As more startups enter the $1.5 trillion global payments market with free services, banks could lose as much as $280 billion in revenue by 2025, according to a professional services firm Accenture report titled Banking Pulse Survey: Two Ways To Win issued on Monday.
According to the report, the global payments market is expected grow to $2 trillion by 2025, but banks are likely to lose out on $280 billion, or 15% of their global payments revenues.
Banks face rising completion from tech startups like Stripe, Square, Paypal and TransferWise that offer foreign exchange payments to retail and small business customers with lower fees, according to Reuters.
New technology makes more payments become instant, thus removing the need for credit cards that earn banks revenue, Accenture said in a report. This in turn accelerates the trend towards free payments. Accenture estimates that free payments would put 8% of banks’ payment revenue at risk.
“The digital boom will mean banks have to fundamentally change the way they think about their revenue composition,” said Alan McIntyre, who leads Accenture’s Banking practice globally. “To succeed in the future, banks will need to develop new digital business models at scale.”