Financial startups could be ready to register as much as $280 billion in revenue that banks would now be missing out. According to a report released by Accenture, the global payment business is expected to reach $2 trillion by 2025. Nevertheless, banks would be losing 15% of their global payments revenues.
Financial startups are expanding around the world, and banks could feel their presence by 2025. The payments business, that includes card payments and international transfers is currently dominated by traditional financial institutions and banks.
This industry could reach a $2 trillion market by 2025, but banks could start losing their dominance. Indeed, Accenture considers that $280 billion (or 15% of the global payments revenues) are going to move to FinTech startups.
As LearnBonds previously reported, Challenger Banks in the UK registered five million new accounts during the first half of the year. If the number of accounts continues growing at the same pace, there could be 35 million challenger bank customers by 2020.
Other relatively new financial startups include Stripe, Square and PayPal. They offer similar services to banks but for lower fees and more flexible schemes. At the same time, firms working with digital assets such as Bitcoin (BTC) are also expanding in the market.
Gareth Wilson, head of Accenture’s global payments team, explained:
“Rather than being at the forefront of the new wave of the booming payments market, banks are feeling the heat from new competition and seeing their margins squeezed.”
In addition to it, Mr. Wilson said that the world is now moving towards instant, invisible and free payments.
In order to arrive at such a conclusion, Accenture analyzed trends in how consumers are processing payments and how payment providers could behave in the future. Indeed, the banking system has high fees compared to those offered by startups and financial companies.
Back in 2018, the Bank of America released a report in which they acknowledge the risks they face with a more competitive landscape. The bank makes reference to the adoption of new technologies, including internet services, cryptocurrencies and payment systems.
“This can reduce our net interest margin and revenues from our fee-based products and services,” the Bank of America explained.
Traditional financial companies and banks will have to increase their investments and expenditures to modify their banking channel strategies. Nevertheless, considering some constraints that FinTech do not face (i.e. operating with physical branches), banks might not be successful in developing or introducing new services to the market.