Like in many other sectors, the financial services sector is impacted by the rise of the sharing economy phenomenon. Whilst once small, some platforms today have become quite sizeable and can no longer be ignored by the traditional financial institutions. Especially since they provide alternatives to the very core activities of the incumbents: payments, lending, funding and insurance. Most solutions are based on online intermediaries, enabling P2P interaction, at lower transaction costs. International money transfers are drastically improved using P2P operating models, new P2P insurance solutions are created and both lending and capital raising now take place on P2P platforms. Technological innovation is making it easier for people to connect, exchange and trade without the need of a traditional financial institution.

The payments industry is facing its most radical change in decades. This is due to at least four change drivers — increased regulation, changing customer behaviour, technological innovation and new entrants. The sector faces increased competition from large established tech companies and small FinTech start-ups that are moving into the payments space. Based on the authors’ work with companies in the financial services industry and expert interviews, this paper identifies two distinct types of trends: those enhancing the existing payments system and those trying to build a completely new system. It is clear that a lot of the innovations focus on disintermediating the incumbent organisations. But how can these organisations best address these changes? Building on previous research the authors discuss four crucial capabilities for incumbents to master in an increasingly turbulent environment like the payments sector — designing superior customer experiences, setting up data-driven infrastructures, building multiparty collaborations and providing platform-based solutions. It is impossible for organisations to predict what will happen, but they will be better prepared for the road ahead by investing in these four capabilities.