Banks are facing significant pressure to modernize their merchant services as nearly 40% of small and mid-sized businesses consider shifting to specialized payment technology providers, according to the Capgemini Research Institute's World Payments Report 2026. The report, published September 25, 2025, reveals that traditional financial institutions risk losing relevance with merchants who are increasingly dissatisfied with current banking services. Satisfaction levels remain particularly low among small merchants at 15% and mid-sized merchants at 22%, creating an environment ripe for disruption by more agile competitors.

The research highlights that banks have systematically deprioritized merchant services due to margin compression, complex infrastructure requirements, and substantial operational costs. This strategic gap has allowed PayTechs—firms specifically created to provide technology solutions facilitating payments—to step in and capture market share. While 70% of merchants prioritize high payment success rates and reliable infrastructure in today's digital-first environment, only 19% of banks express confidence in their ability to deliver these critical services effectively.

Operational inefficiencies present significant challenges for banks attempting to retain merchant clients. The report documents that bank onboarding processes can take up to seven days with costs reaching $496 per merchant, compared to PayTech solutions that enable businesses to go live in under 60 minutes for as little as $214. Additionally, merchants currently experience up to nine hours of annual downtime due to unreliable payment systems, making alternative PayTech options increasingly attractive for businesses seeking operational stability.

Despite the competitive threats, the report identifies a substantial opportunity for traditional providers, with 66% of merchants still preferring established banking partners for their financial services needs. The global payments landscape continues to expand rapidly, with total worldwide non-cash transactions projected to reach 3.5 trillion by 2029, led by strong growth in the Asia-Pacific region. However, PayTechs are leading the innovation race, with 60% adopting generative AI across their operations compared to just 41% of banks, suggesting that traditional institutions must accelerate their digital transformation efforts to remain competitive.