The Capgemini Research Institute has released its World Payments Report 2026, underlining the need for banks to modernise their merchant services.
Data revealed that financial institutions face increased pressure to optimise their merchant services due to competition from more agile PayTechs, which have been developed specifically to offer technology solutions that deliver payment services.
Bank’s battle to maintain relevance
In its 21st edition, the Capgemini Research Institute’s report uncovered that banks face several complexities, with satisfaction levels being especially low among small (15%) and mid-sized merchants (22%). However, 66% of merchants still gravitate toward traditional providers for their financial services. This brings a substantial opportunity for further development for banks.
The newly released report showcases that banks have started to deprioritise the merchant services business, with most of them mentioning compression, complex infrastructure, and increased operations costs as the main causes for this. As a response, PayTechs stepped in to fill this role. Even if 70% of merchants consider high payment success rates and reliable infrastructure in a digital-first environment, only 19% of banks feel poised in their own ability to provide these services. Additionally, 69% of merchants require fast and simplified onboarding; however, just 13% of banking executives think that their institutions are fully capable of offering this service.
Furthermore, data underlines increased difficulties for banks in onboarding merchants, which can take up to seven days, with an average cost of approximately USD 496. In comparison, PayTechs can allow merchants to go live in under 60 minutes for USD 214. Also, regarding the pace of innovation, PayTechs take the first place, which creates a substantial disparity. For example, 70% of PayTechs have already introduced payment orchestration, an enabler for the intelligent routing of transactions. By contrast, only 47% of banks did so.
Complexities in fraud prevention and payment processing come as yet another area for enhancement. According to the report, only 26% of bank executives are confident in providing advanced fraud prevention and data security.
Considering the current market, where transaction volumes in ecommerce are rising, merchant servicing can bring several opportunities for banks to expand their capabilities beyond processing. Banks can utilise their strengths, including deep trust and the power of working capital, to take back more business. Merchants see banks’ brand reputation (78%), perceived stability and long-term presence in the market (49%), and broader offering of financial products (46%) compared to PayTechs.
