Banks face fallout as 40% of small and mid-sized merchant businesses eye shift to PayTechs

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Banks face fallout as 40% of small and mid-sized merchant businesses eye
shift to PayTechs

• Merchants face up to nine hours of downtime annually due to their current unreliable payment systems, increasing attractiveness of alternative PayTech¹options
• PayTechs are winning the innovation race, with 60% adopting Gen AI across their operations, compared with 41% of banks
• Total worldwide non-cash transactions set to reach 3.5 trillion by 2029, led by rapid growth in Asia-Pacific region
  
  
  

Paris, September 25, 2025 – The Capgemini Research Institute’s World Payments Report 2026, published today, highlights mounting pressure on banks to modernize their merchant services in the face of competition from more agile PayTechs, those firms that have been created specifically to provide technology solutions that facilitate payments. Now in its 21^st edition, the report finds that banks face an uphill battle, with satisfaction levels particularly low among small (15%) and mid-sized merchants (22%). Despite this, 66% of merchants still prefer traditional providers for their financial services needs representing a significant opportunity ahead.

Banks risk losing relevance with merchants
According to the new report, banks have deprioritized the merchant services business, citing margin compression, increasingly complex infrastructure, and hefty operational costs, so PayTechs have stepped in to fill the gap. While 70% of merchants value high payment success rates and reliable infrastructure in a digital-first environment, only 19% of banks feel confident in their own ability to deliver these services. Similarly, 69% of merchants demand fast and seamless onboarding, yet just 13% of banking executives believe their institutions are fully capable of delivering this service.

The report also highlights major challenges in bank onboarding of merchants, which can take up to seven days, with an average cost of up to $496. PayTechs, by contrast, can enable merchants to go live in under 60 minutes for as little as $214. This slow and cumbersome process costs merchants both revenue and patience, turning many into flight risks.

“As many banks focus on the card issuing business over merchant acquisition, gaps have emerged in servicing merchants, enabling agile, digital-first competitors to win market share,” said Jeroen Hölscher, Global Head of Payment Services at Capgemini. “With 40% of merchants on the move, the message is clear: banks risk falling out of the merchant ecosystem entirely. To recover, they need to eliminate the friction that costs merchants time and money, and embrace the possibilities offered by Generative AI. Those who act swiftly and put merchants at the center of their strategy will be best placed to compete with PayTechs in a new era of commerce.”