Traditional banks face profit loss threat due to delayed modernisation of Payments Technology

Traditional banks that fall behind in updating their wholesale payments technology face the stark risk of forfeiting up to 15% of revenues from small and medium-sized businesses (SMBs)—equating to roughly a quarter of their profits—to more forward-thinking competitors.

Projections indicate that global wholesale payments revenues are set to expand at a cumulative annual growth rate of 6%, reaching a substantial $645 billion by 2027. However, a considerable portion of this growth is expected to divert away from traditional banking institutions towards innovative providers, including fintech firms and software companies.

Recent research suggests that emerging providers are well-positioned to capture approximately 10% of SMB transaction global banking revenues, equivalent to around 15% of overall profits. This trend underscores a significant challenge to traditional banks, highlighting the critical need for them to modernise their payment technology to remain competitive in the market.

The evolving financial landscape underscores a growing demand among businesses, particularly SMBs, for faster, more efficient, and cost-effective payment solutions. Businesses are increasingly aligning with technology to tailor their payment services to meet customer expectations. This shift in demand places significant pressure on traditional banks to swiftly adapt to the changing environment.

Investing in the modernisation of payment technology not only enables banks to seize emerging opportunities but also allows them to expand their market influence. Traditional banks have an urgent need to embrace technological and digital transformation initiatives. Failure to do so could result in the loss of market share, decline of revenue streams, and a diminished role in shaping the future of payments.

Prioritising technological advancement is paramount for traditional banks to remain relevant and competitive amidst the current—and constantly evolving—landscape of the financial industry.