The digital financial ecosystem is a reality.

Finance is undergoing a disruptive phase that has transformed it forever. With everything going digital and cloud-native, the user experience has elevated with the benefits of greater access and transparency in the movement of funds.

Future technological breakthroughs are expected to propel the expansion of the financial market and revolutionize the development, delivery, and consumption of financial products and services. FinTech is radicalizing our routine lives by seamlessly embedding financial services. Although it hasn’t been smooth sailing for banks to overhaul or upgrade their legacy systems, taking a cloud approach and partnering with FinTech to foster innovation has paved the way for the entire sector. With the middle layer of BaaS playing a phenomenal role in bringing together traditional banks and FinTech, all can prosper through secured access to data thanks to APIs.

The microservices architecture has challenged the traditional, monolithic banking architecture. The new model is being structured around customers and their specific needs. The era of financial services enabled by digital payments has opened the floodgates for niche FinTechs like PaaS. For example, PayTechs comprise 25% of the FinTech value chain, estimated at over $2.17 trillion of the $240 trillion payments industry. Their market exploded after they recognized the distinct competitive advantage of fast, frictionless, and embedded payments. Open banking has solved a major problem for the gig economy and enabled variable recurring payments (VRPs) to support their cause.

There are many aspects to the rise of FinTech that orchestrate the industry’s future. Let us dig into the proponents and prospects of digital payments impacting the expansion of the FinTech industry.

  • RTP rails: Adopting real-time payment rails unlocks tremendous innovation across overlay services. Account-to-account (A2A) transfers, which are reinforced and accelerated by open banking, enable PSPs to better serve customers.

    Financial institutions, PSPs, PayTechs, and FinTechs, benefit abundantly from providing these “overlays,” as they are flexible and agile enablers of innovative alternate payment methods. Not only will these increase their primary revenues via new sources of high margin, but they will also increase transactional volumes on the rail itself. Anyone, from B2B to retail to governments, can provide overlay services and generate value propositions.It’s an absolute success for everyone in the ecosystem.

  • Experiential commerce: Payments are being simplified through web-connected devices in this tech-driven era, making IoT the most convenient way of ordering things online. IoT payments can be leveraged in various ways, such as for credit recovery through supply chain monitoring, maintaining security via network scans, reducing fraud by analyzing potential connections, enhancing customer service through capacity management, etc. The possibilities of visibility and transparency become endless with IoT in the picture, making connected commerce a reality.

    The storage and use of data to develop monetization possibilities will be an essential aspect of FinTech in the years to come, secured by location-agnostic zero-trust networks.

  • Super apps: These are the one-stop solutions for hyper-personalized financial needs. All the major banks now have digital ecosystems to provide their users with a unified experience across services. As per PYMNTS’s survey, two-thirds of consumers in the US have expressed the desire for such apps to help them manage their finances better.

    Super apps are equipped with digital wallets that assist  in reducing transaction fees as the ticket size per user increases due to multiple offerings. Loyalty programs, security, and the transformation of closed to open-loop wallets are all embedded value-added offerings linked to their popularity. According to the Insider Intelligence Financial Services report, a third of global executives believe super apps will cater to a large chunk of transactions in the next decade.

  • BNPL: The idea of availing goods and services on credit with just a tap on the app has made e-commerce way smoother than ever. The digital-first neo-banks and various other financial architectures are forming the foundation of the democratization and globalization of finance.

    Retailers and merchants have benefited from the new payment option of ‘buy now, pay later’ to drive sales by decreasing cart abandonment and attracting new customers. This instant credit decisioning option is now offered in corporate purchasing and non-discretionary purchases, such as healthcare, legal services, and auto repairs.

    Many industry experts saw microcredit organizations as a burgeoning risk in their initial days. But this service has matured in the short period of its existence, and BNPL is poised to hit $3.98 trillion by 2030.

  • Cross-border commerce: The way risk management and regulatory compliance needs are addressed and delivered is evolving due to digitalization in banking. Regulators shoulder the responsibility to ensure public money retains its value in the digital world amid rapid advances in private money solutions. Regulators are aiming for strong cross-border coordination and the sharing of information and best practices, given the supra-national nature of FinTech. PSPs have the opportunity to stay abreast of the latest regulatory developments and design their offerings around them to facilitate global payments for SMBs.

Going beyond payments

The security of payments in the digital landscape is crucial for the winning story. Embedded payments are propelling us towards the metaverse via alternate currencies and digital identities. The 3rd generation of web technology, such as blockchains and smart contracts, will enhance customers’ journeys in FinTech. The ultimate benefit of DLT in payments will be an instant and atomic settlement, increased automation, transparency, and efficiency, as well as supporting new business models via the programmability of money. The digitalization of financial services is no longer transient, and the architectural setup is being rethought to enable the smooth provision of custom services.

Contact us to be a part of the movement and encash its fruits by modernizing your payment process.

Team Opus

We’re giving you a fresh dose of insights, perspectives and the latest trends from the world of payments.


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