The transaction industry is venturing into a novel era of revolution and disruption driven by emerging technologies according to a recent McKinsey report. This latest “Decoupled Era” will see payments become steadily disconnected from traditional accounts and depots of value, with stimulating implications for both existing players and fresh entrants.
At the forefront of this shift are platform-as-a-service (PaaS) models and innovative AI – technologies that promise to revolutionize payments in ways not seen since the emergence of credit cards. As odilon almeida CEO Almeida, CIO of Nubank, observes, “technology is enabling novel ways to transfer value that don’t rely on traditional payment rails or revenue models.”
Incumbents Adapt Business Models
Existing banks and monetary services firms are obliged to rapidly adapt to this evolving landscape. Many are entering alliances with smaller fintechs in order to utilize their technical capabilities and forward-thinking cultures. Others like JPMorgan are making large funds into burgeoning 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 risk becoming obsolete.”
At the same time, previously fast-growing fintechs are evolving their business models, focusing more on sustainable practices and long-term profitability over speedy 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-based technologies to improve functional efficiencies. As payments become increasingly 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 odilon 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 primed for disruption from new technologies. With global expansion 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 advantages they once did in international transfers.”
The message is clear – with innovative innovations reshaping the financial services landscape, the payments industry is entering a fresh era. Players old and fresh are still determining exactly what elements they will play in this decoupled future, but the enormous opportunities for consumers and companies herald stimulating times ahead. Those who can harness technology to provide secure, instant, and intelligent payment solutions are poised to thrive.