December 5, 2022

txinter

Expect exquisite business

What’s Next in Payments? – SPONSOR CONTENT FROM HEXAWARE


By Swati Dublish, Rajsekar Jayashankar, and Navin Mishra

The payments space is evolving quickly, with the advent of new players other than banks and financial services institutions. These competitors are disrupting the status quo and taking payments from the funds transfer and remittances realm to innovative concepts like buy now pay later (BNPL) and open payments.

With customer expectations having increased, people expect the “art of the possible” from their payments providers—and traditional players need to rethink their strategy to retain their position and customer loyalty lest they become irrelevant. All stakeholders within the payments ecosystem need to align with the broader themes emerging now and in the near future.

We live in a world of artificial intelligence (AI), machine learning (ML), and cloud, a world of “payments as an experience (PaaX).” 

The key payment themes of the future—cryptocurrency, central bank digital currency (CBDC), financial inclusion, and embedded finance—represent stages of the coming evolution of payments that your bank needs to be ready for.

Based on its current relevance and growing adoption, the starting point of payments’ future is cryptocurrency—any form of currency that exists digitally or virtually and uses cryptography to secure transactions.

The rise of cryptocurrencies is fraught with challenges such as uncertain regulatory status, lack of awareness, security, scalability, and misuse of virtual currency. Crypto’s challenges and a need for regulated alternatives call for an evolution of CBDC, a phase we define as “payments as a lifestyle (PaaL).” 

Banks will issue CBDC as legal tender, just as cash is today. But unlike bank deposits, CBDC would represent a claim on the central bank.

The current state of financial infrastructure will drive determination of the speed and the extent of adoption of CBDC. Major concerns about CBDC include privacy in individual transactions, retail CBDC (consumer accounts) as a new function of central banks, use of a CBDC offline, and cybersecurity risks.

In the medium-term future, enabled by CBDC, financial inclusion will play the biggest role in making payments the mainstay of economies around the globe. Financial inclusion refers to including the unbanked segments in the financial ecosystem. Key barriers to financial inclusion include financial literacy, lack of private-sector willingness and capacity to engage, lack of access to smartphones, and unsatisfactory anti-money laundering controls.

Financial inclusion in turn will aid embedded finance—the future of banking—with the bank going to customers at their point of need and not the other way around, a phase we define as “invisible payments.” 

Embedded finance is the integration of financial services—including lending, payment processing, or insurance—with nonfinancial businesses’ infrastructures without the need to redirect them to traditional financial institutions. The embedded finance opportunity for banks entails rapid acquisition of customers and deposits, fee-revenue growth through partnership agreements, and reduction of customer acquisition and unit-processing costs.

Technology will be key to propelling banks into the new realm, where payments no longer will be proprietary but will be democratized as a service. For your bank to stay relevant and to future-proof your payments business, your bank needs to: 

  • Look at your technology. Banks must start preparing for the impact these new payment vehicles will have on onboarding, security, channels, and digital banking platforms. Banks should align digital payments and digital banking modernization initiatives to reuse digital banking apps and solutions to support this transition. 
  • Assess your role. Financial technology products and services will be the essential tools promoting inclusion in the financial systems of the future, helping communities around the world build long-term economic resilience and enabling financial growth.  Banks will play a major role in driving this change. 
  • Seize your opportunity. Embedded finance will help banks reach more customers with lower costs of acquisition, expand distribution channels, and develop new value-added services, creating unprecedented opportunities of scale. 

Future of Payments Reimagined

The era of payments as a product is already in the past, as banks are nearing a shift in consumer expectations. The journey of payments is likely to go through a three-generation transformation. 

Gen One: Payments as an Experience (PaaX)

The payments world is on the cusp of transformation, with a focus on improving end-user experience through improved interfaces and smoother transitions. Banks and fintechs are using the power of AI, ML, and cloud to enable Gen One. This experience is commonly called frictionless payments.

Gen Two: Payments as a Lifestyle (PaaL)

As the current experience stabilizes and wearable technology becomes the norm, payments will become a part of the lifestyles of individuals and businesses, launching the next era. The flourish of state-owned crypto could become the singular force for seamless operations for both domestic and cross-border payments.

Gen Three: Invisible Payments

Over the next three to five years, payments will play a game-changing role not merely as a ubiquitous function but also by working seamlessly behind the scenes. Monetizing payment transactions will ensure that payments are financially inclusive and embedded in the larger business-transaction ecosystem.

The Generational Shift


Society is embarking on a shift in experience, in value creation, and for a better quality of life. Payments will drive this transformed experience for a large segment of the population as we go through these three generational changes.


Hexaware’s banking solutions include Amaze®, a cloud enablement platform; Tensai, an automation platform; and H.A.R.V.I.S., a banking virtual lab and incubator. Learn more about the future of payments and how Hexaware can help banks and financial institutions keep up in a dynamically changing industry.


Swati Dublish is a Banker, driving business transformation through technology for Banks & Fintechs at Hexaware Technologies. Rajsekar Jayashankar is Banker, Researcher, and Core Banking product specialist at Hexaware Technologies. Navin Mishra is Strategist for Financial Services in Public Sector at Hexaware Technologies.