What is total processing volume (TPV)?

TPV is a widely used term in the payments space and acts as a useful measure of monetary value generated over a particular time period via any payment method.

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October 2, 2023
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What is total processing volume (TPV)?

Total payment volume (also known as total processing volume) is a widely used term in the payments space and acts as a useful measure of monetary value generated over a particular time period via any payment method. 

Essentially, while TPV is something of a blunt instrument when it comes to measuring financial performance, it can offer an insight into the growth and reliability of a particular payment processor. 

In this article, we explain what TPV is, how to calculate it, and why it’s important. We also look at some real life examples of TPV in the payments space and show how you can elevate your TPV with Checkout.com. 

Total payment volume definition

Total payment volume (TPV) measures the gross value of payments successfully processed through a payments platform over a given timeframe. 

By benchmarking this figure against comparable payment processors, you can gain an insight into things like financial health, performance, and market postion.  

TPV does measure revenue to an extent. However, as it doesn’t account for expenses like transaction fees, it’s important to note that TPV does not reflect profitability or the amount of net revenue generated by a platform. 

Many notable payments platforms publish TPV in their financial reports, making it easy to compare the TPV of different providers. 

How to Calculate TPV?

TPV is a fairly simple calculation involving the sum of every transaction processed by a platform over a predefined period. 

  • Step 1 - record every single transaction processed by a payments platform over, for example, a year, whether via card, digital wallet, or any other method
  • Step 2 - establish the total monetary value for each transaction
  • Step 3 - add these values together to get the annual TPV for a payments provider

Expressed as a formula, TPV looks like this: TPV = Σ (Ti). 

Σ is the symbol for summation notation. Ti represents the monetary value for each transaction. 

Why is TPV important?

TPV is a critical metric in payment processing and can offer you insights into: 

  • Business health - while TPV doesn’t correlate directly with revenue, a growing TPV is a great indicator that, as more or higher value payments are coming in, your business is scaling and healthy
  • Market position - as we’ve seen in the Stripe and Ayden example, TPV can also provide an indication of your market share or how you’re growing in comparison to your competitors 
  • Strategy - knowing your own and your competitor’s TPVs can also help to inform strategy. For example, if your TPV is increasing rapidly, you might need to invest in improved processing and fraud detection capabilities 
  • Financial planning - by showing how your TPV might continue to change over a particular timeframe, this metric can help you with budgeting and financial forecasting 
  • Operational insights - by getting more granular with your TPV, you can start to understand how your transaction value changes over the course of weeks or even days. This could flag up potential issues before they spiral and also allows you to pinpoint your peak processing times

Elevate your total payment volume with Checkout.com

Checkout.com provides an integrated set of tools and features designed to enhance and simplify payment operations for your business. With a focus on boosting efficiency, reducing fraud, and opening up new global markets, we can help your business grow its TPV. 

For example, our platform lets you process payments in more than 150 currencies and offer dozens of popular local payment methods to your customers, helping to increase transactions and, therefore, your TPV. 

Likewise, multi-factor authentication and machine learning tools that stop potential fraud while approving more legitimate transactions can reduce declines and boost your acceptance rates. That means more genuine sales and a higher TPV. 

Speak to our sales team to find out more about how Checkout.com elevate your TPV.  

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October 2, 2023 16:21
October 2, 2023 16:21