It is difficult to predict the future. When I was asked to predict the next banking crisis in 2023, I punted. I accepted the speaking engagement but failed to predict the future.
I must have been a fool.
I gave predictions another shot, this time at a smaller, more intimate event for customers of Atlantic Community Bankers' Bank. I aptly named it Predictapalooza. For a fun twist and to engage the audience, we handed out fake tomatoes for people to throw at me if they disagreed with my predictions. Spoiler: the biggest barrage came when I predicted that the dollar would no longer be the world's reserve currency.
Nobody has asked me to do Predictapalooza again. Maybe because I didn't say it with the certainty and authority that the predictors do. I delivered my predictions not with gravitas but with humor. I still have not figured out how the predictors can be so certain.
This makes it more difficult for bankers to predict the direction of their industry, their markets, and their bank. Go to a conference and you are told with high confidence that this thing or that thing will happen. And that bankers must do this or do that. I spoke with industry veteran Charles Potts about this recently. That the barrage of banking and fintech prognostications has made bankers so skeptical it is resulting in inaction, rather than measured action.
As advisors, bankers want to hear from us about the direction of the industry, and how other banks are successfully navigating the current and emerging environment. We owe it to them to be as knowledgeable as possible and apply that knowledge to our clients' situation. By no means, however, are we certain.
And I would be skeptical of anyone who claims they are.
So far the dollar remains the world's reserve currency. And by making US Treasuries the collateral behind stablecoins, the Genius Act will make my prediction even less likely.
~ Jeff
Bonus coverage: A great AI use case is to evaluate past predictions. I did so below regarding Payments, Branches, and Cryptocurrencies. Remember those bold predictions?
I also did a "where are they now" for Best of Show winners from Finovate in 2015. Ten years ago. Only four of the eight are active and operational. The other four have been either acquired or shut down. And these were the "best."
Predictions on Payments
|
Prediction |
Outcome & Current Reality |
Source Examples (General) |
|
Increased Disruption from FinTechs in
Payments |
FinTechs have significantly disrupted
the payments sector, particularly with peer-to-peer (P2P) payments and
non-bank money transfers, forcing traditional banks to adapt or partner. |
PwC's Blurred lines: How FinTech is
shaping Financial Services (2016); McKinsey's analysis of FinTech growth. |
|
Growth of Mobile and Digital Wallets |
Digital wallets have become the leading
online payment method in many regions, and their adoption for in-person
payments has also increased substantially, displacing cash. |
Federal Reserve's Diary of Consumer
Payment Choice; Worldpay's Global Payments Report series. |
|
Decline in Cash Usage (at least in many
economies) |
Non-cash transactions, particularly
electronic transactions, have continued to grow at a faster rate than overall
payments revenue, indicating a clear move away from cash. |
McKinsey's On the cusp of the next
payments era; Capgemini's World Payments Report. |
|
Momentum for Faster/Instant Payments |
There has been a significant push and
implementation of instant payment systems globally (e.g., the EU's SEPA
Instant Credit Transfer, the US's FedNow, India's UPI). Consumers and
businesses increasingly demand faster payments. |
American Banker's 2015 Predictions
Revisited (discusses momentum for a faster payments system); Treasury's The
Future of Money and Payments. |
|
Increased Focus on Customer Centricity |
The FinTech revolution has driven banks
and payments providers to focus intensely on improving the customer
experience (convenience, accessibility, tailored products) to compete with
tech-savvy new entrants. |
PwC's Blurred lines: How FinTech is
shaping Financial Services. |
|
Prediction |
Outcome & Current Reality |
Source Examples (General) |
|
Widespread Adoption of Blockchain/DLT
for Core Payments |
While Distributed Ledger Technology
(DLT) and blockchain were heavily touted as the immediate future for core
payment system infrastructure (especially cross-border), their widespread,
day-to-day use for large-scale, primary payment systems has been slower
than predicted. Instant payment systems (like FedNow and SEPA Instant) were
often built on established rail upgrades, not DLT. |
KPMG's 10 predictions for the future
of payments (2020, still predicting DLT as the primary means); Bank for
International Settlements (BIS) papers discussing DLT and central bank
initiatives. |
|
Disappearance of Cash in the U.S. |
While cash usage has declined in the
U.S. compared to its global counterparts, it has proven resilient, especially
among certain demographics and for small-dollar transactions. The prediction
of cash "plummeting" in the near term has not fully materialized. |
Federal Reserve's Diary of Consumer
Payment Choice (notes cash's resilient "floor of support" in
North America); Forrester predictions cited in Payments Dive (often
predicting a plummet that has not fully occurred). |
|
Banks' Immediate Loss of Most of Their
Payments Business |
While FinTechs have captured market
share, the prediction that a very large percentage of traditional banking's
business would be lost to FinTechs by 2020 often overstated the pace.
Banks have largely retained their core role by either modernizing, acquiring
FinTechs, or forming partnerships. |
PwC's Blurred lines: How FinTech is
shaping Financial Services (2016, predicted "More than 20% of FS
business is at risk to FinTechs by 2020"). |
- For a specific example of a
prediction review:
The American Banker article 2015 Predictions Revisited: What the
Seers Got Right and Wrong is an example of an industry publication
specifically tracking and reviewing past predictions.
- For a specific example of
early predictions on disruption:
PwC's Blurred lines: How FinTech is shaping Financial Services
(2016) heavily emphasized the risk to incumbents and the disruption in
payments by 2020.
- For a specific example of
ongoing payment trends:
The Federal Reserve's Diary of Consumer Payment Choice
reports and other studies provide concrete data on shifts in cash vs.
digital payments in the US.
Predictions on Branches
|
Prediction |
Supporting
Evidence in Practice (True) |
Source
Examples (2015-2020 Context) |
|
Net
Decline in Physical Branch Count |
The
overall number of physical bank branches in the U.S. has continued to decline
year-over-year, with the rate of closures often increasing in the mid-to-late
2010s, and accelerating due to the pandemic. |
A 2018
analysis noted a net loss of over 5,400 bank branches since 2012, with the
closure rate nearly doubling between 2015 and 2018. The NCRC noted a loss of
over 13,400 branches since 2008. (Self Financial, NCRC) |
|
Shift
from Transactional to Advisory Role |
Branches
are increasingly being repurposed from high-volume transaction centers (like
teller lines) to centers for complex advice, sales, and relationship building
(e.g., mortgages, wealth management). |
A 2021
review noted that the move toward branches focusing on an "advisory
focus" rather than a "transaction focus" was a confirmed trend
in the industry. (The Financial Brand) |
|
Increased
Integration of In-Branch Technology |
New and
remodeled branches feature more self-service options, such as Interactive
Teller Machines (ITMs) and digital signage, replacing some of the functions
of traditional tellers. |
Experts
noted the acceleration of "migration of transactions to self-service...
including leveraging interactive teller machines, or ITMs." (BAI via
Coconut Software) |
|
Reduced
Branch Size and Optimized Footprint |
Banks
began reducing the square footage of new and remodeled branches to lower real
estate costs, preferring smaller, more efficient, and strategically located
sites. |
Data
shows that the average new branch location for the largest banks had
decreased its square footage significantly (e.g., 46% reduction from 2000 to
2023 YTD), moving away from large strip-center or first-floor office
branches. (Cushman & Wakefield, though the data extends past 2020, the
trend started earlier). |
|
Prediction |
Supporting
Evidence in Practice (False/Nuanced) |
Source
Examples (2015-2020 Context) |
|
"The
Death of the Branch" (Complete Extinction) |
While
closures have been significant, the prediction that all or nearly all U.S.
branches would close by a near-term date (e.g., by 2030 or 2034) has not
materialized. |
Reports
around 2020 and later surveys consistently show that a large majority of
consumers (e.g., 94% in a 2020 study, 72% in a 2023 survey) still use a bank
with physical branches, value having a nearby location, and prefer in-person
for complex activities like loan selection or problem resolution. (WBR
Insights/Coconut Software, TD Bank via The Financial Brand) |
|
Massive
Decline in Customer Reliance on Physical Banking |
While
digital use surged, the physical branch remains important for a substantial
portion of the population and specific interactions. |
Even
with the rise of digital tools accelerated by the pandemic, a significant
portion of consumers (e.g., 84% in a 2023 survey) reported visiting a branch
in the past year, and many (41-52%) prefer in-branch interaction for complex
issues or financial planning. (WBR Insights/Coconut Software, TD Bank via The
Financial Brand) |
|
Smaller
Banks Will Quickly Disappear Due to Branch Costs |
Community
banks have shown greater resilience in performance than some predictions,
leveraging their traditional relationship model. |
A 2020
FDIC study noted that community banks proved resilient after the 2008
financial crisis, showing faster growth in return on assets, stronger asset
quality, and higher loan growth rates relative to non-community banks in the
2012-2019 period. (FDIC) |
- Net Decline & Branch
Redefinition:
The trend of bank closures and the re-imagining of the remaining branches
into "advisory hubs" were commonly cited and have been
consistently supported by FDIC data and industry analysis (e.g., Self
Financial, NCRC, The Financial Brand).1
- The "Death of the
Branch" Narrative:
While sensationalist predictions of near-term zero branches circulated,
the persistence of consumer demand for physical locations for certain
needs (especially advice and problem resolution) has demonstrated a more
nuanced, "blended model" where digital and physical channels
coexist (WBR Insights/Coconut Software, Cushman & Wakefield).
Predictions on Cryptocurrency
|
Prediction |
Outcome |
Source
Reference |
|
Extreme
Volatility and Speculative Bubble |
Cryptocurrencies,
especially Bitcoin, have demonstrated extreme price volatility with
significant spikes and slumps, confirming their nature as highly speculative
investments rather than stable currencies for exchange. |
Bank for
International Settlements (BIS) 2018; Brookings Institution (Prasad, 2021);
European Central Bank (ECB) (2022) |
|
Use
in Illicit Activities |
The
anonymity offered by early cryptocurrency transactions made them the
preferred medium for illicit activities, including fraud, scams, and
ransomware payments. |
Brookings
Institution (Prasad, 2021); Chainalysis (cited in MDPI, 2023) |
|
High
Transaction Costs/Scalability Issues (for early Bitcoin) |
As
Bitcoin grew in popularity, issues like slow transaction times and high fees
became prominent, making it cumbersome for daily use as a medium of exchange. |
Brookings
Institution (Prasad, 2021) |
|
Importance
of Underlying Blockchain Technology |
While
skeptical of the currency itself, many experts acknowledged that the
underlying distributed ledger technology (DLT), or blockchain, was ingenious
and had potential to transform payment services and financial settlement
processes. |
Bank for
International Settlements (BIS) 2018; International Monetary Fund (IMF)
(Lagarde, 2018) |
|
Prediction |
Outcome |
Source
Reference |
|
Crypto
will Go to Zero / It's a "Ponzi Scheme" |
While
some prominent figures predicted Bitcoin's value would crash to zero (e.g.,
Nobel laureate Eugene Fama's prediction), the overall cryptocurrency market
cap has grown dramatically (reaching over $2.5 trillion in late 2021), and
Bitcoin has established itself as a recognized, though volatile, asset class. |
Chicago
Booth (Fama, cited in Capitalisn't); MDPI (Prasad, 2021); ECB (2022) |
|
Banks
Will Be Displaced by Decentralized Systems |
While
there has been disruption, traditional banking and central banks have not
been replaced. Instead, financial institutions have largely remained on the
sidelines initially but are now increasingly exploring and adopting the
underlying technology and, in some cases, offering crypto-related services.
Central banks are also exploring Central Bank Digital Currencies (CBDCs). |
Bank for
International Settlements (BIS) 2018; Brookings Institution (Prasad, 2021);
ECB (2022) |
|
Lack
of "Legitimacy" as a Financial Instrument |
Initial
skepticism labeled Bitcoin as merely a tool for money laundering. However,
some major financial institutions and investors (like BlackRock's Larry Fink,
who previously called it a money-laundering index) have since reversed their
positions, calling it a "legitimate financial instrument" and
seeking to incorporate it into mainstream finance (e.g., through ETFs). |
Chicago
Booth (Fink, cited in Capitalisn't) |
- Bank for International
Settlements (BIS).
V. Cryptocurrencies: looking beyond the hype. Annual Report 2018,
Chapter V (Published in June 2018).1 (Reflects expert caution
on scalability, efficiency, and role as money.)
- Brookings Institution. Prasad, Eswar. Bitcoin:
The brutal truths revealed. (Published June 16, 2021).2
(Discusses volatility, illicit use, and scalability issues.)
- Chicago Booth / Capitalisn't. Why This Nobel Economist
Thinks Bitcoin Is Going to Zero. (Published January 30, 2025 - but
discusses prior Fama and Fink predictions from earlier years).3
(Cites early high-profile skepticism that proved largely false on the
"zero" price point.)
- European Central Bank (ECB). Decrypting financial
stability risks in crypto-asset markets. Financial Stability Review
May 2022, Box B. (Reflects the view that crypto's size and complexity grew
significantly since late 2020, and highlights high volatility.)4
- International Monetary Fund
(IMF).
Lagarde, Christine. The Future of Currency in a Digital World.
Finance & Development, Vol. 55, No. 2. (Published June 2018).
(Reflects a more measured expert view, advising to "keep an open
mind... not only because of the risks they pose, but also because of their
potential.")
Finovate Fall 2015 Best of Show
No comments:
Post a Comment