In order to get beyond transactions, one must increase volume and provide value. The future seems bleak for a lot of financial organizations, including banks, issuers, acquirers, and payment networks. The Head of Cards & Payments at Cognizant, Ashish Bhatnagar, proposes that "everywhere commerce" and "anything of value" are the two forces that will transform payments. How to make digital assets tradeable across networks is a key concern for banks and payment providers. Payments companies must begin to consider the future and try out new value shops. However, what are the next steps that payment providers need to do in order to go beyond transactions and bring in the future of payments?

Getting ready for new valuable stores

Although central bank digital currencies (CBDCs) are becoming more and more popular, regional maturity levels differ greatly. By the end of June of last year, transactions utilizing China's digital yuan had reached 1.8 trillion yuan (US$249.33 billion), solidifying the nation's position as a pioneer in the development of digital tokens issued by central banks.

The Bahamas and Jamaica have launched CBDCs, putting Latin America and the Caribbean in the forefront of the use of digital currencies. The introduction of digital currency in Jamaica was significantly influenced by payments: $2,500 in JAM-DEX was given to the first 100,000 users of the CBDC who registered using the digital wallet and transaction network Lynk.

"To gain an early competitive edge, banks must be prepared to go beyond experimenting and make risky decisions. Financial transactions might potentially undergo a transformation thanks to smart contracts. The self-executing programs are distributed ledger based and autonomously enforce and execute transactions on a blockchain according to pre-defined encoded criteria. These digital contracts are used by programmable payments, which allow for automatic, conditional money transfers. Contracts to transfer property ownership, for instance, can be designed and carried out automatically. The ownership of the item may be instantly changed via the smart contract after the buyer pays the seller, according to Ashish Bhatnagar.

Other nations are experimenting with offline payment methods as well. For example, China is integrating "super SIM cards" with its digital yuan app, which enable purchases to be made even while the phone is off. Through the use of NFC technology and natural language interactions, conversational payments enable users to make payments offline, even in places with spotty network coverage.

Value is emerging "everywhere, anything" but not without industry issues. Concerns regarding privacy, sustainability, and network interoperability are only a few of the issues surrounding new stores of value, in addition to the business cases' feasibility. Furthermore, regulatory action is imminent. How soon will authorities adapt to the new environment? Thus far, there has been minimal discourse on the safeguarding of digital assets. Furthermore, the influence on the environment continues to be a crucial factor. Ethereum, the second-biggest cryptocurrency in the world, has reduced its emissions by 99.99% following an unusual experiment to forgo energy-intensive mining in favor of an alternative strategy.

The search for new valuable stores will never come to an end. Technology and innovation are inherently prone to introducing novel concepts to the market. They provide financial organizations a starting point advantage as they modernize their core by drawing lessons from more basic technological solutions. Experimenting with new value stores is equally vital as it prepares banks to serve future GenY and GenZ banking consumers.

The final result? The current world of fiat currencies, card payments, and e-commerce, as well as the developing world of new stores of value, are the two realms in which banks and the clients they service work. Even while the second world gradually emerges, the first will not disappear anytime soon.

Considering the future

According to Ashish Bhatnagar, "Key initiatives for banks, issuers, and acquirers include enabling and promoting innovative payment mechanisms including bitcoin, CBDCs, and NFTs. Future plans for payment networks should investigate the broader meaning of money, which encompasses anything of value. Networks must not only have the capacity to accommodate novel payment methods but also comprehend their function and get ready for decentralized, open digital ecosystems that facilitate cross-sector economic transactions.

"All financial institutions must experiment with novel technologies in order to manage the rapidly changing payments technology landscape. There are two key advantages to the trials. They first offer insightful information about the viability, difficulties, and potential for optimization of the technology. Second, they may support innovation agendas and help businesses maintain their competitiveness.

"Financial institutions must prioritize stability as they look into new value stores to make sure the asset's worth maintains stable over time. Integrity and trust are of the utmost importance, requiring strong security measures, as well as solid governance and user adoption methods. Remember that everything depends on a strong business case that offers a measurable value proposition. Create a route that works for your company. For each bank and payment provider, there will be a distinct ideal way to go beyond transactions. Establishing a baseline through an evaluation of the organization's actual maturity is always the first step; genuine maturity should not be confused with isolated triumphs. Modernization is at the center of the transformation agenda, and growth instead begins with the development of solid basic capabilities.

In order to guarantee that your company remains at the forefront of payment innovation, he offers the following three tips to consider:

"First, get off quickly or scale. In the payments industry, economies of scale are crucial. Financial institutions should evaluate if their payments business is sustainable in the long run and consider scaling up or exiting the sector, given the declining worldwide margins and rising legacy run costs. The choice to scale will need strategy changes toward expansion through channels like joint ventures for better product distribution, such as embedded payments; the pursuit of M&As that offer a competitive edge in a particular industry or region; and the assessment of platform-based service models.

"Secondly, focus much more on effectiveness. To run better, you have to pull all the levers that promote efficiency. At this point, businesses should thoroughly assess their IT infrastructure to eliminate any unnecessary components, then use automation and generative AI to streamline workflows. They may also launch "speedboats" in crucial regions to gradually replace antiquated super-tanker systems. Another area in which they may take use of technology is with deepfakes. It's increasingly essential to use excellent AI to combat poor AI.

"Lastly, Show courage. Financial institutions must increase innovation both inside and outside the company as they prioritize payments as a growth area. Establishing payment-focused innovation labs helps businesses to quickly create and test new concepts. In order to succeed in the future, businesses must adopt a daring mentality and develop new consumer journeys on an intuitive level."