95% of Payment Service Providers (PSPs) have experienced their bank accounts being closed or restricted by their banking partners. Worse still, 71% reported that the closures or restrictions occurred with minimal transparency and no explanation from their bank.
This is according to a new report from cross-border payments and FX fintech, Neo.
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The report entitled ‘Beyond Banks: The Rise of Fintech Solutions in the Payment Service Provider Industry’, presents findings from a survey of 100 C-suite professionals at PSPs across Europe. It aims to shed light on the challenges they face in their banking relationships and their strategies for overcoming them.
69% of PSPs rely on just three or fewer banking partners
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 were to fail, like we saw in 2023’s banking crisis, these firms would face significant risk.
The research also revealed that only 2% 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. 39% of PSPs have one to three EMI/PSPs, while 48% maintain relationships with four to five EMI/PSPs demonstrating a strong preference for diversified fintech partnerships. 75% of PSPs are actively exploring fintech solutions as potential replacements for traditional banks.
Other notable findings showed that the top pain points when working with traditional banks are lengthy onboarding processes (44%), incompatibility with crypto exchanges (29%), risk of account closure (25%), legacy technology (23%), and poor customer support when payments are blocked (19%).
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By GlobalDataLaurent Descout, Co-Founder and CEO of Neo, commented: “PSPs have evolved from card processors to become critical intermediaries in the financial ecosystem, facilitating electronic transactions between merchants, consumers, and financial institutions. 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.”
