7 (realistic) predictions about fintech in 2019
When it comes to fintech, there is no shortage of big bets on which new technologies will come to fruition and the levels of mass adoption. From talk of plastic cards going away to the end of cash, everyone is eager to anticipate the next big trend.
But change takes time.
Fintech is an exciting industry to work in, filled with innovations to satisfy ever-shifting consumer needs and a demand for more seamless ways to manage money. However, even the best technologies are always iterative.
In the interest of keeping financial institutions of all sizes and our fintech peers honest on what types of innovation will come in the year ahead, I thought I’d take a moment first to level-set expectations and identify what won’t happen in 2019, followed by what more realistic advances we may see.
We won’t see the end of cash, but points and loyalty will become more of a currency
Everyone keeps talking about a cashless industry, but the reality is that society as a whole hasn’t yet opted to part with paper money. Cash is such a deeply embedded institution that unseating it will take many years. The end of cash can only truly be a possibility when fintech has evolved to better serve lower-income consumers or underbanked populations in developing countries.
The new currency that we will see take shape in 2019 is loyalty. Strides are being made in the loyalty space that will allow people to redeem their rewards right at a point of sale, whether it’s saving money on gas or getting a free item at a retailer. On the back end, loyalty processors will spend less time on marketing and recordkeeping and will shift their focus toward technologies augmented with real-time settlement.
We won’t see the end of plastic, but the industry will move in that direction, especially with contactless technology
This is another big shift for consumers who are becoming more accustomed to spending money without reaching into their wallets. But plastic is still important for consumers, and banks will continue to make that experience simpler by improving contactless technology.
However, while contactless payments will be huge in 2019, it won’t see wholesale adoption because of the cost to issuers. While the big banks are being more aggressive in this space, other financial institutions will roll out contactless technology as cards expire, instead of as a mass reissue.
2019 will not be the year for blockchain and crypto, but it will be a year for AI and machine learning
The truth is that blockchain and crypto are still looking for problems to solve and the large-scale business case isn’t there yet. There is a lot of innovation in the space, but broader adoption is still a few years out.
The technologies we’ll see much more of in 2019 are artificial intelligence and machine learning, which have clearer applications and benefits. We’ll see AI dominate in the coming year not as a product itself, but as a crucial ingredient in back-end technology. So while it won’t be recognizable by consumers, it will be pervasive.
Smaller banks and credit unions’ digital capability won’t reach that of the big banks, but open banking and other disruptive technology will help narrow the gap
Let’s face it: Community banks and credit unions will never have the same resources as their larger brethren to create the Amazon-like, consumer-friendly digital experience that customers have come to expect.
But there are a lot of new capabilities like open APIs and cloud-based delivery that they can take advantage of to build digital experience in cost-effective ways. The smart ones will be leaving no stone unturned to find them, and while they have a lot of ground to cover, we’ll see a great deal of progress made by these institutions in 2019.
Data breaches won’t let up, but we will see crucial developments in authentication and combating fraud
The hundreds of millions of consumers impacted by data breaches are not only a cause for concern, but some U.S. lawmakers are looking to put standards in place to protect consumers, much like the General Data Protection Regulation did in Europe.
Financial institutions and fintechs will spend much of 2019 working on and launching new and better ways for consumers to have more control of their cards and their personal information. Consumer controls over card status, including new services offered by the major players allowing cardholders to freeze their accounts, are becoming standard. New text-messaging tools for authorizing or preauthorizing transactions, as well as authentication tools for validating users based on login and engagements will all provide additional hurdles for fraudsters to navigate.
The “Forget Me” features being adopted into some state laws will force change as well with tools that give consumers more control. The key to these solutions is communication and verification with consumers so that as we empower them, we educate them on how they can combat fraud.
Financial institutions won’t become branchless, but they will get more creative with their real estate
There is undoubtedly a shift in consumer behavior when it comes to in-branch activity. FIS’ 2017 PACE survey found that 72% of all bank interactions are now done digitally. In the year ahead, we will continue to see a surge in direct-to-consumer banks as financial institutions tap into consumer demand for higher-interest deposits and convenient, easy-to-use online services.
But branches are still far from obsolete, so 2019 won’t be the year that they go away. If anything, we will continue to see creative uses of traditional branches, hybrid models such as PurePoint’s high-touch financial centers, and more experiential initiatives such as the Capital One Café.
We won’t get to the holy grail of real-time payments across the entire financial ecosystem, but we will make great strides in that direction
With the Federal Reserve’s goal of making real-time payments ubiquitous by 2020, financial institutions and fintechs alike are moving quickly to develop and implement technology in this space.
In the coming year, we won’t hit real-time nirvana, but the bigger commercial banks will see real-time payments ramp up and the smaller regional institutions and credit unions will focus on their capabilities to accept these payments. For the smaller institutions, making a wholesale change to their ecosystem just to do a real-time payment might not be a reality, but there will be a lot of testing and investigation in this space.