Welcome back to the Protocol Power Index, a ranking of the most powerful companies by tech industry subsector, as well as the companies best positioned to challenge them. This time: payments infrastructure.

The payments stack has been evolving dramatically in the last decade with the rise of ecommerce and new forms of money transfers, and though it's a sector that's been touched by Midas through each of its iterations, there's somehow still space for newcomers to be minted. Payments giants have ceded coveted territory to new market entrants during the process, but they are hardly down for the count.

The industry stalwarts, Visa, Mastercard and PayPal, are together worth around $1 trillion. Square is worth $100 billion and Stripe was valued at just shy of the same number in its last financing . But no two companies in this Power Index have taken the same track to their current status as frontrunners. In fact, the payments ecosystem is so large that there's room for more than one winner — and often those winners partner tightly even as they compete, creating a complex web of alliances and rivalries within the space.

They are all united, though, in confronting technological shifts in the world of payments: the rise of "buy now, pay later;" the possibilities afforded by cryptocurrencies; the ever-faster processing of payments. All the companies on this list are moulding themselves to prepare for a future shaped by these trends — even if they don't yet know exactly what it will look like.

But which companies have the lead right now? And which ones are challenging that dominance? We've ranked the market for you.

Ranking	Company	Score
1	Square	84.75
2	Visa	81.44
3	Stripe	80.37
4	American Express	79.89
5	PayPal	78.06
6	Mastercard	72.22
7	Discover	68.71
8	Western Union	67.14
9	Fiserv	62.42
10	FIS	60.05

Explore the Data

The Protocol Power Index is designed to view power through a holistic lens that reflects how modern tech companies amass and exercise their strength. To do so, the Power Index takes into account 30 metrics across five categories — Economics, Leadership, Innovation, People and Politics & Policy — and synthesizes them into a single Power Score. Read our full methodology statement here .

What happens next?

Forces that stand to shape payments in the coming years include: the rise of "buy now, pay later" as an alternative to traditional credit, improved fraud detection and the (admittedly remote) possibility that cryptocurrencies become a viable alternative payments system.

Momentum Ranking	Company	Score
1	Stripe ↑	88.24
2	Square	71.76
3	PayPal ↑	43.53
4	Discover ↑	35.29
5	AmEx	30.59
6	Mastercard	27.06
7	Visa	22.35
8	FIS ↑	21.18
9	Fiserv	20.00
10	Western Union	16.47

Traditional payment providers risk losing market share as BNPL continues to gain popularity.

• BNPL is taking off as an alternative to traditional consumer credit. The sector has been buzzing with activity in recent months, with Amazon and Shopify forging partnerships with Affirm, Square purchasing Afterpay for $29 billion and PayPal agreeing to buy the Japanese BNPL provider Paidy for $2.7 billion to expedite growth after launching BNPL services last year. Apple and Goldman Sachs are rumored to want in on BNPL. Visa, AmEx and Citi are also all hoping to throw their hats into the ring.
• Tom Seo, a venture capitalist at Dash Fund, told Protocol this year that BNPL has become "table stakes" for any ecommerce or payments company. Seo added, "something is wrong if you don't have it."
• BNPL has become a popular alternative to traditional credit, particularly among younger consumers . BNPL can help customers avoid interest charges associated with a typical credit card, as some BNPL firms, including Affirm and PayPal , don't charge consumers late fees for missed payments.
• Merchants stand to gain from BNPL adoption as the lower upfront payment can entice consumers to spend more. Klarna, for instance, suggests retailers with BNPL options can expect to see a 45% increase in average order value. (Critics of BNPL say it can encourage reckless spending , though that's also possible with traditional credit.) Given this upside, merchants are often willing to pay higher fees on BNPL transactions relative to the 2-3% charge taken on comparable Visa or Mastercard transactions.
• So while BNPL represents a new opportunity for payments providers, it also comes with heightened competition.

Advancements in AI will improve fraud detection , which is a huge expense for payment companies.

• In the Protocol Braintrust from January 2021, Mastercard's Ed McLaughlin said the company experiences 200 fraud attempts per minute. McLaughlin said Mastercard's investment in AI-powered fraud detection has helped it block $55 billion in confirmed fraud with a 60% decrease in false declines.

• Further advancements in AI promise to help payments companies clamp down on fraud with greater speed and accuracy. Major financial institutions such as Citi and American Express have poured money into developing AI fraud detection tools. The sector has also received considerable VC investment in recent years: Several startups — including Jumio , Onfido , Payfone , BioCatch and Feedzai — have each raised well over $100 million in VC funding to tackle financial fraud using ML and AI.
• While AI-powered fraud detection has the potential to be a significant boon to payment providers, it also comes with risks surrounding allegations of privacy overreach and bias. Earlier this year, the insurance startup Lemonade published a tweet suggesting it could use AI to detect fraudulent customer claims based on "non-verbal cues." The company later deleted the tweet and said it was poorly worded seeing as they have no plans to use AI to deny claims based on physical or personal features. The incident highlights the care with which companies need to roll out AI fraud detection features; miscues in this realm could draw public outcry and regulatory scrutiny.

Finally, cryptocurrencies could disrupt the payments industry. But that's a very large "could," because even though cryptocurrencies are clearly here to stay, that doesn't mean they'll materially change the role of payment providers.

• The mainstream cryptocurrencies can't yet handle the volume of transactions necessary to become a mainstream payments provider. Whereas legacy payments providers can handle thousands of transactions per second, the Bitcoin blockchain can only handle three to seven and the Ethereum blockchain can handle around 15, according to Deloitte Insights. Lightning technology, Ethereum 2.0 and other emerging protocols are critical to watch, as they could strengthen crypto's usefulness for transactions.
• At present, though, crypto payments take far too long to settle. By contrast, real-time payments using existing, non-blockchain systems are gaining mainstream adoption , with payment volume rising 41% in 2020 to reach 70.3 billion transactions globally.
• Making payments on cryptocurrency blockchains is also expensive. Transaction fees can be pushed higher by geopolitical events, energy costs and blockchain demand.
• One way cryptocurrencies could displace payments providers is if a country adopts a coin as its national currency. This is exactly what happened in El Salvador , but the initiative has gotten off to a rocky start. It's also worth noting that countries with global reserve currencies — as the U.S. has and China hopes its digital yuan might be — would view decentralized cryptocurrencies as a threat to their control over the financial system.
• National governments will likely adopt their own central bank digital currencies (CBDCs), though these won't necessarily interfere with traditional payments systems. China has already launched a CBDC with its digital yuan, The Federal Reserve published research in May 2021 on the possible launch of a CBDC and the EU is actively exploring its own digital euro that could combine centralized and decentralized elements. The design of CBDCs will determine the extent to which they infringe on traditional payments. For instance, depending on design, CDBCs could largely be limited to large cross-border settlements or they could entirely replace traditional currencies and include programmable elements determining who can buy what from where.
• In the meantime, stablecoins could help bridge the gap between traditional and digital currencies. Stablecoin transaction volume has closely followed the cryptocurrency exchange transaction volume in recent years: There were approximately $3 trillion worth in stablecoin transactions in the first half of 2021, according to McKinsey and Company. Stablecoins have gained popularity as a means of circumventing high cross-border payment fees. This points to the potential for stablecoins and later CBDCs to exert downward price pressure on the fees taken by traditional payments players.

Methodology

To rank the competitors, we've developed a formula that encapsulates 30 criteria. Those criteria span five groupings that factor into power: Economics, Leadership, People, Innovation & Politics and Policy. We then developed two systems for weighting the criteria — one for measuring power and the other for measuring momentum — such that companies can be scored on a 0–100 scale. Read our full methodology here .