SAN DIEGO–Are you paying much attention to driverless cars and alternative energy? What about Blockchain?
Most credit unions would say no, as the disruptive technologies on which they are focused are much closer to their financial services home. But one person is urging a rethinking, saying those technologies and others are going to have an impact on financial services firms.
Gerrard Schmid, CEO of D+H, told the company’s Connections 2015 meeting here that both the company and its more than 8,000 bank and credit union clients have all seen accelerating change over the past 12 months, but that is only a precursor to what’s ahead.
“Two of the longer-term trends some of our clients are starting to talk about are driverless cars and alternative energy,” Schmid told the meeting. “You might be saying, ‘How on earth could this impact financial services?’ And I say, ‘Perhaps, quite profoundly.’ Driverless cars could lead to a fundamental change in our own beliefs about transportation and transportation business models.”
Schmid cited a Goldman Sachs forecast that is calling for 2017 to be a watershed year for driverless technology, a technology that is being driven more by companies such as Google as it is the major car manufacturers.
“So how does this impact you?” asked Schmid. “If you are a financial institution involved in auto lending, you need to be asking who will you be lending to? If you are in auto insurance, who will you be insuring?”
Schmid noted that when he was younger he couldn’t wait to get a driver’s license and a car. His own 17-year-old daughter isn’t even sure she’ll ever own a car, or even get a license.
Similarly, said Schmid, some D+H clients have also begun paying attention to renewable energy as another “major wave in disruption.”
“How might this impact you? If you lend to the energy sector, it makes for an interesting discussion,” reminded Schmid.
Other issues he said deserve attention are a bit better known, although perhaps also not well understood:
- Developments in artificial technology, biotechnogy, the Internet of Things, and wearables. “All of these technologies are going to have an impact on industries, including financial services,” said Schmid. “I think five years from now we will find many of these are prevalent in our technology.”
- Blockchain and Bitcoin. Schmid noted that about $800 million has been invested in Blockchain and Bitcoin in recent years. Blockchain is the crypto-technology beneath Bitcoin. “Think of it as a distributed general ledger, it’s a decentralized time-stamping mechanism,” he said. “It is effectively tamper-proof.”
But why are the technologies so potentially disruptive to banking institutions?
According to Schmid, banks and credit unions are being disintermediated out of one of their most fundamental strengths, being the trusted partner with consumers. A great example, he said, is cross-border payments, where an FI and a correspondent FI are usually involved in each country. With Bitcoin, there is no FI.
“A lot of people are placing a lot of bets right now,” said Schmid. “Many of our larger clients are running several pilots with Blockchain.”