12 payments and fintech trends for 2018
December 29, 2017 10:07 AM
From artificial intelligence applications to runaway bitcoin pricing, it's easy to get lost in the stream of banking technology and fintech developments during the past year.
One of thebiggest news stories of the year was the massive breach at Equifax, in which the personal data of roughly 145 million people was compromised. The aftershocks of the breach are still being felt, as lawmakers weigh changes to the credit reporting industry and the banking industry as a whole struggles with how to make systems less vulnerable to attack.
The rise and fall and rise again of bitcoin has also dominated headlines this year, with bankers like JPMorgan's Jamie Dimon staying skeptical while Goldman Sachs is planning to open a trading desk for cryptocurrency. If the price of bitcoin continues to rise, will bankers reconsider it?
More banks, meanwhile,are experimenting with mobile-only applications designed to help them reach areas where they lack a physical presence. And institutions are also increasingly trying to seize on AI or voice-enabled gadgets as a way to expand consumer banking. The question remains over how robust those platforms will prove to be, or whether Silicon Valley competitors might gain an edge in that arena.
Also unclear is whether some of those tech giants may join the banking sector. The Office of the Comptroller of the Currency continues to consider giving a charter to fintech firms, while the existing industrial loan company charter could also allow nonfinancial firms into the system.
With so much uncertainty, the only thing that's clear is how different the sector may look a year from now. Following are predictions for how the leading trends in technology will impact banking in 2018.
One of the
The rise and fall and rise again of bitcoin has also dominated headlines this year, with bankers like JPMorgan's Jamie Dimon staying skeptical while Goldman Sachs is planning to open a trading desk for cryptocurrency. If the price of bitcoin continues to rise, will bankers reconsider it?
More banks, meanwhile,
Also unclear is whether some of those tech giants may join the banking sector. The Office of the Comptroller of the Currency continues to consider giving a charter to fintech firms, while the existing industrial loan company charter could also allow nonfinancial firms into the system.
With so much uncertainty, the only thing that's clear is how different the sector may look a year from now. Following are predictions for how the leading trends in technology will impact banking in 2018.
Andrew Harrer/Bloomberg
Faster payments will find their niche
As with many innovations, real-time and same-day payments are battling against a lot of deep-rooted habits.
The allure of faster payments should be obvious, but many consumers and businesses have not only become accustomed to the multi-day process of settling transactions — they have come to count on the float to manage their budgets.
Thus, the real drive for faster payments will come from other emerging sectors. Gig economy companies likeLyft have already been outspoken about the need to pay their workers in real time; after all, a Lyft driver can't wait two weeks for a paycheck to buy gas for the next rider. The solutions available now aren't appropriate for all circumstances; instant debit payments, for example, are only an option for drivers who have a debit card and are willing to link it to Lyft.
As 2018 progresses, the bigger players in the gig economy will get more outspoken about their needs, and new companies will emerge that further validate the push for faster payments.
The allure of faster payments should be obvious, but many consumers and businesses have not only become accustomed to the multi-day process of settling transactions — they have come to count on the float to manage their budgets.
Thus, the real drive for faster payments will come from other emerging sectors. Gig economy companies like
As 2018 progresses, the bigger players in the gig economy will get more outspoken about their needs, and new companies will emerge that further validate the push for faster payments.
Andrew Harrer/Bloomberg
In-car payments get up to speed
In a good sign for digital assistants and in-car payments, Korean automakers Hyundai and Kia have announced plans to install AI assistants in their cars starting in 2019. The automakers have a goal of every vehicle having some kind of network connectivity by 2025.
Additionally, driverless cars are already taking to the roads in tests in Arizona, creating more opportunity than ever to embed payments technology in the dashboard. Consumers who don't have to pay attention to the road can instead plan their errands and place orders online.
Even so, the clearest use cases will stay close to the road. Internet-connected cars will be able to prepay for gas or order food for takeout. They will be able to pay for parking as well. Those are the use cases we're most likely to see in the immediate future, but they will set the tone for bigger ambitions with in-car commerce.
Additionally, driverless cars are already taking to the roads in tests in Arizona, creating more opportunity than ever to embed payments technology in the dashboard. Consumers who don't have to pay attention to the road can instead plan their errands and place orders online.
Even so, the clearest use cases will stay close to the road. Internet-connected cars will be able to prepay for gas or order food for takeout. They will be able to pay for parking as well. Those are the use cases we're most likely to see in the immediate future, but they will set the tone for bigger ambitions with in-car commerce.
naypong - stock.adobe.com
Gas stations invest in payments and security
Gas stations have until late 2020 to install EMV readers at the pumps, and this still feels like a far-off deadline even though other businesses faced a deadline of October 2015. Still, some gas stations are acting now to upgrade their pumps, and in doing so they are looking well beyond EMV compliance.
Upgrading a gas pump is no small feat. Depending on how the pumps were installed, upgrading to EMV could require breaking the concrete to replace older wiring and install new hardware.
With such efforts underway, some gas stations are looking past EMV to new mobile and loyalty payment systems. Others are consideringalternative fraud protections .
Individual gas stations will choose different paths — and some may choose not to upgrade to EMV at all — but the market will develop innovations that could spill over into other retail categories.
With such efforts underway, some gas stations are looking past EMV to new mobile and loyalty payment systems. Others are considering
Individual gas stations will choose different paths — and some may choose not to upgrade to EMV at all — but the market will develop innovations that could spill over into other retail categories.
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Artificial intelligence and data analytics
With much of the banking industry focused on testing and development of artificial intelligence capabilities, expect growth in three areas: client contextualized experiences, operational efficiency and risk mitigation. With more vendors offering AI, smaller banks will begin testing applications too.
App experimentation
Banks and fintechs will feed off one another's efforts to capture younger clients. The biggest banks are likely to emulate the approach fintechs have developed to reach millennials, resulting in more banking-only apps such as JPMorgan’s Finn . In turn, fintechs will look to offer more traditional banking services.
Cybersecurity
After high-profile breaches like Equifax and relentless attacks by hackers, banks will double down on cybersecurity initiatives and spend more on modernizing IT infrastructure. Banks will also examine key vendors based on the rigor of their own cybersecurity, as well as the security of the vendor’s supplier network.
The evolution of chatbots
Virtual assistants are expanding beyond simple interactions, beginning to offer up suggestions to customers. The ability to conduct transactions is the next step in chatbot maturity. With an added layer of authentication, banks may task chatbots with even more sensitive interactions.
Commercial banking innovation
Smaller banks are discovering that by upgrading their technology, they can compete for valuable commercial clients beyond the footprint of their branches. Enabling paperless onboarding and processing, particularly in commercial lending, will attract more investment.
Mike Kane/Bloomberg
A threat from Silicon Valley?
Amazon is at the top of every analyst’s list of nonbank competitors poised to enter the space. But other tech giants like Google or Apple could try to get in on the action.
Banks should gird for disruption from such deep-pocketed tech firms as regulatory efforts including the OCC’s fintech charter or an ILC may potentially offer them a way in.
Banks should gird for disruption from such deep-pocketed tech firms as regulatory efforts including the OCC’s fintech charter or an ILC may potentially offer them a way in.
Data sharing
More banks will share data with third parties through application programming interfaces. But without regulation, there won’t be a movement to European-style open banking. Customers will, however, get more options on how they want their data shared and where, possibly with a subscription service, or by turning their physical cards on and off with a mobile app.
Fintech investment
U.S. fintech companies will receive $4.7 billion from all types of investors in 2018, according to the research firm Statista. The firms most likely to reap investments are those developing blockchain, AI and machine learning technologies.
The mainstreaming of cryptocurrency?
There will still be plenty of stories about bitcoin in 2018, as prices will undoubtedly continue to fluctuate wildly. But Goldman Sachs’ decision to trade bitcoin demonstrates how Wall Street in 2018 will expand initial efforts to profit from the popularity of cryptocurrency.
