Software vendors threaten to replace banks in SME payments

By partnering early, banks remain the backbone of SME financial flows, McKinsey said.

Banks face getting replaced in the payments ecosystem of small and medium enterprises (SMEs) in the medium term by software vendors unless they partner with them.

Banks in early-stage markets, or those where vendors make up less than 10% of SME payments volume, present a massive opportunity for vendors. Early movers can influence technical standards, commercial models, and market segmentation, McKinsey & Co. said in a January 2026 report.

Banks in these markets, however, face disintermediation from SME relationships. In these markets, they rarely have partnerships with vendors or are often direct competitors,

“By integrating early, banks remain the backbone of SME financial flows while allowing ISVs to own the user experience,” the management consulting firm said in the report “Decoding ISV maturity: a global playbook for payments growth.”

In the Asia Pacific region, more banks are partnering with finch companies to make services better for their clients at a fraction of a cost.

“For our part, banks recognize that for something as simple as making cross-border payments instant, they need a partner,” said Samarth Bansal, general manager at Wise Platform, at an earlier interview with Asian Banking and Finance.

Many banks are focused on keeping their customers’ deposits and financial activities within their apps because they think that’s how they can make more money, Bansal had said.

More fintechs are expected to collaborate with traditional financial institutions in Southeast Asia as a means to drive innovation and financial inclusion, according to a separate report by YCP Solidiance.

Along with payments, digital credit demand is poised to become a primary revenue driver for SEA financial services, YCP Solidiance said. Automated loan procedures are speeding up approvals and expanding access to underserved segments, it wrote.