Tech start-ups offering the ability to send money for free could wipe $280bn from big bank’s revenue by 2025, a new study says.
The prediction is based on the fact that more tech start-ups, including challenger banks, are offering free and instant money transfers to both friends and businesses.
This new technology threatens the traditional global payments business, which this year was worth around $1.5 trillion, professional services firm Accenture said in its report.
The firm said it predicted changes in the behaviour of payments providers and technology had led it to its prediction, which would account for 15 per cent of bank’s global payments revenue.
“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,” Gareth Wilson, head of Accenture’s global payments team told Reuters.
More than two-thirds of banking executives surveyed said that they agreed that digital payments are more commonly free.
“We face an inevitable world of instant, invisible and free payments, which spells trouble for banks that don’t want to be relegated to the plumbing of payments.”
Accenture also reports that as payments become faster – often instant – it will add pressure on credit card providers to justify their credit card products.
Newer tech platforms such as PayPal and Adyen also mean that the merchants can directly accept payments without the need for intermediary banking products, the firm reports.