As the year draws to a close, many of us will be looking to predict what the future holds. Fintech is constantly evolving, and financial services firms are having to assess how this can work for their business as an opportunity rather than a threat. Bob Legters, chief product officer of banking and payments at Fidelity National Information Services (FIS), a company that provides financial services technology, writes about his predictions for fintech in 2019 for American Banker.

According to Legters
2019 won’t see the death of cash, but an increase in points and loyalty, such as giving consumers loyalty rewards and savings. “Strides are being made in the loyalty space that will allow people to redeem their rewards right at the point of sale.”

Contactless technology will move financial services closer to becoming plastic-free, but not entirely. Credit cards are still important for consumers, but banks will move to improve the user experience through refining contactless technology and other financial institutions will roll out contactless technology when current cards expire.  

Artificial intelligence (AI) and machine learning are also on the agenda, rather than cryptocurrency, which is “still a few years out” in terms of “broader adoption”. AI will dominate as part of back-end technology, so not necessarily visible to consumers but noticeable in the user experience.  

Financial institutions will work to combat fraud and data breaches for their consumers by launching new strategies for users to have more control of their personal information and cards. New services offered by some firms, such as allowing cardholders to freeze their accounts, are becoming commonplace. In 2019, authentication tools, such as text-messaging for authorising transactions, will be important. Also the way consumers are interacting with their banks is shifting, with a 2017 survey from FIS reporting 72% of bank interactions are digital. 

Real-time payments (also known as instant payments) will become more common for bigger commercial banks, while smaller banks will be testing and investigating these payments more. 

American Banker articleUS financial planning projections The financial planning profession has some emerging trends on the horizon too, according to Dawn Doebler CFP® senior wealth adviser at US-based advisory firm The Colony Group, in an article for WTOP, the website for the Washington-based commercial radio station.

According to Doebler
Financial planning for increased longevity will be a trend in 2019. The Social Security Administration says that a man reaching 65 today can expect to live, on average, until the age of 84.3, and a woman turning 65 today can expect to live, on average, until the age of 86.7. Also, according to the World Economic Forum, people born in 2007 have a life expectancy of 103 years. 

Potentially living longer means you have to plan for more than just your portfolio. “Handling diminishing mental capacity, coordinating required minimum distributions from multiple individual retirement accounts, funding potential long-term care needs, administrating bill payments and responding if a caregiver is suddenly incapacitated” all should be considered and clients should have honest conversations with loved ones and spouses about such issues to be able to plan better. 

There will be a focus on estate planning for second marriages and conversations surrounding the future with a new spouse. “Men and women are taking responsibility for securing not just their wealth, but their future financial security regardless of their role in the financial arrangement of the family.” This is a positive trend and takes into consideration the diversity of modern-day family structures. 

Using technology to help with financial tasks will increase, for example, from tracking spending to providing real-time investment data. There will be a rise in Opportunity Zone investments (described by the IRS as “an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment”) due to the changes brought about in the Investing in Opportunity Act, part of the Tax Cuts and Jobs Act of 2017 in the US. The act gives potential tax savings for investors who meet requirements designed to help the “economically distressed”. 

WTOP article
Forward thinkers – who was right?Writer Myelle Lensat reflects on some accurate predictions of economists and experts over the past 25 years in an article for Bankrate, a personal finance website. 

Some examples from Lensat’s list
Meredith Whitney, an American business woman who previously worked at asset management company Oppenheimer, predicted in 2007 that Citigroup would lose billions and urged clients to stay away from the firm’s stocks. Citigroup was forced to cut its dividend to offset losses of billions of dollars from bad assets in 2008 and the firm “ultimately contributed to the subprime mortgage market collapse”.  

Another prediction about the mortgage market came from American economist Nouriel Roubini, who said in a speech to the International Monetary Fund in 2006 that subprime mortgage lenders were in trouble. Roubini said the crisis would start with the subprime lenders. He was correct. In 2008, the housing bubble burst. 

Jeff Bezos, founder, chairman and CEO of Amazon, predicted that consumers would buy the majority of their goods online. He did this at a time when firms such as Walmart were investing in more brick and mortar stores. Now, Amazon is the number one online retailer in America, Lensat reports, with an average of 1.87 billion users per month. 

Warren Buffet made a US$1m bet in 2007 that low-cost index funds from S&P would outperform hedge fund Protégé Partners over ten years. In 2017, his choice fund returned 7.1%, outperforming Protégé Partners’ 2.2%. He also bet that the Bank of America would make a comeback after suffering legal issues after the financial crisis. In 2011, he made a US$5bn deal with the bank and it paid out an annual dividend of 6% and he received preferred shares. In 2017, Buffet was also given the option to buy 700 million shares of common stock at US$7.14 per share. He exercised this right and made US$11bn out of the deal. 

Bankrate article
 
Will Legters and Doebler make it onto a list of accurate predictions in future? Their predictions are on the safer end of the spectrum so they do have a chance. What’s in your crystal ball for the year? Let us know in the comments. 
Seen a blog, news story or discussion online that you think might interest CISI members? Email bethan.rees@wardour.co.uk.