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Technology and finance are perpetually working hand in hand, from the abacus to the supercomputers used to drive complex financial models today. The fintech industry, born as a disruptor to the financial service sector, is increasingly shifting towards new models of collaboration with banks.

Collaboration opportunities for 2021 and beyond

2020 has dynamically encouraged financial institutions to shift their services from offline to online channels meeting the pandemic accelerated shift in consumer behaviours to digital. Looking to 2021 and beyond, new opportunities and challenges emerge in a post pandemic era.

New fintech players, given the border-less nature and acceleration of industry convergence across previously siloed verticals, are expected to gain more collaborative efforts striking the right balance between continuous innovation and healthy competition.

Numerous banks, insurers and asset management companies are partnering with fintech companies to achieve their digital transformation and become more agile.

The fintech industry is at a crucial inflexion point with digital banks at the centre. Growing demand for virtual and contact-less interactions has made financial services that are more secure, convenient, traceable and, ultimately, more attractive to both end consumers and businesses.

Liberalisation is felt throughout the financial industry. Businesses are keen to tap into new ways of reaching and transacting with home-bound consumers preferring digital payments over cash. The cashless payments journey in India has accelerated and grown leaps and bounds with the advent of UPI and BharatQR from NPCI.

Banking-as-a-Service (BaaS) is an end-to-end process enabling third parties to connect directly with banks’ systems to build products on top of the banks’ regulated infrastructure. BaaS is growing in popularity because it makes it far easier for anyone to create seamless, scalable payment experiences across and within borders. BaaS enables smarter working solutions, removing the need to obtain regulatory licenses, reducing operational costs while providing a new and improved customer experience.

The future of BaaS hinges on the type of financial technology solution providers can offer to support banks, financial institutions, and businesses in the frontiers of the new global economy. Partnering with third-party BaaS providers may allow businesses to bypass much of these developmental complications.

Personalisation is a growing trend in all industries. Micropayments are seeing an upward tick bringing widespread accessibility toward new payment options, like digital wallets and cryptocurrencies platforms.

How will technology continue to shape the future of finance?

Looking at how technology and paradigm shifts like open banking have been shaping the future of finance, will allow us to look ahead at when is next for technology and finance.

Technology has increased access and driven a series of changes to financial systems around the world. Open banking has opened customer and API access to financial data increasing cooperation between fintech companies and traditional banks. Open banking has also allowed fintech companies to leverage big data providing more customized services.

The advent of Open Banking APIs presents a unique opportunity to innovate and deliver instant payments at scale. BNP Paribas Instanea is an instant payment initiation solution on the rails of open banking. This initiative will deliver Account to Account (A2A) payment capabilities to enhance the speed and enable a secure transaction for merchants all across Europe using SEPA instant.

Regulatory agencies are frequently playing catch-up with new rules and regulations to incorporate advancements in technology. Regtech solutions streamline the compliance process with local laws, a market growing at a Compound Annual Growth Rate (CAGR) of 20.3%. From loan origins requests at retail channels to instant credit scoring of customers opting lending options at payment touch points to fraud and anti-money laundering checks, financial institutions need to collaborate with regtech startups using emerging technologies like AI and ML to help address risk and regulatory challenges.

2020 is also the year cryptocurrencies saw an increasing adoption among mainstream financial services companies, like PayPal and businesses like Tesla. Fintech solutions for cryptocurrencies will gain grounds with the adoption of the market.

Cash is not dead but clearly on the way out as mobile payment options become universally available. From small startups to technology corporations like Google and Apple, mobile payments have become a priority in the financial services industry.

International transfers, nonetheless, remain a consumer pain point for many. They are globally not as seamless as local transfers yet, even with big players like Transferwise raising millions of dollars. The remittances market continues to rise in size, presenting an increasing opportunity in mobile payments.

In addition, cloud adoption offering architectural agility using modern tech stacks are today available on pay as you go flexi models can be harnessed by fintechs and banks together to help render fault tolerance and help seamlessly auto scale services to meet growing volumes.

The combination of a well-designed cost-effective elastic cloud architecture coupled with secure devops practice improve developer agility to flex to the needs of growing business challenges, making the overall throughput better.

The trends outlined above invite for collaboration between technology and banks as opportunities. Financial institutions need technology to meet their consumer expectations, while technology companies need licenses and expertise from banks to provide their services.

The way forward in the financial sector will perpetually be a close collaboration, yet healthy competition. Embracing innovation, disruption and transformation will guide the dynamics of the global financial ecosystem.

Authored By-
Benedict Xavier
Head - Payments Specialist Digital Banking, Payment Gateway, Open Banking - Expert in Digital Transformation & Payments

About FSS 30 Year
Financial Software and Systems (FSS) is a leader in payments technology and transaction processing. The company offers a diversified portfolio of software products, hosted payment services and software solutions built over 30+ years of experience. FSS, end-to-end payments suite, powers retail delivery channels including ATM, POS, Internet and Mobile as well as critical back-end Chennai, India. FSS services leading global banks, financial institutions, processors, central regulators and governments across North America, UK/Europe, ME/Africa and APAC and has 2,500 experts on-board.

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