Payment Firms vs Banks: Who Will Win the Business Banking Market?

The question of whether payment firms will "win" the business banking market is the wrong framing. It implies a binary outcome: one model displaces the other, the winner takes all. What's actually happening is more interesting — a structural bifurcation of the market along lines that map closely to client complexity, and a parallel emergence of hybrid models that blend banking and EMI capabilities. Understanding what this looks like in practice matters for any business thinking about its financial infrastructure over the next five years.

Let me set out the landscape as I see it from the front line of the specialist payment sector.

Where Banks Are Strong and Will Remain Strong

Banks have structural advantages that EMIs and payment firms cannot currently replicate. Fractional reserve banking allows banks to lend — to provide overdrafts, working capital facilities, trade finance, letters of credit. For businesses that need lending alongside their payment infrastructure, the banking relationship provides something fundamentally different from what an EMI can offer. Lending is capital-intensive in a way that the EMI model, constrained by safeguarding requirements, is not designed to support.

Banks also have direct access to central bank infrastructure — Bank of England reserve accounts for UK institutions, Fed accounts for US banks. This gives them structural advantages in certain settlement contexts that EMIs access only via bank intermediaries. For businesses operating at the very largest transaction volumes, this can matter for settlement efficiency and counterparty risk management.

For large, simple businesses — major retailers, manufacturers, professional services firms with domestic-focused operations — the bank relationship remains entirely fit for purpose. These businesses get a current account, an overdraft, perhaps a credit card facility, and a relationship manager who changes every two years. It works adequately. Payment firms are not competing meaningfully for this segment.

Where Payment Firms Are Already Winning

The contest is genuinely over for complex businesses. Not "tilting toward payment firms" — over. An iGaming operator can't get a banking relationship at any UK clearing bank with meaningful service quality. A crypto exchange with FCA registration can't open a GBP settlement account at HSBC or Barclays. An FX broker can't get the multi-currency account infrastructure it needs from NatWest. The banks have already exited. Payment firms are not competing with banks for these clients — they are the only option.

Beyond the specifically debanked sectors, payment firms are winning on product quality for businesses with international operations. Multi-currency accounts with competitive FX are better at EMIs than at banks for most SME and mid-market businesses. API-native infrastructure that integrates with modern treasury management systems is better at EMIs. Onboarding speed — measured in days rather than months — is better at EMIs. The product competition, in the payments infrastructure space, has shifted decisively toward the payment firm model.

The Hybrid Model

What I think the end state looks like for most sophisticated businesses is a hybrid model: a banking relationship for lending and capital markets access, a specialist payment firm for payment infrastructure and multi-currency management. This model already exists for many larger businesses that have chosen to use Wise, Airwallex, or CCYFX alongside their bank rather than instead of it. The payment firm provides better payment infrastructure. The bank provides credit facilities.

The question is whether this hybrid model will remain two separate relationships or whether regulatory changes will allow payment firms to develop lending capability and banks to develop the sector knowledge to serve complex clients. I think the former is more likely in the medium term. The regulatory barriers to payment firms developing lending capability are substantial — you need a banking licence to take deposits and lend against them at scale. The banking sector's decision to exit complex clients appears structural rather than cyclical.

The Consolidation Question

The specialist payment firm sector will consolidate. There are currently too many EMIs with too little differentiation competing for the same complex client base. The consolidation drivers are familiar: compliance overhead is increasingly fixed in nature, scale reduces the unit cost of payments infrastructure, and correspondent banking relationships are more easily maintained by larger institutions with more volume to offer.

The firms that will survive and grow in this consolidation are those that have genuine sector specialisation — real compliance capability for specific industries, not generic high-risk tolerance — combined with the financial strength to maintain correspondent relationships and the technology infrastructure to provide API-native service quality. Size alone isn't sufficient. Product quality and sector knowledge matter as much as scale.

CCYFX was built with this consolidation dynamic in mind. Our focus on specific sectors — iGaming, crypto, FX, offshore — is deliberate. We'd rather be the best provider for a specific group of complex businesses than a moderate provider for a broad range of clients. That specialisation is, ultimately, the durable competitive advantage in this market.