This article was written by Ravi Satyanarayana, Consulting Partner – Payments, Banking, DeFi and IT Strategy, BFSI, TCS. The original article was published by Tata Consultancy Services. You can find the article here.
Business and risk implications for banks.
2026 will be a pivotal year for banking payments to tackle key risks. such as:
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 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:
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:
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:
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:
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.
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