If history is any guide, it’s foolish to make predictions about the banking industry. There are too many external variables, from regulations to international turmoil—that the industry often suffers through no fault of its own. Technology can be even more volatile—it’s very hard to forecast which platform will gain broad adoption next, and which will recede into legacy status, or never even make a ripple. That’s why it’s an act of extreme hubris to make any kind of predictions about banking and technology.
But 2016 is here, so let’s go for it.
Pay It Forward: Perhaps the most surprising thing about mobile payments is that it’s still more the exception than the rule. As documented exhaustively on this blog, many options have hit the market in the last few years, including some with predictions of being a game change, but the market didn’t experience a dramatic shift overnight.
To be clear, the benefits are beyond obvious: The entire process is extremely convenient, highly secure and ridiculously easy. Just about any option on the market represents a major advance over cash or even credit cards. And yet, and yet, with each passing year, the predictions of mass adoption fall by the wayside
One odd obstacle is the sheer variety of platforms and apps. It’s normally a good thing when consumers can make choices, but it’s gotten to a point where each new rollout generates no more than passing interest. In fall 2015, when no less an entity than Google launched Android Pay in September, there was virtually no buzz. By contrast, Apple Pay had hit the market a year earlier, courtesy the newest iPhones and the Apple Watch, and it came with a torrent of hype. But despite the company’s promises of world domination, it’s still an outlier.
So let’s refine our expectations this time around. In 2016, there’s not going to be one technology that replaces all others, and the market won’t see a sudden spike while traditional forms of payment get discarded. However, mobile payments will keep gaining popularity, just as they have regularly, and instead of coalescing around a single platform, consumers will help narrow a field that keeps widening. If we reach some kind of critical mass in 2016—which is still possible—it will be through organic and incremental growth, not the emergence of a killer app.
Safety First: Let’s assume that in 2016, the ongoing flood of stories about data breaches at massive corporations and identity theft among consumers will inspire one of two reactions. Those reactions are: 1) We’ll say we’re mad as hell and we’re not going to take it anymore, forcing financial institutions and other providers to implement better security; and 2) We’ll be upset, wonder when it might happen to us, then forget about it. In fact, that’s not a stretch—it’s exactly what’s happened for the past few years.
Technology security gets so much coverage that it’s become almost a cliché. But there’s still no shortage of disastrous hacks—corporations get hit almost routinely, as are consumers. The irony is that tools to at least reduce the sheer number of variety of incidents are both available and affordable.
For example, take fingerprint scanning technology. There are already numerous options available, and Apple has been touting the TouchID feature in its phones for some time now. We also have iris recognition tools, which involve scanning the eyeball before the device in question, or even a particular app, grants access. This option is arguably even more secure than the fingerprint alternative. However, innovation seems to be running far ahead of adoption.
The onus might be on banks and related providers to take the draconian step of mandating biometric technologies as a part of every process. In other words, you’re required to authenticate your identity before every online or mobile transaction. This would surely reduce the volume of crimes committed in this area, but it would also spark major backlash. Moving forward, 2016 might be the year in which consumers are forced to take better security precautions against their will.
The Social Scene: Will there ever be a pause in the emergence of social channels? Will consumers ever stop adopting the newest entry, even as they cling to (or discard) the one before? Will social technologies replace email altogether? And what can the banking industry do to benefit from the newest forms of communication?
Most of these tools, as cool as they are, seem entirely consumer-oriented—they’re primarily for casual communication and sharing, the very opposite of serious-minded financial information dissemination. And yet consider how essential they’ve become for marketing every kind of product and service in every industry, ours included. So why always play catch-up, instead of being out front?
Some aspects of financial services are virtually crying out for technological advances, mainly because they’ve changed so little in the past few decades. Consider the ATM: How much has it really evolved since it arrived? What does it do now that it couldn’t do 20 years ago?
In fairness, there’s been considerable talk, and some action, of bridging the gap between mobile devices and the ATM and that will likely escalate. But as far back as the summer of 2013, we explored the potential of bringing social capabilities along as well. The screen that comes up when we put in the card (or use mobile-enabled authentication) represents an invaluable piece of real estate. A few heart innovators are using the opportunity to offer customized greetings, remind you of upcoming milestones and ease the process of buying gifts.
But this is just a start—what if the technology could draw from publicly available social media posts to amp up the service levels and drive impulse purchases? What if there were applications specifically for this hybrid environment? In 2106, we’re predicting there will be advances on this front.
Market Crashers: Here’s an old question that’s just as relevant now as before: Is Amazon a retailer or a technology company that just happens to be in the retail business? (Remember, it generates consider revenue from cloud computing services.) Are FreshDirect and Peapod grocery stores, or technology companies that sell groceries?
It’s a key issue because for some time now many of the most interesting financial products—and that word can mean many things—have come not from rival banking institutions but instead technology specialists offering custom services in a range of areas. In some cases they’re household names like Google and Apple (see above), in others they’re practiced finance-oriented vendors like Intuit, and many are startups with niche offerings. But finance bring such a critical element of every business, companies in very different markets are increasingly getting in on the action, too: Wal-Mart, for example, has made multiple forays into financial services, and there are surely others making big plans.
One intriguing aspect of this whole scenario is that while the financial services industry must live and die under strict compliance mandates, some of the other alternatives seem to thrive without such restrictions. But as these competitors crash the markets, look for that to change. We’re anticipating that as these outsiders continue offering financial instruments, they’ll be subject to the kind of government scrutiny we’re accustomed to, and that could lead to messy fights.
And here’s one other possibility—many of our industry’s largest players have invested billions in custom technology development. Could they compete with Silicon Valley types by offering—directly or through partners—some technology offerings of their own?
The Next New Thing: We’ve all been so obsessed with mobile apps that it’s easy to forget there are many other technology paradigms emerging and taking hold. So what’s on deck now?
We’ve said it before and we’ll say it again—the Internet of Things (IoT) is coming, and coming soon. The fact that microchips and sensors can be embedded in every conceivable object means that all ‘things’ that are now single-purpose, static and standalone can take on new functions, evolve consistently, and become connected to all other ‘things.’ Just a few years ago, very much in our lifetime, the phone could do no more than enable a disembodied conversation; today, we’re steadily coming up on 2 million apps for the iPhone. That’s the power of the IoT, and the potential gigantic: Gartner puts the number of IoT-related devices at somewhere around 26 billion in 2020, with a market value of $15 trillion.
To be clear, this will introduce many new platforms, many new apps and many, many many new endpoints. It will be an integration and security nightmare, but it will also serve up a blizzard of data that can guide business initiatives more effectively than any option we have now. And for those wondering what this has to do with banking, remember that many wondered the same thing about mobile devices.
Conclusion: The safest prediction about 2016 is that many things will change—guessing what those changes will be is actually less important than being prepared for whatever they turn out to be. This is a market that turns on a dime, and those than can keep up will do very well.