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Thought Leadership - Scoring Predictions for 2017: A Look Back

Thought Leadership - Scoring Predictions for 2017: A Look Back
Posted: Jan 29, 2018
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In keeping with the tradition started last year, where we scored how well we did on the previous year’s predictions, here is a look at what we thought was going to happen in 2017, versus what really did.

Tom Davis gave us these prognostications:

Checkout-less shopping will proliferate. More than a handful of top 100 retailers will jump into the checkout-less shopping game in 2017

The Score: C

Amazon opening their Amazon Go concept store, with no cashiers, no scanners, was the first gauntlet to be thrown down by merchants who were widely expected to follow suit. Sam’s Club rolled out its ‘Scan & Go” app allowing shoppers to scan items in their cart on their phone, pay on the phone, and literally roll out the door. This was adopted by Sam’s Club owner Walmart as well. But, Amazon didn’t open up Amazon Go to the masses in 2017, just to its employees, Sam’s Club and Walmart are still less than a handful, (albeit a really big hand), and adoption of checkout-less shopping still has a way to go.

 

We will enter the era of the personal assistant, Sales volumes on purchases initiated from an Amazon Echo will grow faster than Apple Pay sales volumes at the point of sale.

The Score: A

At least according to one source, Echo owners increased their purchases of consumer products … by 13.5%. Meanwhile, a report from Adobe Digital Insights noted the [average order value] AOV for Apple iOS devices was $127, a 5.1 percent increase from 2016. This is not quite apples to apples (pun intended), but it meets the spirit of the prediction.

 

2017 will see a dramatic shift in the regulatory and legislative environment. The new administration will be successful in reforming, but not repealing Net Neutrality, CFPB and the Durbin amendment in 2017.

The score: B

Net neutrality was not just reformed, but ripped out completely; the CFPB saw frequent challenges to its authority throughout 2017, culminating in Cordray’s replacement with a handpicked new director. The Durbin amendment, the issue most closely at the hearts of debit issuers, remains intact, at least for now.

 

Wearables will continue to struggle as a payment device. Little to no growth in payment volume in wearables in 2017.

Score: A

Wearables got a lot of press space in 2017: Fitbit jumped in, as did Garmin. Visa announced the ability to pay at the upcoming winter Olympics using gloves, commemorative pins, and NFC stickers. Of course, the Apple watch, and the Android Gear both have payments capability. However, despite the introduction of all the new tech, and despite predictions by many analysts that payments by wearables will grow by triple digits, there has been no material payment volumes seen in 2017.

 

Internet of Things and connected devices will continue to amaze and make our lives easier. More development in this area, but no significant change in the way payments work with these devices.

Score: B

Amazon released no less than 7 different versions and form factors for its hugely popular echo product. Google Home only has two versions, but both are also very popular. And the capabilities of these devices do indeed continue to amaze. But contrary to the prediction, the way we make payments is changing as well. With the right skills, the echo can pay bills (“Alexa, ask Capital One to pay my credit card bill.”), shop and purchase items from Amazon (“Alexa, order batteries”, “Alexa, dog food”, “Alexa, add paper towels to my cart”); and even order pizza from Dominoes (““Alexa, open Domino’s and place my Easy Order”).

 

Legalized marijuana could present increased opportunities for many credit unions. Prediction: A stalemate continuing at the federal level, but increased involvement at the state level as far as banking services for the marijuana trade.

Score: C

According to the U.S. Treasury, almost 400 banks and credit unions currently serve the cannabis industry, a number that has more than tripled since 2014. Washington state, Oregon, Alaska and Colorado invested in staff, updated policies on anti-money laundering and other changes to accommodate legal recreational marijuana. In 2018, California, Nevada, Maine and Massachusetts will start allowing sales of recreational pot. But except for Hawaii, which only went so far as to allow a Colorado-based credit union to serve medical marijuana dispensaries in Hawaii, there has been minimal action at the state level. And it looks like the stalemate at the federal level might soon be resolved, and not for the better, reversing loopholes created by the U.S. Treasury under then President Obama, making it even harder for banks and credit unions to operate legally and still do business with entities in the cannabis industry.

 

Lou Grilli gave us these prognostications at the beginning of 2017:

 

Payments will become increasingly complex and inconsistent, causing a backlash against emerging payments.

Score: C

Ways to pay have certainly become more varied and disparate. Whether to swipe or insert a card still befuddles many people at the POS. The advent of a contactless card only adds one more confusing option. In addition, mobile order ahead (including in-app payments) for quick service restaurants and checkout-less shopping apps, such as Walmart’s scan & go, offer an alternative to paying by card before leaving a store or restaurant. Tapping a phone, or watch (or glove or pin, as mentioned above) are yet more options for ways to pay. So, it’s true that payments have, and continue to become, increasingly complex. But any backlash against emerging payments has not been seen.

 

Millennials will not drive spending in 2017.

Score: A-

Any prediction about a demographic this broad (ranging in age from 18 to 34) is bound to be right, and wrong, at the same time, but according to CNN Money, “Overwhelmingly they're delaying major milestone purchases like real estate, cutting back on discretionary spending and taking a fiercely self-sufficient approach to their money.” Tempering that sentiment, at least one source claims that “Millennials Saved Thanksgiving Weekend”, citing that older millennials (25-34) were the biggest spenders over Thanksgiving weekend, by 25%.

 

2017 will be the year of P2P

Score: A+

P2P was in the news frequently in 2017, dominated by Venmo’s wildly successful growth (over 100% year-over-year, moving $9 billion in just the 3rd quarter alone). Meanwhile, banks and credit unions rolled out their own P2P service, Zelle. Apple launched its own P2P service, Apple Pay Cash. Zelle and Apple’s entry into this space came late in the year, so it’s too early to measure uptake, but P2P certainly made quite a few headlines in 2017.

  

One of the big tech companies will become a bank.

Score: C

The rumors started: Amazon lobbyists met with the Office of the Comptroller of the Currency (OCC) this year to discuss “issues related to mobile payments and payment processing, financial innovation, and technology," according to publicly available lobbying disclosures. PayPal met with OCC officials to discuss “mobile payment innovation” issues related to underserved customers and remittances and money transfers, according to its disclosures. Square, the merchant processor for many SMBs, processing well over $50 billion in card payments annually, did apply for a controversial bank charter, called an industrial loan company license, to offer loans and deposit accounts for its small business clientele. But the prediction was intended to imply that Google, Amazon, or the likes would enter the banking industry, which did not happen in 2017. Nevertheless, we did see several tech companies offer banking services on the fringes, despite not becoming banks. Venmo began issuing debit cards so that Venmo users could spend their Venmo funds at brick and mortar stores. Amazon granted more than $1 billion in small-business loans to more than 20,000 merchants.

 

Some credit unions will see margins squeezed in 2017 as rates rise.

Score: A

The primary factor determining whether a credit union emerged from 2017 ahead or behind is size, as in the amount of assets. According to NCUA data, the net worth of credit unions with $500 million in assets and up had high single digit or double-digit growth in net worth. Below that size meant either flat or declining net worth from one year ago. The combination of increased compliance and regulatory costs (including stricter CECL reserves), lending costs, management costs, staffing costs; increases in the Fed rate, which in turn increased the cost of money, while most car and mortgage loans are fixed, was responsible for 12 credit unions being placed under NCUA conservatorship, with another 200 credit unions disappearing due to being absorbed in acquisitions.

 

2017 will see the rise of a few fintech single use charter banks.

Score: F

In 2016, a new and highly controversial type of banking license, called a fintech charter, was rolled out by the OCC with the goal of inspiring innovation and competition using digital technologies in banking. However, as recently as December, no applications have been received.

 

 

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Shelly-Ann Wilson Henry

Shelly-Ann Wilson HenryShelly-Ann Wilson Henry

In her role as PR & Communications Manager, Shelly-Ann plays a critical role in the development, distribution and management of the content that supports Trellance’s thought leadership agenda.

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