The Capgemini Research Institute’s World Payments Report 2026, released recently, underscores growing pressure on banks to upgrade their merchant services as nimble PayTech firms gain ground.
Now in its 21st edition, the report reveals that banks continue to struggle, with satisfaction levels among small (15%) and mid-sized merchants (22%) remaining low.
Even so, 66% of merchants still favor traditional providers for financial services, pointing to a strong opportunity for banks moving forward.
The report notes that banks have deprioritized merchant services due to low margins, complex infrastructure, and high costs, leaving space for PayTechs to step in. While most merchants prioritize reliable payments and quick onboarding, only a fraction of banks feel equipped to deliver.
Merchant onboarding with banks can take up to seven days and cost nearly $500, compared to less than an hour and about $214 with PayTechs, making slow processes a key driver of merchant attrition.
“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.”
PayTechs are rapidly outpacing banks in innovation, with 70% adopting payment orchestration versus 47% of banks, and 60% using GenAI compared to 41%.
They are also more proactive on emerging trends, with nearly half exploring CBDCs and stablecoins and 59% investing in digital identity, far ahead of banks.
Banks also lag in fraud prevention and security, only 26% of executives feel confident in their capabilities, while merchants report losing 2% of revenue to fraud and facing up to nine hours of downtime each year.