Banks Under Pressure: 40% of Merchants Eye Shift to PayTechs
Mumbai: The Capgemini Research Institute’s World Payments Report 2026 reveals that banks are under pressure to modernize their merchant services due to increasing competition from agile PayTechs. With satisfaction levels among small and mid-sized merchants at an all-time low (15% and 22%, respectively), banks risk losing relevance in the merchant ecosystem. Despite this, 66% of merchants still prefer traditional providers for their financial services needs, presenting a significant opportunity for banks to regain ground.
Challenges in Bank Onboarding and Payment Processing
The report highlights major challenges in bank onboarding of merchants, which can take up to seven days and cost an average of $496. In contrast, PayTechs can enable merchants to go live in under 60 minutes for as little as $214. Merchants face significant losses due to unreliable payment systems, with up to 9 hours of downtime annually and losses of about 2% of total revenue to payment fraud.
PayTechs Outpacing Banks in Innovation
PayTechs are winning the innovation race, with 60% adopting Gen AI across their operations, compared to 41% of banks. Additionally, 70% of PayTechs have deployed payment orchestration, a critical enabler for intelligent routing of transactions, compared to just 47% of banks. PayTechs are also shaping market expectations in line with regulatory shifts, prioritizing Central Bank Digital Currencies, stablecoins, and digital identity frameworks.
Global Non-Cash Transactions Surge
Global non-cash transactions are expected to reach 3.5 trillion by 2029, driven by rapid growth in the Asia-Pacific region. Instant payments and digital wallets are gaining influence, rising from 13% in 2020 to 25% in 2024, while the share of cards is expected to decline from 65% to 52% during the same period.
Opportunity for Banks
Banks can leverage their unique strengths, including deep trust and power of working capital, to win back business. Merchants value banks’ strong brand reputation (78%), perceived stability, and broader suite of financial products. By offering embedded, industry-specific value-added services and modernizing their payment systems, banks can compete with PayTechs and regain market share.
