The market for third-party banking software is expected to grow by 7.5% a year by 2025, according to new market research.
The report from Technavio forecast that this segment would add $3 billion in market value between 2020 and 2025.
The growing use of digital payment services was the primary driver of this growth, Technavio reported, as banks seek to update their technology to keep up with consumer demands for online services.
“With the introduction of mobile banking platforms and e-wallets, time-crunched modern clients have begun to prefer online transactions such as payments made through websites or mobile apps,” the report stated.
Europe is predicted to lead the growth of the banking software market, expanding by a third in the forecast period. Longer term, other growth markets such as the US and Canada will see significant expansion.
In Canada, as much as 90% of all money spent in 2030 will be via digital payments, Technavio predicted.
“As a result, numerous financial companies throughout the world are offering digital payment solutions in order to improve day-to-day processes and obtain a competitive advantage over their competitors,” the research company said.
“This is incentivizing other businesses in the sector to include digital payment options in their product offerings. However, data privacy and security issues will be a major challenge for the third-party banking software market.”
Financial institutions including Cross River Bank, First National Bank of North Arkansas and Bellwether Credit Union all announced new fintech partnerships last month as interest in new technology increases.