Treasury and payments: Rethinking transaction fees in the era of instant everything

Estimated reading time: 7 minutes

Let’s face it — all good things must come to an end. In an era of automation, many familiar roles, products, and services have ridden off into the sunset. The Yellow Pages. Cashiers (at least the human kind). DVDs. Film cameras. All but gone. We could debate the speed and quality of it all, but the point is, change happens. And it’s happening now in the banking industry, where we’re seeing the end of the era for traditional transaction fee models.

Of course, this is a bit of a taboo topic, one many of my colleagues tend to avoid. But as those who know me will acknowledge, I rarely shy away from topics that drive transparency and inclusiveness. Recently, I discussed this and other topics moving our payments world in Going Boldly – The 2025 Top 5 in Payments and the Dark Mirror: Bold Predictions That Virtually No Banking Professional Will Say Out Loud. Pricing models, while delicate, include the challenges banks face today around transaction fees.

The real question is whether improved transparency is enough on its own, or if something deeper needs to change in how banks think about payments pricing?

P × V: Still the centre of the storm

Price-times-volume (P × V) has long been the corporate transaction fee model across most regions, with Asia Pacific being a notable exception due to its diverse currency and market structures. Years of low interest rates conditioned banks to depend on fees as a core revenue stream. That era has ended, and with it, the luxury of inertia. Many bankers, especially those newer to the industry, have only ever known a fee-driven environment. But for those who’ve been through full market cycles, we know that what’s “normal” has always been fluid.

It’s important to note that while the P × V model is under pressure, we should not be too quick to assume it’s headed for extinction. What if, instead of collapsing, it’s simply being reshaped?

P × V sits at the centre of a much broader conversation. It’s the base unit, the DNA of how banking runs. And when external forces start to pull on it — tariffs, supply chain disruptions, market volatility — the entire system can start to unravel. But that doesn’t mean it disappears. More likely, it evolves.

Some industry voices have declared the end of P × V as we know it. Gird your loins, the end is nye! But maybe not. Maybe this is a transition to a hybrid era, where P x V still plays a central role, just within a new framework of performance and value alignment.

A new era of volume, value, and velocity

Thanks to real-time payments (RTP), distributed ledger technology, artificial intelligence (AI), and the rise of micropayments, corporates are pushing back on legacy pricing models. The sheer volume of transactions is exploding, but that doesn’t mean banks should continue pricing them the way they did in the past.

Clients want pricing that reflects the reality of today’s market, not just a number multiplied by another number.

According to the 2023 McKinsey Global Payments Report, “the increase in electronic payments transaction volumes has consistently outpaced payments revenue growth (17% versus 6%) over the past five years.” In other words, volumes are up, margins are down, and pricing is stuck in the past.

AI is adding even more complexity. As companies use AI to reshape customer experiences, they’re also demanding more from their banks, asking for pricing that is dynamic, responsive, and reflective of their business model.

Forces reshaping P x V

The traditional P x V model is no longer sufficient in an environment where client expectations, regulatory shifts, and economic volatility are reshaping how banks price their services. To remain competitive and responsive, institutions must acknowledge and adapt to a more complex set of drivers that influence pricing models today.

Among the primary forces:

• Market Demand & Competition: Banks are adjusting pricing based on customer demand and competitive pressures. Institutions with strong market positioning may have more flexibility in setting prices.
• Economic Conditions: Inflation, interest rates, and liquidity levels impact pricing decisions. Banks are navigating excess liquidity and muted loan growth, which affects P x V pricing strategies.
• Regulatory & Compliance Considerations: Financial institutions must align pricing strategies with evolving regulations and compliance requirements.
• Customer Segmentation & Analytics: Banks are leveraging data analytics to refine pricing models, ensuring they cater to different customer segments effectively.

Cost Structures & Profitability Goals: Institutions must balance pricing with operational costs and profitability targets, ensuring sustainable revenue growth.

What’s next? These foundational shifts are giving rise to a wave of innovation that promises to disrupt P x V even further. The next evolution of change includes:

• Artificial Intelligence & Automation: AI-powered pricing engines allow businesses to adjust prices dynamically based on demand and market conditions.
• Dynamic Pricing Models: Companies are moving beyond static pricing, leveraging data-driven insights to maximise margins and customer value.
• Supply Chain Adjustments: Global supply chain disruptions are driving smarter pricing strategies, including localized sourcing and real-time margin management.
• Bespoke Client Pricing: Tailored pricing based on purchase history, loyalty, credit profitability, and other personalized metrics.
• Regulatory & Market Pressures: Sustainability concerns and fairness in pricing are becoming more prominent, influencing how companies set prices.

Pricing pressure in a time of uncertainty

Several of these shifts are being compounded by broader economic uncertainty. Tariff impacts, supply chain disruption, and general market volatility are influencing how businesses approach pricing, and financial institutions are feeling that same pressure.

Recent analysis from Greenwich confirms that nearly half of US businesses are considering raising prices to offset the uncertainty created by new tariff policies. That’s having a ripple effect inside banks, where credit risk assessments, FX exposure, and cost of capital are all being recalibrated in response to shifting client needs and macroeconomic instability (Greenwich, 2024).

These insights reinforce the need for banks to evolve from static, legacy pricing structures into responsive models that can flex with external conditions. Corporate clients are already looking for partners who can help them navigate uncertainty, and increasingly, they’re willing to explore non-traditional providers to find that agility.

Rethinking models: Performance-aligned pricing

Meeting today’s corporate expectations means abandoning “one-size-fits-all.” Banks must look to models being used in SaaS and cloud. Such subscription-based, usage-based, outcome-based, and hybrid models should all be on the table.

You’ve heard the phrase “data is the new oil,” and when it comes to pricing, AI is the wellspring. AI-powered optimisation is reshaping how businesses set prices dynamically. It enables companies to analyse vast data sets in real time, including everything from demand patterns to competitor pricing to customer behaviour.

Predictive analytics is the next frontier, forecasting demand and pricing proactively. Reinforcement learning algorithms are being used to continuously refine strategies to maximise long-term revenue and deliver client satisfaction.

Just look at:

• Amazon – adjusting prices throughout the day based on algorithms.
• Uber – surge pricing in real time.
• Airlines – ticket prices vary based on seasonality, availability, and demand.
• Hotels – modifying room rates based on occupancy and local activity.

Corporates have embraced this. And now they’re turning to their banks, asking: “Why can’t you do this too?”

The opportunity ahead

Will P x V fade into the AI sunset?

Unlikely. But it will evolve. What’s emerging is a smarter, more responsive version of P x V — one that is adaptable, ethical, and aligned with client outcomes.

AI and data aren’t replacing pricing strategy. They’re enhancing it. The real transformation lies in transparency, personalisation, and sustainability, principles that are fast becoming the new standard.

All good things must come to an end. But better things are just getting started.