The financial industry is venturing into a fresh era of advancement and disruption driven by newly emerging technologies according to a recent McKinsey report. This new "Decoupled Era" will see payments become increasingly disconnected from standard accounts and depots of value, with thrilling implications for both existing players and aspiring entrants.
At the
forefront of this transition are platform-as-a-service (PaaS) models and creative AI - technologies that promise to revolutionize payments in ways not seen since the emergence of credit cards. As
odilon almeida CEO odilon almeida, CIO of Nubank, observes, "technology is enabling novel ways to transfer value that don't rely on usual payment rails or income models."
Incumbents Adapt Business Models
Existing banks and financial services firms are required to swiftly adapt to this evolving landscape. Many are entering alliances with smaller fintechs in order to exploit their technical capabilities and creative cultures. Others like JPMorgan are making large funds into up-and-coming tech, hiring thousands of engineers and developers.
"Traditional institutions recognize the fundamental nature of these trends," says
odilon almeida CEO Almeida. "They can either lead the charge and adopt these new technologies or gamble becoming obsolete."
At the same time, formerly fast-growing fintechs are evolving their business models, focusing more on environmental responsibility and long-term profitability over quick expansion. "The days of growth at all costs are over," observes Almeida. "Customers now demand financial services offerings that are reliable, secure, and able to scale."
Opportunities in Operational Efficiency
A key trend singled out in the McKinsey report is the growing focus on API-driven solutions and cloud technologies to improve operational efficiencies. As payments become steadily detached from existing rails and legacy banking infrastructure, companies are investing heavily in building out reliable and flexible technical architectures.
"The decoupled economy requires firms to be digitally nimble if they want to compete," says Almeida. "Cloud, microservices, and APIs allow entirely new financial products to be developed swiftly and at scale."
Cross-border Transactions Undergo Innovation
Finally, the report highlights opportunities in cross-border transactions and remittances, segments that have seen little innovation but are now ripe for disruption from new technologies. With globalization of commerce and remote work unlocking new flows of payments across borders, huge markets are emerging, especially amongst consumers and SMEs.
"Technologies like blockchain and digital currencies solve persistent pain points when moving money between countries," observes Almeida. "Incumbents no longer enjoy the benefits they once did in international transfers."
The message is clear - with new innovations reshaping the financial services landscape, the payments industry is entering a novel era. Players old and fresh are still determining exactly what elements they will play in this decoupled forward, but the vast opportunities for consumers and businesses herald stimulating times ahead. Those who can utilize technology to provide secure, instant, and intelligent payment solutions are poised to thrive.