There has been much discussion lately on various technologies that will someday threaten the existence of our banks. Like the Bitcoin futures speculation and cryptocurrency from other naysayers, it looks like we will eventually get there. But before we do, there are certain trends that can influence how the online banking industry looks in five years’ time. There will be so many new developments that it is difficult to name a handful, but we do have a few lists that can be used as inspiration.
Food delivery companies have taken over thousands of grocery stores, and Amazon’s grocery business is eating up the retail market. Starting in Europe, grocery delivery continues to proliferate and we have other new food delivery start-ups. We spoke to the founders of several to try to forecast when these trends will become mainstream in the U.S.
As the name would imply, online lending companies like LendingClub have competed with traditional banks for loans for the last few years. Still, they have a long way to go, given the 1% default rate and that 20% of mortgage products that make their way into the U.S. housing market default or leave for foreclosure. Thus, there is a long way for online lending to go before it becomes mainstream in the U.S. The biggest question for those making loans is, how do they control their loan officer’s incentives, as they may work against their lending customers?
The interest rate gap between banks and credit unions has shrunk from 21.5% in 2011 to 6.5% in 2018, and financial centers and financial institutions have been opening credit unions. To increase their loan access, many banks will still have to buy credit unions’ assets such as bank loans. Thus, there is a long way for the rest of the fintech industry to go before we’ll see online banks across the nation.
By 2020, many people may be using an artificial intelligence platform as their primary banking platform. This is a shift that’s already taking place, as the data on personal loans and credit card defaults show. Even if they never fully replace human agents, AI technology can enhance customer service and can empower users. In 2018, some major banks began to deploy AI for other types of banking services, such as helping businesses account for their assets. AI now has the potential to do much more.
Distributed ledger systems like Ethereum and Twine are beginning to have an impact on the banking industry. Blockchain technology, the underlying tech of both distributed ledger systems, is being deployed to change the fintech industry. Some banks are using blockchain in their existing technologies, such as smart contracts, and even making the technology into bank accounts. Now, Ethereum and Twine are becoming mainstream financial technologies. By 2020, more industry players could adopt distributed ledger technologies, as well as mobile payments and money transfers.
Though one may never need it, an aging population will have an impact on the U.S. population. The result? Financial considerations by the health industry. MeatingPlanet asked a health care industry expert whether that will one day become commonplace in medicine. His answer? Yes, it will. “The next iteration in medicine will focus on changing the care model to pay more attention to an aging population and return the focus from life expectancy to health care quality,” said Dr. Thomas Loeb. And in 2020, we should see the first health plans with actuarial reports on their customers that rely on rigorous scientific research for using the information in the best way.