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Total Payment Volume (TPV) in startup

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Total Payment Volume (TPV) in startup in Bangladesh

What exactly is TPV?
Total Payment Volume (TPV) is the monetary value of all transactions processed by a specific payment processor on a gross basis.

Total Payment Volume (TPV) is the sum of all payments received.

What exactly is Total Payment Volume (TPV)?
TPV is an abbreviation for “Total Payment Volume (TPV)” and is a term commonly used in the payments industry, particularly digital payment technology businesses and FinTech startups.

Total payment volume (TPV) is the total monetary value of all transactions executed by a payment platform over a specified time period.

Payments made by credit card, debit card, mobile payments, digital currencies, and any other method of payment accepted by a given platform are all included in TPV.

Some notable examples of significant payment systems and processing companies today that serve customers on both the B2B (e.g., merchants) and B2C (i.e., individual consumers) sides are as follows:

PayPal Holdings, Inc. (PYPL) is a publicly traded company.
Block, Inc. was once known as Square (SQ).
Stripe Inc.
(SHOP) Shopify Inc.
Mastercard, Inc. (MA) Visa, Inc. (V)
The practical application of tracking the TPV measure is to understand the scale and growth of a payment processor, which has a direct impact on the platform’s revenue and profits.

Actively monitoring a payment processing company’s TPV and comparing it to other comparable peers in the payments sector is also beneficial for estimating the level of trust customers place in the platform to handle their transactions (and its growth trajectory).

Because their transactions are enabled by the provider, the payment processor chosen by a firm (i.e. the B2B customer) is a vital aspect of essentially any business model, which means that trust and reliability are two variables that ultimately determine which payment processor is picked.

All else being equal, the higher the total payment volume (TPV) on a payment processing platform, the more revenue it generates.

However, because the TPV is a measure of “gross” volume over a set time period, it does not correctly represent the payment processor’s profitability or actual income.

As a result of the processing and transaction costs that diminish the gross revenue amount, the TPV statistic does not reflect the actual net revenues produced by a certain platform.

Nonetheless, the TPV remains one of the most important KPIs for payment providers and platforms to closely monitor and report to investors in order to provide insights into the current state of their growth profile, which conceptually “flows down” to influence their net revenue, growth trajectory, and profitability; however, TPV is NOT equivalent to net revenue.

Example of PayPal TPV KPI
PayPal (PYPL) is one example of a leading payment provider that includes total payment volume (TPV) as a key performance indicator (KPI) in its financial reports, including investor relations presentations and related filings.

For example, in its most recent 10-K filing, PayPal’s management team notes, “Net revenues increased $2.1 billion, or 8%, in 2022 compared to 2021, driven primarily by growth in total payment volume (TPV).”

The fact that PayPal’s management team considers TPV to be a key driver of historical (and future) transaction revenue performance exemplifies the relationship between TPV and net revenue.

Revenue from PayPal Transactions
“Our transaction revenues are primarily derived from fees paid by our customers to receive payments on our platform.” These fees may have both a fixed and a variable component. The variable component is often a percentage of the payment amount and is known when the transaction is completed. When the underlying transaction is approved for a refund, the variable component of the fee is eligible for reimbursement for a percentage of our transactions. Each quarter, we estimate the amount of fee refunds that will be processed and record a provision against our transaction revenues. Total Payment Volume (“TPV”) refers to the volume of activity performed on our payments platform that results in transaction revenue. We earn additional fees from merchants and consumers on currency conversion transactions, when we enable cross-border transactions (i.e., transactions where the merchant and consumer are in different countries), to facilitate the instant transfer of funds from our customers’ PayPal or Venmo accounts to their bank account or debit card, to facilitate the purchase and sale of cryptocurrencies, and as contractual compensation from sellers who violate o Certain incentives provided to our consumers also diminish our transaction revenues.”

  • PayPal Administration (Source: PYPL 10-K)

Example of PayPal Total Payment Volume (TPV)

PayPal TPV Key Performance Indicator in 2022 (Source: PYPL 10-K)

How Do You Determine TPV?
The total payment volume (TPV) measure is calculated by adding the monetary value of all transactions handled by a payment platform during a certain time period.

The following is a step-by-step procedure for calculating the total payment volume (TPV).

Identify Processed Transactions Keep a record of each transaction processed by the payment platform over a specific time period, including the customer, transaction ID number, and so on.
Determine the Total Monetary Value related to Each Processed Transaction Determine the total monetary value attributable to each processed transaction specified in the previous step.
Calculate the Sum of Transaction Monetary Values Compute the total payment volume (TPV) by adding the monetary values of all transactions performed within the specified period.
The TPV Formula
The formula for calculating total payment volume (TPV) is simple: it is the sum of the monetary value of all transactions performed across a payment network during a given time period.

(Ti) = Total Payment Volume (TPV).


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