Financial institutions' e-finance and e-payments innovation will get slower before it gets better: consumed with integration, the largest financial institutions will see a slowdown in product innovation for a few years followed by an era of unprecedented customer control for their financial affairs.
We've seen the slowdown before where the largest banks are still operating on multiple systems platforms representing past acquisitions, making life difficult for customers. In just the last few months, what are now the top three banks went from 25% to 39% of online consumer market share, and today their focus is on making the underlying systems work together, which in turn will cause new features to be delayed. This diversion gives mid-market banks and credit unions an opportunity to catch up on providing more innovative capabilities to consumers, small businesses and corporate customers. Innovation is vital to banks and credit unions in attracting and keeping customers' deposits, as evidenced by the 42% of online households who say that they will choose their next financial provider based on "online service capabilities." The slowdown will be short-lived, and eventually the big banks will usher in a new era of customer-controlled finance, powered by unprecedented levels of system integration through the efforts of tech giants such as EMC, Fiserv, IBM, Metavante, Microsoft, Oracle, and many others.
Here's an example of what I expect to see in the future:
- Always-on interaction. Today the consumer gets the latest updates from their financial when they seek it, on the financial's terms. In the future, the financial will find the customer/member on the methods they've chosen in advance (text messages, widgets that innocuously give a desktop status update, and more), so that the consumer has control like never before.
- A single "dashboard" for viewing and controlling everything, with a common set of controls. Say goodbye to the financial institutions' disparate units speaking different languages. In the future the consumer is more likely to do all their business with one provider because they'll display the same information the same way. This isn't about account aggregation, but rather integrating all the consumer's financial affairs at the core technology level, in order to remove the aggravating "gotchas" that prevent a pleasurable, secure and effective customer experience.
- Members more in control of their accounts, through UDLAPs (user-defined limits and prohibitions) and alerts. Rather than worry about having their credit card shut off when they are on vacation or left on for someone to siphon funds out of the country, UDLAPs and alerts will initially be managed online, with notification and controls pushed out to the customer/member's phone for on-the-fly changes to future updates based on the last one the consumer just received.
- Plummeting fraud levels and goal-driven finance for the masses. With passbooks, checkbooks and even personal finance software (such as Quicken) steadily going out style, people are increasingly relying on the messy practice of frequent log-ins to manage their affairs. Banking consolidation and follow-on technology developments will eventually usher in the era of consumer-controlled-finance, which will eventually smack-down the nation's $45-billion identity fraud problem and bring wealth-management like capabilities to the masses for banking, payments, investments, and even lending and insurance accounts.
