Fintech – The next 5 years

I am currently taking a UC Berkeley course on Fintech. One of the course discussions was around the following question:

As the Fintech industry grows rapidly:

What do you think financial and banking services will look like five years from now? What specific services do you expect to be disrupted and disintermediated?

This took me down a small rabbit hole, and I ended up writing a few paragraphs. Once I submitted it, I realized that this is something that I should share with others as well.

Disclaimer: This definitely requires a follow up conversation/article/blog post.

I am looking at the answer to this question from 4 different perspectives – technological, social, ethical, and regulatory.

Technologically – all of the previous comments and messages (from others in the class) are (very realistic) possibilities for the future. However, I believe we are much closer to that future, than 5 years from now.

In the next 2-3 years (especially accelerated by COVID), there will definitely be a consolidation of banks, and a swarm of neobanks like Chime (chime.com) and Envel (envel.io).

I also think that if we broke down what is qualified as “Financial and Banking Services” – there is a possibility of individual service providers with even more disruptive technologies than today, hitting the market first (similar to SoFi for loans, Robinhood for investment, xoom for remittances), then acquisitions to get covered by known common umbrellas (PayPal, Stripe, etc.), but continue to operate as independent brands, and then finally a market for aggregators (similar to what Kayak does for airlines) that help compare the products.

Finally, there are a couple of specific disruptive technologies that can bring about significant change – 5G (leading to Internet of Skills), and of course Blockchain and DeFi – which can introduce tokens/crypto-currency based economies and financial services. These can change the way we imagine our future. [For those of you interested my thoughts on this space – http://www.saurabhdubey.com/stayliquid/life-at-the-speed-of-5g/]. And you may look that that blog and say that is not 5 years from now – but I think “Ready Player One” is about 5 years away.

From a blockchain perspective, Smart Contracts are going to have a huge impact on disintermediation. It would be very easy to imagine a technological move to smart contracts for most financial services in the near future.

Socially – the above technological changes (again influenced by COVID and people’s visceral reaction to reduced social interaction) – will still run into those who will want a social interaction – and that’s where I think 5G could play a signficant role in disrupting the future 5 years from now. I can very well imagine a future where (similar to TurboTax Live Help) you have a virtual bank teller, which is a computer generated person (https://thispersondoesnotexist.com/) and really an AI behind the face/video. We already have Bank of America branches in Colorado (where I live) where you walk into a branch and there is no person there, but only video rooms (https://www.fintechfutures.com/2013/04/bank-of-america-launches-video-banking-atms/) for consultation and interaction with banking officials. So, in the age of Siri, Alexa, Bixby, and a number of other virtual characters, it would be a real possibility to have a number of fake people available on a video ATM/video call – to assist with banking features, loan applications, etc.

Ethically – This presents an interesting dilemma. AI learns from current data, and current data has implicit bias. This has been a widely discussed concept. If you are interested – https://thefintechtimes.com/why-fintech-needs-to-tackle-ai-bias/ , https://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=5629&context=flr. As more AI is introduced as a disruptive technology, especially in the people facing side of financial services (like loans, credit ratings, etc.), the implicit bias in our existing data will create ethical issues, which could lead to legal issues.

The second ethical concern is that of AI being the middle-‘person’. We tend to think of AI in its current sense – which is Narrow AI or Artificial Specific Intelligence (ASI). In the next 5 years, even AI will start growing closer to Artificial General Intelligence (AGI). As AI becomes more autonomous, we will need to start considering AI to be the middle-‘person’. While still driven by rules and learnings from the data, the ethical question of emotionless AI advice, and accountability of the outcomes of that advice (from such robo-advisors) is going to cause turmoil in the fintech industry.

Regulatory – The above ethical dilemmas will eventually lead to regulatory impact. Every new technology introduces the need for more regulations. I believe that in the next 3 years, we will see many more regulations come through that will slow down the pace of fintech advancement.

In some ways, you can almost see the journey over the next 5 years, with its possible ups and downs from the impacting factors.

Of course, it goes without saying that if a yet new technology comes into play, one that we don’t yet know about or is not mainstream, it can change all predictions.

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