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Payment Service Providers Shift to Fintech, 95% Report Banking Restrictions

Pat Crawley
Pat Crawley
32 Min Read
payment-service-providers-shift-to-fintech,-95%-report-banking-restrictions

Wednesday, 09/10/2024 | 14:47 GMT by Jared Kirui

  • A report by fintech firm Neo indicates that 75% of PSPs are exploring fintech solutions as alternatives to traditional banks.
  • The majority are now relying on fewer banking partners.

Fintech

Payment Service Providers (PSPs) face significant challenges in their relationships with traditional banks. A recent report by fintech firm Neo showed that 95% of PSPs have had their banking accounts closed or restricted, often with little to no explanation. Amid limited banking options, many PSPs are now turning to fintech solutions.

Banking for PSPs

The report presented findings from a survey involving 100 C-suite executives at European PSPs. A concerning 71% of these professionals noted that their accounts were closed without transparency from their banking partners.

Source: Neo

Relying on a small number of banking partners is a risky strategy for many PSPs. Approximately 69% of respondents indicated they depend on three or fewer banks, which heightens their vulnerability. Additionally, only 2% of PSPs reported successfully opening a traditional bank account in less than six months.

The average wait time extends to nearly a year, leaving many PSPs frustrated and seeking alternative solutions. As a result, the research highlighted that over one-third (39%) of PSPs have formed partnerships with one to three Electronic Money Institutions or other PSPs. Nearly half (48%) reportedly maintain relationships with four to five EMIs.

Source: Neo

Besides that, the report identified several problems PSPs encounter when dealing with traditional banks. 44% of respondents are affected by lengthy onboarding processes, while 29% cited incompatibility with crypto exchanges. Additionally, 25% reported the risk of account closures as a significant concern, alongside challenges resulting from outdated banking technologies.

Challenges in Traditional Banking

The difficulties extend to cross-border payments, where 31% of PSPs highlighted limited banking platform capabilities, particularly in real-time processing and multi-currency handling. The discrepancies between regional issues are notable; for example, reconciliation of flows emerged as a top concern in the UK, while limitations in banking platforms troubled many in Italy and France.

In light of these challenges, PSPs are increasingly integrating EMI and PSP solutions into their operations. On average, firms have three EMI/PSPs within their banking ecosystem.

Source: Neo

A significant 75% of PSPs are actively exploring fintech solutions as potential replacements for traditional banks. This trend is particularly pronounced in regions like the UK, where 86% of PSPs are looking to fintech partners for improved service delivery.

When selecting a fintech partner, PSPs prioritize several key factors. The security of funds tops the list at 31%. Speedy onboarding (26%) and low, transparent fees (26%) also play crucial roles in decision-making.

Payment Service Providers (PSPs) face significant challenges in their relationships with traditional banks. A recent report by fintech firm Neo showed that 95% of PSPs have had their banking accounts closed or restricted, often with little to no explanation. Amid limited banking options, many PSPs are now turning to fintech solutions.

Banking for PSPs

The report presented findings from a survey involving 100 C-suite executives at European PSPs. A concerning 71% of these professionals noted that their accounts were closed without transparency from their banking partners.

Source: Neo

Relying on a small number of banking partners is a risky strategy for many PSPs. Approximately 69% of respondents indicated they depend on three or fewer banks, which heightens their vulnerability. Additionally, only 2% of PSPs reported successfully opening a traditional bank account in less than six months.

The average wait time extends to nearly a year, leaving many PSPs frustrated and seeking alternative solutions. As a result, the research highlighted that over one-third (39%) of PSPs have formed partnerships with one to three Electronic Money Institutions or other PSPs. Nearly half (48%) reportedly maintain relationships with four to five EMIs.

Source: Neo

Besides that, the report identified several problems PSPs encounter when dealing with traditional banks. 44% of respondents are affected by lengthy onboarding processes, while 29% cited incompatibility with crypto exchanges. Additionally, 25% reported the risk of account closures as a significant concern, alongside challenges resulting from outdated banking technologies.

Challenges in Traditional Banking

The difficulties extend to cross-border payments, where 31% of PSPs highlighted limited banking platform capabilities, particularly in real-time processing and multi-currency handling. The discrepancies between regional issues are notable; for example, reconciliation of flows emerged as a top concern in the UK, while limitations in banking platforms troubled many in Italy and France.

In light of these challenges, PSPs are increasingly integrating EMI and PSP solutions into their operations. On average, firms have three EMI/PSPs within their banking ecosystem.

Source: Neo

A significant 75% of PSPs are actively exploring fintech solutions as potential replacements for traditional banks. This trend is particularly pronounced in regions like the UK, where 86% of PSPs are looking to fintech partners for improved service delivery.

When selecting a fintech partner, PSPs prioritize several key factors. The security of funds tops the list at 31%. Speedy onboarding (26%) and low, transparent fees (26%) also play crucial roles in decision-making.

Jared Kirui

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Jared is an experienced financial journalist passionate about all things forex and CFDs.

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