The vast majority (95 per cent) of Payment Service Providers (PSPs) have experienced their bank accounts being closed or restricted by banking partners, according to new research by cross-border payments and foreign exchange (FX) fintech, Neo.
Neo also revealed that 71 per cent of PSPs’ bank account closures or restrictions occurred with minimal transparency and no explanation from their bank.
In its report, ‘Beyond Banks: The Rise of Fintech Solutions in the Payment Service Provider Industry’, Neo highlights the challenges facing C-suite professionals at PSPs across Europe in their banking relationships.
Nearly three-quarters (69 per cent) of PSPs rely on just three or fewer banking partners. Neo says that a PSP relying on fewer than three banks is in a precarious position, especially since safeguarding banks typically don’t make up the majority of these banking partnerships. If a safeguarding bank failed, as seen during 2023’s banking crisis, these firms would face significant risk.
The research also revealed that only two per cent of PSPs have been able to open an account with a traditional bank in under six months, with the average time stretching to nearly a year (11.5 months).
As a result, many are now exploring alternative solutions. Over one-third (39 per cent) of PSPs have one to three EMI/PSPs, while 48 per cent maintain relationships with four to five EMI/PSPs demonstrating a strong preference for diversified fintech partnerships.
Seventy-five per cent of PSPs are actively exploring fintech solutions as potential replacements for traditional banks. Respondents highlighted what they viewed as essential qualities when selecting a fintech partner: security of funds (31 per cent), speedy onboarding (26 per cent) and low, transparent fees (26 per cent) were the key factors.
Significant challenges remain
Neo revealed the banking services that PSPs rely on the most. Transaction processing (40 per cent) emerged as the most cited service, closely followed by technology services (38 per cent), liquidity management and investment of balances (35 per cent) and safeguarding accounts (26 per cent).
However, PSPs working with traditional banks also revealed the top pain points they experience most often:
lengthy onboarding processes (44 per cent)
incompatibility with crypto exchanges (29 per cent)
risk of account closure (25 per cent)
legacy technology (23 per cent)
poor customer support when payments are blocked (19 per cent)
The main cross-border payment issues were limited capabilities of banking platforms (31 per cent) such as real-time payment processing and multi-currency handling, reconciliation of flows for receivers (26 per cent) and reporting of transactions in ERP or TMS (24 per cent).
A particular pain point in the UK was the reconciliation of flows (43 per cent), In Italy, 40 per cent said limitations of banking platforms were the most significant issue and 40 per cent in France said reporting transactions in ERP or TMS was the largest problem.
PSPs now have alternative options to traditional banks
Laurent Descout, co-founder and CEO of Neo, comments: “PSPs have evolved from card processors to become critical intermediaries in the financial ecosystem, facilitating electronic transactions between merchants, consumers, and financial institutions.
Laurent Descout, co-founder and CEO of Neo
“Despite this, the vast majority have faced poor treatment from their banks including account closures and restrictions with little transparency from their bank. This lack of transparency not only hampers immediate operations but also complicates future planning and risk management. They also represent a potential breach of regulatory obligation if the PSP is left with no other bank to safeguard clients’ funds.
“For those that have faced account closures, it takes a ridiculously long time to get another one set up with traditional banks. These significant delays impede PSPs’ ability to scale and operate efficiently in international markets, affecting their competitive edge and growth potential. The complexity of opening an account could be why so many PSPs rely on such a small pool of banks, leaving them at risk if their partner should fail.
“The good news is that PSPs now have alternative options to traditional banks and many are exploring them. The ongoing shift toward fintech is reshaping the market, driving competition, and setting new benchmarks for efficiency and service. As this continues, fintech providers who truly understand the diverse needs of PSPs across regions will be best positioned to capture market share and form lasting partnerships.”
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