Industry
Banking
Banking Services Transformation: Unlocking Exponential Value
Highlights
- In 2026, banks will face intense pressure to remain relevant and competitive in the rapidly transforming payments marketplace due to the convergence and acceleration of long-standing technology and industry shifts.
- While consumer expectations are changing quickly and regulatory pressure is intensifying, AI along with tokenization, and embedded finance are moving from emerging concepts to industry standards.
- Payments are no longer a technical function in the background, but influence conversion, customer trust, and the resilience of international business through intelligent orchestration, platform approach, and programmable liquidity management.
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Risk implications
Business and risk implications for banks.
2026 will be a pivotal year for banking payments to tackle key risks. such as:
- Revenue pressures from lower interchange and merchant platform competition, offset by new services like wallet provisioning, token orchestration and platform APIs.
- Balance sheet and deposit dynamics through tokenized deposits can shift behavioural liquidity away from bank deposits towards central banks or platform approaches, stress testing margin and funding models.
- Operational complexity induced through multi-rail convergence, token management, agentic AI workflows and asset custody challenges integration and reconciliation needs.
- Regulatory and model risk arising from agentic systems demands stronger model governance and explainability.
All these force banks to choose whether to lead, partner or commoditize.
Banks that act now on four strategic priorities can help preserve margins and capture new value pools.
Multi-Rail Strategy
Multi-rail orchestration is strategic and not optional.
It enables a 360-degree view of customer transaction activity with new routing options creating new revenue pools in treasury, custody and tokenization, raising the bar for banks to offer value beyond liquidity and credit. Orchestration lowers transaction cost and increases success rates via smart routing, settlement netting, and accelerates reconciliation when integrated with on-chain primitives. Programmable rails introduce new AML and monitoring surface, triggering risk and compliance model changes along with operating model shifts with new controls and observability due to more real-time, event-driven flows across on-chain and off-chain data exchanges.
Tokenization services enable secure, high-margin client relationships for deposits, debt, and funds. Programmable payments automate business logic for finance and treasury. Orchestration and middleware optimize settlement and liquidity for banks. Token rails reduce costs and accelerate cross-border B2B transactions. Data and AI enhance risk management, pricing, and personalization. Embedded finance APIs bundle payments with reconciliation and reporting. Cost savings are achieved through faster, lower-fee settlements.
Key recommendations for banks to address these opportunities:
- Leverage ISO 20022 and Open Banking data to deliver advanced services like cash flow forecasting and fraud intelligence.
- Define a multi-rail strategy and governance for custody, issuance, and public DLT participation allowing centralize payment orchestration and tokenization, exposing APIs to clients.
- Run pilots for tokenized assets and atomic settlement by collaborating with regulators via sandboxes.
- Launch tokenization and custody services, strengthen on-chain risk controls, and offer treasury-as-a-service, real-time liquidity management, and programmable payment flows for corporates.
Platform thinking
Scale through platform thinking with embedded finance.
The customer interface is shifting away from the bank's direct channel, losing acquisitions outside of bank’s channels. Platforms demand lower interchange and processing fees, and SME lending margins shrink due to dynamic, platform-driven BNPL and credit models. Platforms control behavioral, lifestyle, commerce and operational data as banks lose underwriting edge. New risk profiles arise like third-party risk, API outages, ecosystem failures, partner fraud, dispute complexities. Fragmented reconciliation with multi-party, multi-rail settlement across platforms, banks, fintechs, card schemes and tokenized rails.
Banks have the opportunity to serve as the regulated trust layer within digital ecosystems, offering compliance-as-a-service, KYC and risk orchestration, settlement, and escrow solutions. By developing robust Banking-as-a-Service (BaaS) platforms with APIs for payments, lending, cards, digital KYC, and tokenized deposits, banks can enable embedded treasury and working capital solutions for SMEs through integration with ERP, TMS, marketplace, and accounting platforms.
Even if banks lose direct customer interfaces, embedded finance channels can significantly increase transaction volumes. Leveraging data-driven risk models will help combat fraud, enable contextual credit, and support instant underwriting. Additionally, banks can deliver a multi-rail value proposition through intelligent routing and programmable settlement for merchants, SMEs, and corporates.
Key recommendations for banks to address these opportunities:
- Develop premium fee strategies for instant payment services that deliver clear business value and speed.
- Transition to a unified payments platform for rapid, cost-effective service deployment and seamless fintech integration.
- Embed secure banking products in non-financial platforms, leveraging Bank-as-a-Platform (BaaP) with unified APIs, configurable pricing, and streamlined partner onboarding.
- Establish robust partnership frameworks and tiered programs. Integrate AI-driven risk and compliance, multi-rail payments orchestration, and digital identity solutions.
- Modernize core systems with cloud-native, event-driven architecture, and scalable APIs.
- Shift distribution to ecosystem-led models, enabling API monetization and micro-services at the point of need.
AI Autonomy
Moving beyond automation to autonomous, goal-driven actions with AI.
The adoption of AI-driven strategies in banking enhances speed, accuracy, and autonomy throughout the payment lifecycle. To remain competitive and resilient, banks must prioritize AI integration. This approach unlocks new revenue opportunities such as smart routing fees and value-added payment agents and improves conversion rates through streamlined user experiences. Operational efficiencies are achieved by reducing manual processing and reconciliation costs, though this requires increased investment in secure AI infrastructure, monitoring, and skilled personnel. Key risks include accelerated fraud, compliance challenges from autonomous actions, and model drift in decision-making. Maintaining customer trust depends on transparency and explainability, as mishandled automated processes can quickly erode confidence
Intelligent agents optimize payment routing for cost savings, automate reconciliation and settlement, and enhance customer experience with personalized offers and instant credit. AI-driven fraud defense uses generative models for rapid anomaly detection and autonomous transaction freezing. Cloud-native agent platforms enable fast market expansion and product launches, while dynamic pricing and recommendations maximize revenue by adapting to real-time market conditions and customer behavior.
Key recommendations for banks to address these opportunities include:
- Establish board-level AI governance with strict standards for responsible, explainable, and ethical AI.
- Form an AI oversight committee to review deployments and embed compliance and audit trails into agent workflows.
- Implement a ‘three-lines-of-defense’ model for real-time monitoring and accountability.
- Modernize with a cloud-native AI platform and unified data fabric to eliminate silos.
- Prioritize high-impact AI use cases, such as fraud detection and real-time reconciliation.
- Invest in employee upskilling for AI collaboration, and use agentic AI for complex tasks, reserving traditional automation for simpler needs.
Tokenized Liquidity
Liquidity will be tokenized, borderless, and always-on.
Emerging blockchain-based payment rails for cross-border and institutional transactions present significant regulatory challenges. These systems introduce funding and liquidity risks, including the potential for rapid outflows, and may shift payments, custody, and settlement away from traditional intermediaries. Realizing efficiency gains depends on standardization, network effects, and integration with legacy infrastructure. Use of public blockchains raises concerns regarding deposit insurance, capital and liquidity requirements, KYC/AML compliance, and cross-border regulation. Additionally, programmable finance and instant collateralization could enable new banking products, such as custody services and marketplaces
Banks can issue tokenized deposits or stablecoins to enhance trust and generate returns from reserve assets, while leveraging DLT infrastructure via APIs and value-added services. They can provide custody, settlement, and asset management for tokenized assets. Tokenized settlements reduce intermediaries and costs, accelerate cycles, and enable programmable automation. Fractionalization broadens market access, and interoperability allows tokenized deposits to serve as universal settlement rails across DLT and traditional finance.
Key recommendations for banks to address these opportunities:
- Banks should adopt a proactive, multi-faceted strategy by enabling dedicated teams to explore DLT and tokenization, run pilot projects, and pursue partnerships with fintechs and industry groups.
- Invest in modern, interoperable technology and robust cybersecurity for digital assets.
- Prioritize issuing tokenized deposits and consider fully reserved stablecoins to enhance control and enable 24/7 settlement, leveraging existing regulatory frameworks and trust.
Way Forward
To stay competitive in 2026 and beyond, banks must transition from siloed payment systems to integrated, intelligent platforms.
Delivering fast, secure, and cost-effective payments, alongside automation-ready APIs and tokenization, will drive modernization and innovation. Multi-rail orchestration, real-time fraud prevention, and API-first design will reduce operational friction, build customer trust, and enable banks to meet regulatory demands while defining the next generation of retail and corporate payment experiences.