The Capgemini Research Institute has highlighted the necessity for banks to modernize their merchant services in its latest World Payments Report 2026.
Challenges Faced by Banks
Data from the report indicates that financial institutions are under pressure to enhance their merchant services due to competitive challenges posed by agile PayTechs, which offer tailored technology solutions for payments.
Banks must address several complexities identified in the report, with small (15%) and mid-sized merchants (22%) expressing lower satisfaction levels. Despite this, 66% of businesses still prefer traditional providers for their financial needs, presenting a significant opportunity for banks to improve.
Merchant Service Prioritization
The Capgemini Research Institute’s report notes that many banks have begun to downplay merchant services due to issues like reduced priority, complex infrastructure, and increased operational costs. In response, PayTechs are stepping in to meet the market demand.
While 70% of merchants value high payment success rates and reliable infrastructure in a digital environment, only 19% of banks believe they can deliver these services effectively. Furthermore, 69% of merchants require rapid and straightforward onboarding; however, just 13% of bank executives feel their institutions are capable of providing this service.
Onboarding and Speed
The data suggests that merchant onboarding is a challenge for banks, often taking up to seven days with an average cost of approximately USD 496. In contrast, PayTechs can enable merchants to go live within 60 minutes for just USD 214.
With regards to innovation pace, PayTechs are leading the way, having already introduced payment orchestration, a key enabler for intelligent transaction routing. Only 47% of banks have done so.
Fraud Prevention and Security
Banks struggle with fraud prevention and payment processing, as only 26% of bank executives are confident in providing advanced fraud protection and data security measures.
Merchants’ Perceptions and Opportunities for Banks
Given the current market dynamics where ecommerce transactions are on the rise, merchant servicing can present opportunities for banks to expand their services beyond mere transaction processing. Leveraging their trust and financial product offerings, banks could regain a significant share of this business.
Merchants value banks’ strong brand reputation (78%), perceived stability in the market (49%), and broader range of financial products (46%) compared to PayTechs.
