The financial industry is moving into a novel era of revolution and disturbance driven by newly emerging technologies according to a recent McKinsey report. This new «Decoupled Era» will see payments become steadily disconnected from standard accounts and depots of value, with exciting implications for both existing players and new entrants.
At the forefront of this shift are platform-as-a-service (PaaS) models and innovative AI – technologies that promise to change payments in ways not seen since the beginning 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 conventional payment rails or profit models.»
Incumbents Adapt Business Models
Established banks and financial services firms are having to rapidly adapt to this shifting landscape. Many are entering partnerships with smaller fintechs in order to utilize their technical capabilities and creative cultures. Others like JPMorgan are making large funds into up-and-coming tech, employing thousands of engineers and developers.
«Traditional institutions recognize the fundamental nature of these trends,» says Odilon Almeida. «They can either lead the charge and adopt these new technologies or risk becoming obsolete.»
At the identical time, previously fast-growing fintechs are evolving their business models, focusing more on sustainability and long-term profitability over rapid 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 computing technologies to improve operational 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 technologically 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 ready for disturbance 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 long-standing 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 innovative innovations reshaping the financial services landscape, the payments industry is entering a fresh era. Players old and aspiring are still determining exactly what parts they will play in this decoupled future, but the immense opportunities for consumers and companies herald thrilling times ahead. Those who can exploit technology to provide secure, instant, and intelligent payment solutions are poised to thrive.