In the race to handle payments, banks are increasingly losing ground to smaller, nimbler paytechs—companies that provide not only end-to-end payment solutions but business accounts and operational tools.
Data from Capgemini highlights how these companies are challenging banks with faster services, more cost-efficient services. Onboarding a merchant through a bank can take up to seven days and cost as much as $496. Paytechs, by contrast, can activate a merchant in less than an hour for as little as $214.
Paytechs are also leading in innovation. More than two-thirds already offer payment orchestration, which consolidates a merchant’s payment operations and delivers a comprehensive view of the entire ecosystem. Fewer than half of traditional banks provide such services. Paytechs have further distinguished themselves by adopting emerging technologies— such as generative AI and stablecoins—at a much higher rate than banks.
According to Capgemini, these findings reflect how banks have deprioritized merchant services, leaving a gap that paytechs have readily stepped in to fill. Merchants, meanwhile, are focused on achieving high payment success rates and dependable infrastructure—yet only 19% of banks surveyed expressed confidence in their ability to deliver on these needs.
The pressure is especially pronounced among smaller and mid-sized merchants, nearly half of whom say they plan to switch to paytechs within the next year.
Still Looking for Stability
Interestingly, the majority of merchants still prefer traditional providers for their financial services needs. They point to banks’ strong brand reputation, perceived stability, and broader suite of financial products as key advantages over paytechs.
At the same time, merchants indicate a willingness to return to traditional payment providers if they can deliver industry-specific, value-added services—such as loyalty programs tailored for retailers. In fact, most surveyed merchants said they would consider switching back if a bank offered comparable services at similar costs to a paytech.
Room for Improvement
Customized services are one of the strongest opportunities for improvement. While paytechs have proven more agile in tailoring solutions to specific segments, fewer than a quarter of merchants surveyed said they receive meaningful, personalized value-adds from banks.
Fraud prevention is another critical area where banks can regain ground. Merchants reported losing nearly 2% of their total revenue to payment fraud, yet only about a quarter of bank executives expressed confidence in their institutions’ ability to deliver advanced fraud prevention and data security.
The post How Banks Can Regain the Ground They’ve Lost to Paytechs appeared first on PaymentsJournal.
