The payments industry may be on the verge of a “decoupling era” as banking partnerships are on the rise.
A Mckinsey report, On the verge of a new payments era: Future opportunities for banks, says the industry may be transitioning from the “accounts era” to an era creating new opportunities for growth.
The report says the “decoupling era” will provide banks with “differentiation” opportunities in technology.
Consumer demand for convenience, affordability, and security will create a solid opportunity for banks to differentiate and adapt in time for the upcoming focus on technology.
“In the Decoupled Era, banks will no longer be able to rely solely on the account ownership paradigm.
“They will need to build new businesses to keep customers within their service ecosystem,” said the report.
The report added that the new era will be even more reliant on technology, with banks and fintechs increasing partnership opportunities to serve the market.
Whilst the market is on track to receive $3 trillion in payments revenue by 2027, a focus on technology is needed to enhance the profitable nature of the the projected revenue.
“Payments tech modernization can reduce operating costs by 20 to 30 percent and halve time to market for new products,” highlighting another advantage to the shift following an innovations-heavy “accounts era.”
“Companies should consider partnerships to integrate innovative products and services that may be too lengthy or costly to develop in-house,” the report said.