Since the day I started writing about financial services 21 years ago (yikes), people have asked me if I’m running out of things to write about. Most people can’t imagine how you’d write four paragraphs on banking innovations, let alone 40,000. But running low on ideas is the least of my concerns. The underlying topic, money, is massive and ever-changing with new technology, regulations, and consumer tastes.

Money impacts us every single day. And for most people, it’s an almost 24/7 pursuit, and defines what they do all day, where they live, who their friends are, how they spend their leisure time, how happy they are (up to $75k annually in the USA anyway), and even how long they live. So if you are in the business of managing money, be it storing it, spending it, maximizing it, or protecting it, you have a vital role.

It’s not a perfect metaphor, but you could call money the operating system (OS) of living. That’s probably overly tech/hipster, but then again that’s what we do for a living. And if money is the OS, then payments, insurance, wealth management, and so on, are all apps running across it. Which kind of makes sense in a Friday afternoon way of thinking.

What does that mean for running your financial services business? YOU ARE SO FREAKING IMPORTANT IN YOUR CUSTOMERS’ LIVES! That’s a blessing and a curse. They can’t live without you, which is great for revenues, but you also can’t afford big mistakes. That means service, security, trust, user experience all have a higher bar than the average tech or service company. And that’s expensive.

But thank goodness for mobile. It’s a miracle device in so many ways. But aside from chatting and photo sharing, its biggest impact could be on financial matters. Mobile is a free, 24/7 connection to money. That could be disconcerting, especially for the majority of consumers with money worries. So it’s the job of the bank, credit union, PFM provider, to use that connection to ease anxiety, rather than exacerbate it.

But that’s no easy task, given that money is the one of the biggest sources of anxiety in the country, accounting for three of the top-10 worries according to a 2015 study conducted by Chapman University (Hi Charlie). Unlike many posts, I don’t claim to have an answer here. But there are strides being made by pioneers who harness spending data to let customers know how much “free cash” they have at the moment (e.g., Simple’s Safe to Spend) or where they stand on their monthly budget (e.g., Moven and Capital One’s new Inform app) as well as chatbots that have your back (e.g., Bank of America’s chatbot Erica demo’d this week).

It’s a great time to be a bank/financial technologist. Enjoy making a difference!!

Ever since Microsoft made its vast fortune off the back of MS-DOS, becoming the “operating system for ____” has been a software nirvana. And look what happens when you substitute financial terms for computer terms in the OS definition. It describes a position that fintech companies around the globe aspire to: “the software that controls/manages the flow of money.”

Financial Operating System
noun
1.  Software that manages personal finances, controlling and scheduling spending, managing deposits, transfers in/out, communications and security.
Abbreviation: FinOS

Intuit has captured this spot for small businesses (SMB) in the United States with Quickbooks. But even Intuit has given up trying to be the OS for consumers. Why? It’s too hard to gain trust while also providing enough value to wrest consumers away from their primary bank or credit union.

So guess what, all you bankers and CUsters? You are the de facto operating system for your customers’ finances. Embrace it, but don’t take your good fortune for granted or you may find yourself irrelevant to the next generation of consumers. Like successful tech companies, you need to keep upgrading the system. Here are a few core features missing at most financial institutions:

1. Complete fraud protection
   >> 100% guarantee against losses
2. Advocacy
   >> Make it an open network, even if a product recommendation sometimes leads outside your FI
3. Credit for all
   >> If you can’t make the loan yourself, deliver customers to someone who can
4. Rational fees
   >> Fees are fine, large PENALTY fees should be avoided
5. Family connections
   >> Real-time funds-transfer, spending tracking, and so on
6. Risk management
   >> Insurance for anything I’m worried about
7. Business intelligence
   >> Help me grow/start/manage my business even if it’s just a hobby

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Notes:
(1) See also Part 1: The technical side of the bank as an operating system.
(2) OS definition at top from Dictionary.com
(3) MS-DOS picture courtesy of Computer History Museum

It’s about this time every year that someone tells me there just isn’t that much new going on, at least not like the “old days” (which could be last year, 2007, or 1997). Usually, they want me to change their mind, offer up some crazy examples of how the world of financial services is about to be turned on its head.

But things just don’t move that fast in the world of money, nor should they. In the past 50 years, there’s been a banking technology game-changer every 10 years or so:

• 1960s: Credit cards move unsecured consumer lending outside the branch
• 1970s: ATMs moved cash withdrawals out of the branch
• 1980s: Call centers moved customer service and account queries out of the branch
• Late 1990s: The internet moved account queries away from the telephone, mail and ATM
• Late 2000s: Mobile moved account queries away from the (desktop) web, and check deposits out of the branch
• Late 2010s: ????

We are still hard at work on the mobile phase which started very late in the last decade. Apple didn’t allow outside apps until mid-2008, and it wasn’t really until 2009/2010 that mobile banking came into its own. And the Great Regulation push after the Great Recession, has stifled innovation somewhat.

However, halfway through the 2010s, I’m still unsure what history will show as the groundbreaking change of the decade. Here are three contenders:

• Wearable computing: That’s just a workaround before less cumbersome technology comes along
• Bitcoin/blockchain/crypto technology: It may be on the chart in the next decade, but I don’t think it gains dramatic traction in the next four or five years (at least not in countries with stable fiat currencies)
• Crowdfunded/marketplace lending: While initially commercialized by Zopa, Prosper, Lending Club in the 2005-2007 period, it really didn’t get going until after the worst of the financial crisis had run its course in 2010/2011 (and after the SEC shut down the U.S. companies for half-a-year in 2008/2009).

My prediction: All three contenders are interesting and potentially huge. But I don’t think wearables or crypto will gain enough traction in the next four or five years to be considered the game-changers of this decade. But I do believe history will show that direct investor-to-customer lending (aka P2P lending or crowdfunding) begin to take hold in the mid-to-late 2010s.

Last year, total worldwide volume in crowdfunded loans was just $11 billion. That’s just 1% the size of a Chase, BofA or Citibank. So clearly, there is a long, long way to go before we start considering crowdfunded lending to be a disruption. But I believe it will begin to take measurable deposits and loans away from banks, credit unions and credit card issuers by 2018/2019.

We are due for a new game-changer, and I doubt we will be wearing it on our wrists.

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Picture credit: PixGood