Payments is set to become a £41 billion market in the UK, but British banks could lose out unless they do more to offer customers payment services that are instant, invisible and free.

The study found that payments volumes around the world are increasing and will continue to grow at 5.5% a year. This is driven by a combination of demographic factors such as the growing number of middle-class consumers in India and China, increasing globalisation of trade and finance, and the rapid development of digital banking and mobile wallets. However, there are big risks on current bank business models that risk £230 billion in lost opportunity globally.

For instance, rising competition from non-banks in invisible payments - where payments are incorporated in mobile apps or devices, thus cutting out banks and cards will put £1.7 billion of bank revenues at risk. Customers now expect more from their banks, and fintechs and social media giants are hot on banks’ trails in providing this. But, non-banks carried out just 8.1% of global payments revenues in 2019, demonstrating newcomers haven’t broken the barriers just yet.

“In order to avoid being pushed aside, banks need to both continue to develop scale - becoming big, efficient machines - at the same time as differentiating themselves in the minds of their customers. Currently, rather than being at the forefront of the wave of the new-payments market, banks are feeling the heat from the competition,” says Sulabh Agarwal, Accenture UK’s payments lead. “We’re inevitably facing a world of instant, invisible and free payments, which presents both a challenge and opportunity for banks.”

The research found that the industry is aware of the challenges posed by new technologies in payments.

More than two-thirds (74%) of European banking executives surveyed agree that payments are becoming free; nearly three-quarters (72%) believe that payments are already invisible or will become so over the next 12 months; and even more (78%) said that payments are either already instant or will become instant over the next 12 months.