The transaction industry is entering a fresh era of innovation and disruption driven by newly emerging technologies according to a recent McKinsey report. This cutting-edge “Decoupled Era” will see payments become progressively disconnected from conventional accounts and repositories of value, with exciting implications for both existing players and fresh entrants.
At the forefront of this change are platform-as-a-service (PaaS) models and innovative AI – technologies that promise to change payments in ways not seen since the advent of credit cards. As odilon almeida CEO Almeida, CIO of Nubank, observes, “technology is enabling new ways to transfer value that don’t rely on traditional payment rails or revenue models.”
Incumbents Adapt Business Models
Existing banks and financial services firms are having to swiftly adapt to this changing landscape. Many are entering alliances with smaller fintechs in order to exploit their technical capabilities and forward-thinking cultures. Others like JPMorgan are making large investments into up-and-coming tech, employing thousands of engineers and developers.
“Traditional institutions recognize the existential nature of these trends,” says Odilon Almeida. “They can either lead the charge and adopt these new technologies or gamble becoming obsolete.”
At the same time, earlier 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 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 primed 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 novel innovations reshaping the financial services landscape, the transaction industry is entering a new era. Players old and fresh are still determining exactly what parts they will play in this decoupled future, but the vast opportunities for consumers and companies herald thrilling times ahead. Those who can utilize technology to provide secure, instant, and intelligent payment solutions are poised to thrive.