payment acceptance, including UPI and credit/debit card, with the option for BNPL. In MENA, where digital payment adoption is similarly accelerating but accounts for only a third of payments today, Dukkantek and Hala are building POS solutions to accept both cash and digital payment methods. In the US, there are multiple sub-verticals that are under-electronified. For example, Forage enables payments for the one in eight Americans reliant upon government assistance to buy groceries. PayRange enables touchless smartphone payment acceptance for traditionally cash-only businesses (e.g., vending machines, laundry, tips). The $900B US restaurant space suffers from similar challenges as retail but must also manage the complexities of managing a restaurant (e.g., menu management, ingredient inventory, operations management). Toast, TouchBistro and GoTab have developed POS systems and offer an array of restaurant-specific tools (e.g., mobile order and pay, kitchen display system). Kickfin, 7shifts, and tiphaus automate workforce management, tip calculations and payouts.
(3) Services: The client base for companies in this subsegment are often small to medium sized businesses — think local gyms and fitness classes, hair salons, etc. These clients have had limited access to software, e-commerce or electronic payments acceptance historically. Vendors in this subsegment often offer bundled solutions to drive electronification. Mindbody, WellnessLiving, and bsport target fitness & wellness; Booksy, Boulevard, and fresha cater to beauty businesses; PushPress is a gym-specific solution; and Alternative Payments focuses on B2B service payments. AffiniPay serves professional services firms (e.g., law, accounting).
(4) Travel, Hospitality, Real Estate: As travel has increasingly shifted to digital channels post-pandemic (e.g., OTAs are now 40% of market), payments challenges have grown (e.g., split/commission payments, instant payouts). For example, Connexpay enables OTAs to instantly access funds from consumers and make payouts to travel vendors. DealEngine has created a travel booking and refund automation platform that integrates into travel vendors’ distribution software. Hotel operators with high average transaction value (ATV) are susceptible to failed payments, fraud and chargebacks. Canary Technologies offers digital authorizations and fraud detection tools during check-in to prevent fraud and chargebacks. amenitiz services smaller independent hoteliers with an entire suite of property management, distribution, and payments solutions, while Lodgify offers similar capabilities for vacation rentals. Shift4, a payments gateway, has a leading position serving travel and hospitality clients due to its software integrations into Sabre, Infor etc. GuruHotel and Selfbook have developed embedded direct booking and payment solutions for hotels, minimizing commissions to third parties. In construction/real estate, where timely payments corresponding to actual progress is critical, Constrafor has built a payment processing solution electronifying payments to subcontractors.
(5) Software & Subscription Economy: Software is now a ~$0.8T market, with vendors leveraging their distribution to cross-sell electronic payment acceptance to their clients. Often, it can be advantageous economically to underwrite clients as sub-merchants by becoming a payment facilitator (“payfac”). Payfac capability requires expertise, software and compliance tools. To address this, Finix, Tilled, Amarylis, and Infinicept have all developed Payfac-as-a-Service solutions. As an alternative, PayEngine, Payabli, and Rainforest enable payments monetization via gateways that can be easily embedded into software. Software vendors also face challenges collecting recurring payments from clients — you have to implement subscription changes, prorate certain payments, retry failed payments, pause/reactivate customers, etc. Paddle, Recurly, Chargebee, and Zuora provide tools to manage these complexities.
(6) Insurance: Payments companies serving the insurance vertical primarily facilitate collections and/or claims payouts, which have historically been manual, paper-based processes. One Inc performs both functions, while Dream Payments focuses on claims payouts. iink drastically improves the speed of payouts for P&C claims by automating endorsements and disbursement across public adjusters, mortgage servicers, and contractors. Ascend automates premium payment acceptance and carrier payables for insurance distributors.
(7) Government & NPO: Local governments and utility companies offer regulated, low margin services and need software solutions to manage payments cost and increase affordability to consumers. Promise enables utilities companies to implement payment plans and distribute relief or rebates to increase collections. PayIt provides automated workflows and digital payments capabilities for government agencies for more seamless resident experiences.
(8) Supply Chain & Transportation: The payments complexities in this $200B+ vertical include managing timing for the release of both goods and funds, multi-party payments and legacy systems or limited data. PayCargo, CargoSprint, and Pando automate freight vendor management and payments. Curant automates A/R and A/P payments for the 3PL and freight forwarders themselves. For corporate and/or trucking fleets, Coast and AtoB offer open loop fuel cards along with fleet management tools to better manage financial operations. Mudflap offers similar tools to small fleets in addition to a fuel discount network. CloudTrucks enables owner-operators to lease on to mega carriers and digitize invoices and finances, enabling quick assessments of invoice accuracy and payment decisions. Outside of the US, LogiPe serves trucking businesses in India with a financial operations suite. Solvento leverages automated proof of delivery validation and invoice authorization to extend credit to shippers/3PL/brokers in Mexico based on volume.
(9) Gaming: The challenge in this space is enabling a seamless pay-in/payout experience while preventing fraud. A study by PayNearMe found that over half of users signing up for a new betting application have faced declined payments — indicating a high rate of false positives for fraud. Furthermore, over 25% of online gamblers have abandoned account registration due to high friction sign-up processes. At the same time, according to ThreatMetrix, one in every 20 account creations is fraudulent. Solutions like PayNearMe, Interchecks, and Trustly seek to address these issues by providing customers the optionality to pay with their preferred method, make deposits, and instantly withdraw, all while maintaining security and compliance controls. Sightline expands payment choices in brick-and-mortar casinos, offering a cashless payment solution via mobile app. Xsolla serves as a merchant of record for the video game industry, transferring risk and liability away from their customers.
(10) Web3: As covered in our previous research, Web 2-Web 3 interoperability is paramount to adoption of digital assets, including fiat-crypto rails. Sardine leverages its fraud & compliance tools to enable fiat-to-crypto transactions with instant settlement via ACH. C14 similarly provides fiat/crypto payment flow for crypto-native businesses. Triple A allows traditional retail and e-commerce businesses to accept crypto payments. Finally, Ramp and Moonpay provide embedded crypto buying/selling capabilities.
VI. Why Work with Tarsadia Investments?
Tarsadia Investments is a $2B+ firm that makes high-conviction investments in category-defining companies globally. We’ve invested across stages from idea to public ownership, with often a decade-plus investment horizon. We use our domain expertise in financial services and technology to support founders on growth, talent and M&A/capital raising.
Please reach out to us if you are:
- Building a payments or fraud prevention business. We often engage with founders outside the fundraising cycle, sharing insights and introductions within our network. We invest in series A and beyond, writing checks from $5M — $75M.
- An experienced leader looking to advise or invest in the space.
- A client looking to work with payments or fraud solutions.
Cold outreach welcome on LinkedIn.
- Proprietary mapping of vendor landscape, applications of each vendor, and key market gaps that includes 275+ companies
- Primary research by Tarsadia team with 200+ calls with founders and 50+ calls with current and potential clients of mapped businesses to drive deep understanding of vendor solutions and areas of overlap and/or uniqueness
- Secondary public research on macro factors driving the need for payment operations software, i.e., supporting our view on why these businesses are getting built with statistics demonstrating the challenges merchants face today
 Credit Suisse
 Goldman Sachs
 Credit Suisse
 FT Partners, McKinsey