What money will look like to the class of 2025

Our grandchildren won’t know what cash is.

They won’t know about the 99% of cryptocurrencies that existed in 2018, because there will only be a few that are going to make it.

They’ll never have to hire a wealth manager because AI will do it for them.

And they will think Google, Facebook, Amazon, and Apple have always been banks.

This isn’t one of those “doom and gloom” type of posts, I promise. I believe fintech is heading through a major transformation, and it will be better for consumers, and disastrous for banks.

The current administration is on path to deregulate many industries. It’s causing a big impact on many industries, but deregulation of the financial services industry will probably have the biggest impact.

Here is what I see as being impacted the most.

Peer-to-Peer Payment Adoption Will Create Network Effects That Will Begin to Eliminate Cash

Venmo, Google Pay, and Apple Pay Cash are the easiest ways to pay your friends without paying a single penny for the transaction.

The amount of payments in the U.S. will continue to increase every year.

PayPal reported $9.4 billion in Venmo transaction volume for the third quarter of 2017, up 93 percent year-over-year.

Zelle, who has processed over $55B in transactions in 2016, continues to enable financial institutions all over the world to do P2P payments.

 

Apple, Google, and Facebook have all released their own proprietary P2P systems which will add to the continued growth of P2P.

The things we used to pay for with cash, like lower denomination items, will be done via P2P in the near future. I truly believe my grandchildren will never have to carry cash.

Fintech Adoption Threatens the Future of Wealth Management (And Related Industries)

There are robo-investment websites like Wealthfront and Betterment that allow you to automatically manage your finances, and make smarter financial decisions without much effort.

Fintech opened up a new world to millennials who previously couldn’t afford money managers and other services that were only available to wealthy individuals.

 

Big financial institutions like Bank of America and Barclays need to take a long look at acquiring these technology companies if they care about servicing the next generation of Millennials and Gen Z.

Acquiring these companies wasn’t feasible due to regulation, but now it’s possible and has opened up major opportunities in this industry.

The deregulation is going to make fintech take off.

Blockchain Technologies Will Find Broader Uses… but Face Government Pressures

In 2000, during the dot com crash, 90% of the startups didn’t make it. Amazon & Ebay were some of the few to make it out alive.

This will be the same outcome for cryptocurrency.

We have new ICO’s coming out every day, and their promises are starting to blend in with no real clear differentiator in the market. There will be a shake-out and some cryptocurrencies will make it out, but the truth is, most of them will completely disappear.

Scarcity should be driving prices and if there is endless supply, given the amount of new ICO’s emerging, the prices can’t last the way they have been.

 

You will start to see major M&A from bigger companies that are looking to invest in these cryptocurrencies. Core brands will emerge and they will become the new cryptocurrency.

However, the reality is that the future of cryptocurrencies will be determined by governments around the world. Pay close attention to how the bureaucrats handle this technology and what regulations they set for it. We will see more deregulation of financial services in general, but blockchain and cryptocurrencies will most likely see the exact opposite, and be regulated in a big way.

Regardless of what happens in the crypto world, blockchain technology is here to stay. It is still great as an authentication mechanism and has many broad uses.

The Big 4 Will Enter Their Way Into the Banking System

Google, Apple, and Facebook all have their own P2P payment systems in place and Amazon has actually provided over $3B in small business loans since 2011.

To be a bank you need to be trusted and well capitalized.

Financial service companies aren’t trusted anymore. The continued disaster of the Equifax breach and Wells Fargo fake checking account scandal are representations of how consumers have deep distrust in financial institutions.

Technology companies, on the other hand, although not perfect, are more trusted than banks by a long shot and are extremely well-funded.

 

It only makes sense that the next step is for technology companies to become banks. It will still take some time for this transition to happen, but it’s on the roadmap for all of these tech companies.

Deregulation of the financial services will continue to make an impact on how Millennials use money. As Gen Z grows up, we will start to see how this all plays out.

Matt Britton