John Mitchell is the CEO and cofounder of the payments technology company Episode Six in Austin, Texas. He formerly worked for NetSpend.

Today, more than 80% of banking is done online, and nearly 70% of adults make or receive digital payments. People are hungry for the ability to access and use all of their assets on their own terms.

With evolving consumer demands, non-traditional players are usurping market share from incumbents. A study on digital payments from professional services firm PricewaterhouseCoopers best explained the dynamic: “Frustration with the traditional correspondent banking model, both cumbersome and costly in a world of instant, low-cost payments, has led to the intensification of non-bank providers.”

The banking industry has historically served essential financial needs by facilitating deposits, simple transactions and providing basic lending services. Legacy technology was specifically set out to help financial institutions (FIs) succeed in this mission.

The technology even carried traditional banks through periods of economic distress — recessions, inflation and a mortgage crisis.

But in the last decade, customer expectations have changed. Rather than basic capabilities, consumers want a complete digital banking experience. They want access to all of the buzzworthy features being offered by digital competitors.

Banks generally don’t have the ability to respond at speed to these new demands because most are sitting on a combination of years of disparate systems put together by piecemeal with an original core built on requirements that no longer exist.

IBM research found that banks have not developed mature payments programs and have gaps in data use, back-office processes, infrastructure and talent. One speaker at The Bank Governance Leadership Network even went so far as to call banks “museums of technology” because of their reliance on systems dating as far back as the 1950s and ‘60s.

Digital services with modern capabilities and a streamlined look and feel are the future, and digital banks are getting it right.

Right now, you could argue that it’s all about streamlining the way payments are made — and not just with fiat currency. By 2025, payments are expected to account for 40% of banking revenues, according to the McKinsey report. The rise of the market has come quickly, doubling in size between 2009 and 2019 and reaching more than $2 trillion in value, the report said.

The industry is continuing to evolve as new spending patterns emerge. Mobile payments have grown at a rate of 23% annually, driven by QR codes, open banking and super apps. Non-cash transactions are up 6%, and real-time payment activity has grown 41% globally, thanks to the popularity of contactless purchases and e-commerce, according to a McKinsey global payments report issued last year.

To power this level of volume and demand, FIs need to innovate. However, a report from Broadridge found that FIs only plan to nominally increase investment in next-gen technologies by 2% to 3% of their total IT budgets. There is still hope for a balance in the market, however. FIs have every incentive to take advantage now. They have the licenses and regulated entities that are trusted, and now they need modernization.

Take JP Morgan Chase for example. The company says it invests $12 billion annually on technology innovation backed by a team of 50,000 tech professionals. While most banks do not have these resources, there is an opportunity to bring their technology up to speed through collaboration.

In a survey for the McKinsey report, 54% of banks said that technology partnerships were very important to developing payments technology, while 27% of banks ranked the development of new banking products as the impetus for fintech partnerships.

As FIs plot their path forward, it is important to take a thoughtful approach to technology and carefully choose partners that maximize their limited resources while helping them advance toward a digital future.