McKinsey's Global Payments Report 2023 coined the term "decoupled era," claiming that the payments industry is entering its fourth phase (paper, plastic and account transactions are the first to third), characterized by a disconnect between payments and traditional accounts, emphasizing user preferences for convenience, economy and security。

Technologies such as platform-as-a-service (PaaS), generative artificial intelligence and decentralized solutions such as tokenization are the main contenders to shape this new reality, the report argues, with the potential implication being the result of an ongoing battle between DeFi and legacy systems, with the former favoring the latter.。

Core Principles of the Decoupling Era

The decoupling era is based on convenience, economy, security and attention to user experience。

Convenience is king

Convenience is the first principle of digital wallet, seamless, contactless transactions, seamless integration of payments into daily life。

In addition, in the field of online shopping, one-click checkout eliminates the cumbersome input of billing information and simplifies the user experience。

Affordability takes center stage

As the disruption of fintech challenges traditional financial institutions, affordability becomes central。

Fintech companies not only introduce competitive fees, but also innovate payment solutions, promote healthy competition, and ultimately reduce costs for consumers。In this regard, contactless payments, which are cheaper for merchants than traditional credit cards, and alternative payment methods such as "buy-and-pay" (BNPL) services are also actively driving financial transactions to become more convenient and affordable.。

Security issues drive innovation

Security is the Frontier of Innovation in the Decoupling Era。

Tokenization is a cutting-edge technology that replaces sensitive bank card data with unique identifiers, providing strong protection against fraud even in the event of token compromise。

Biometric authentication using fingerprint and facial recognition adds an additional layer of security beyond traditional PIN-based methods。

The industry's increasing emphasis on cybersecurity measures reflects the changing environment's commitment to data protection and fraud prevention.。

User experience first

Payments are seamlessly integrated into every aspect of our daily lives。

Embedded finance - where financial services fit seamlessly into other applications - makes payments an inconspicuous but integral part of the user experience。

Personalization is also taking center stage, with payment options tailored to individual spending habits and rewards programs offering discounts based on user preferences。

Finally, real-time insights further enhance the user's ability to provide instant transaction notifications and real-time expenditure details, increasing financial control and transparency。

Traditional possibilities cannot be excluded

While the financial industry is embracing digital wallets, contactless payments, and partnerships between fintech companies and traditional businesses, it seems that it will take time to achieve complete decoupling from accounts。In fact, even with the promise of a shift to "resilient" thinking, traditional systems and regulations still play an important role.。

In the "decoupled era," banks will move beyond account ownership models and must develop new businesses and upgrade technologies to retain customers in their service ecosystems.。

1.Embracing Open Banking and APIs

Banks are increasingly taking advantage of open banking systems, which allow authorized third-party vendors to access customers' financial data with their consent。

This opens the door to working with fintech companies and other players to enable them to offer innovative payment solutions and financial services directly on their own platforms.。

2.Invest in digital wallets and contactless payments

Digital wallets such as Apple Pay and Google Pay are rapidly gaining popularity。Banks are also aware of this trend and are actively integrating these wallets into their mobile banking applications, allowing users to make safe and convenient payments without a physical card.。

In addition, contactless payment methods such as tap payment have also been prioritized, simplifying the in-store checkout experience。

3.Establish barrier-free registration and account management

In the age of decoupling, simplifying account opening and management processes is essential。As a result, banks are working to provide a faster online account opening experience and user-friendly mobile apps that make it easy for customers to manage their finances anytime, anywhere。

4.Provide personalized financial management tools

Banks are increasingly focusing on the user experience and are developing AI-driven financial management tools that provide personalized budgeting, savings goals and spending insights, designed to empower customers to make informed financial decisions.。

5.Working with fintech companies and non-traditional businesses

In a decoupled environment, cooperation is key。Banks are partnering with fintech companies and other non-traditional businesses to leverage their innovative solutions and expand their services to meet a wider range of customer needs and remain competitive.。

Conclusion: Digital inertia is silent killer

The once-prevailing narrative of constant subversion is evolving into a new normal。Unlike the traditional storyline where challengers grab market share from incumbents, a crowded space seems to be emerging, characterized by a move towards digital endgame。Interestingly, the dynamics of winners and losers in this new landscape transcend the boundaries of traditional financial institutions and disruptive challengers。

Rising customer expectations, the emergence of agile industry upstarts, the emergence of powerful technologies, and changing regulations are forcing existing banks to inject meaningful innovation into their established business models, and as a result, they are under unprecedented pressure。

The widening gap between digital leaders and the rest of the industry in terms of profits and market valuations has heightened the urgency for banks to catch up with digital leaders。While digital maturity is not the only determinant of banks "economic performance, clear signals are emerging and shareholders are increasingly taking notice.。

The need for a meaningful digital transformation is now more evident than ever before, reshaping the competitive landscape of banking and reassuring people that digital inertia will stifle the development of banking.。