I recently attended the Fintech + Insurtech Generations conference in Charlotte, N.C., which brings together visionaries across the broad spectrum of finance and technology.
The two-day event showcased many current and emerging trends relevant to banks and credit unions, including blockchain use cases, open banking, and broader views on innovation.
Here are my top five takeaways from the conference.
Open banking will put pressure on financial institutions. The Consumer Financial Protection Bureau, which plans to finalize a rule next year that promotes open banking, views the practice as a way of forcing banks to be more competitive, Alexandra Villarreal O'Rourke, general counsel and chief operating officer of mortgage lender Valon, said during a panel discussion.
"It will create more niche inclusion services and maybe force banks to partner with other companies," she said. "I believe we'll see an explosion of options. The trick will be separating the real solutions with passing options."
Regulatory scrutiny to tighten. Recent joint guidance from federal bank regulators clarifies that they're paying closer attention to fintech partnerships, including Banking-as-a-Service, said Mike Butler, CEO of Grasshopper Bank. Still, having clear rules will make it easier for other banks and credit unions to pursue collaborative relationships.
"I think it is a message from regulators that this isn't going to be the Wild West," Butler said. "There will be scrutiny, and you have to stay within the boundaries of the rules."
Credit union retention and growth are dependent on fintech. Rodney Hood from the National Credit Union Administration made this point very clear, stating that members need fintech firms' financial tools (faster payments, digital assets, digital identification, etc.).
"If we don't keep up with the pace of technology, credit union members may no longer be around," Hood said.
Asia leads the way in innovation. While the U.S. is progressing in digital transformation and user experience, real innovation is taking place in India, Singapore, and Hong Kong.
Nearly 90% of India's population has a digital identity, using fingerprints or iris scans, addressing Know Your Customer issues and making it possible to open accounts at lightning speeds, said Dennis Gada, head of financial services at IT consultancy Infosys. Aided by API interfaces, he said 92 billion transactions were handled in Hong Kong last month.
Digital assets and infrastructure have staying power. Despite volatility, cryptocurrency and other digital assets provide the underlying infrastructure for digital transactions, Manolo Sánchez, former chairman and CEO of BBVA Compass (and a member of SRM's International Advisory Board), told attendees.
Regulation will be beneficial by bringing some rules and guidelines to what could be perceived as a feckless industry. "It would be better if the casino phase would end, but that appears unlikely in the near term," Sanchez said.
The Bottom Line
The U.S. financial services industry is in a state of transition as emerging technology and efforts to regulate fintechs promise to alter how people engage with their banks and credit unions. FIs that understand how new tech works and invest in innovation will have a competitive edge as this transformation unfolds.