“Capitalizing on disruption and unleashing new growth potential requires more than just agility.”
Melissa Cullen, Head of Strategy Banking & Payments, FIS
A FUNDAMENTAL SHIFT
Over the next 12 months, around 80% of respondents expect a major or moderate impact from each of the trends we studied
in-depth.
The results were similarly strong when respondents were asked to look three years ahead, suggesting that for most organizations, the effects are not just significant but also sustained.
INNOVATION EXPECTED
TO IMPACT BUSINESSES
What impact do you expect the following trends to have on your organization over the next 12 months? Looking to the future, what impact do you expect these trends to have on your organization in three years’ time?
(Including stablecoins)
(DeFi)
And while financial services firms have become accustomed to both digital disruption and innovative technologies, the battle for market share is fierce for most business lines. Delays and mistakes can be costly, so it’s vital that leaders ensure they have strong, strategic responses in place.
“The seeds of innovation have already been sown.”
Tony WarrenSVP, Strategic Innovation Executive
Capital Markets Solutions, FIS
THE CHALLENGE OF INNOVATION
Respondents who expect these innovations to impact their business over the next 12 months foresee a variety of effects, including a mix of positives and negatives. But all four trends have the potential to disrupt business models, posing a real challenge for financial services firms.
How innovation will affect my organization
You indicated that these trends would have some degree of impact on your organization, but what specific effects will they have on your organization?
Embedded finance
The metaverse
EMBEDDED FINANCE
Embedded finance takes products or processes that are typically delivered by banks and integrates them into non-bank services or experiences through the power of APIs.
It extends the reach of financial services firms by reducing the cost of acquiring customers. Meanwhile, customers can save time and effort, reduce errors and delays, increase security and create more frictionless experiences.
No wonder, perhaps, that firms are enthusiastically embracing embedded finance opportunities. Even though it’s a relatively new development, close to half of financial services firms are offering some type of embedded finance service, with payment services, banking-as-a-service, consumer credit cards and savings accounts among the most popular. Another 8% are building them but haven’t launched yet.
Embedded finance is also the innovation most closely tied to revenue; among the respondents who believe embedded finance will have a major impact on their organization, 28% expect it to drive revenue for their organization.
CRYPTOCURRENCIES
Cryptocurrencies evoke polarized opinions within traditional financial institutions, ranging from the most optimistic – who believe it is a major opportunity – to the most pessimistic – who see cryptocurrencies as an existential threat.
The data is equally intriguing. One-third of respondents have no interest in developing any kind of cryptocurrencies services, and only 8% will be developing these over the next 12 months. This might suggest that today, the majority currently see no great opportunity in crypto.
However, only 5% ruled out the possibility that their organization would offer cryptocurrency services in three years’ time, suggesting considerable uncertainty around the future impact of cryptocurrencies.
of respondents have no interest in developing any kind of cryptocurrencies services
will not offer cryptocurrency services in the next three years
DECENTRALIZED FINANCE
Decentralized finance (DeFi) generated some of the strongest feelings of any of the innovations we studied. Commonly described as an alternative financial system, it uses blockchain and digital asset technology to manage financial transactions, including cryptocurrencies, without relying on traditional financial institutions or intermediaries.
DeFi may not displace the traditional financial services infrastructure – at least, not imminently. But it has the potential to up-end the competitive landscape.
With the majority of respondents saying DeFi will strengthen competition from fintechs and other disruptive rivals, this innovation is set to become a strategic battleground over the coming years.
To what extent do you agree/disagree with the following statements? (% selecting agree or strongly agree)
DeFi will strengthen the competitiveness
of fintechs and other disruptive rivals
THE METAVERSE
Blockchain technology not only underpins cryptocurrencies and DeFi – it will also be crucial to the scalability and potential of another key trend: the metaverse.
Of course, isolated 3D virtual worlds are possible without blockchain. But the bigger, more powerful metaverse concept relies on blockchain to support Web3-based, democratized, connected 3D virtual worlds. And that’s the model that would usher in more transparency, composability and interoperability than we see across platforms and the internet today.
Digitally advanced sectors such as web services, online casinos, entertainment, video games, education and retail are already active in the 3D virtual worlds that represent the early metaverse, while the pandemic sparked growth in metaverse-like training and conferences. Some organizations are also building digital twins of real places that can be virtually explored by internal teams or customers.
Once the trend gains more momentum, the opportunities will be immense, and along with that comes the demand for convenient, secure, integrated financial services.
While the metaverse may be the most futuristic of the innovations we studied, some financial services providers are already responding.
While the main driver is to improve brand, image or reputation, executives also cite the opportunity to increase or preserve competitive advantage and to retain customers or strengthen relationships.
CONCLUSION
Embedded finance, crypto, DeFi and the metaverse are all significant industry transformations, and they’re developing faster than prior innovations. Those who make the right choices from the plethora of new technologies, innovations and trends at their disposal will dominate the markets of the future.
But as with all disruptive opportunities, there will be casualties too. Financial services organizations must implement clear strategies and devote the right talent and resources to these areas to be able to harness and adapt to the major innovations of our time.
Recommendations:
- Continually listen to your customers to understand their preferences now and in the future. Make sure your strategy and investments are client-centric.
- Seek out opportunities to invite clients and partners into co-creation and ideation sessions to chart the next horizon of financial services.
- Ensure you’re investing in your teams. Consider the skills you have in-house and where you may need to augment.
- Partner with an expert that has the technology and expertise to navigate the entire ecosystem. With open fintech, streamlined solutions and the as-a-service model, you can embrace these innovations with confidence and speed up your time to market.

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Download now“How do you make sure you’re keeping pace, especially when your closest competitor isn’t a bank down the street but a retailer halfway around the world – or even a virtual trading post in the metaverse?”
Melissa Cullen, Head of Strategy Banking & Payments, FIS