PayPal CEO Dan Shulman sees change afoot in the financial services industry. While speaking on a panel at the World Economic Forum in Davos, Switzerland, Shulman outlined the 5 trends that are re-shaping the way financial services are conducted around the world.
- Money is digitizing – 85% of global financial transactions are conducted in cash (based on volume, not value). However, Shulman says the trend is clear. Checks are disappearing. Cash is disappearing.
- Mobile is exploding – Shulman notes that the bill of materials is for a smart phone is down to $30. That means more customers around the world will be able to harness the power of an entire bank branch in the palm of their hand. “Imagine thinking about banking and starting it in a world of software and mobile. It would be fundamentally different for basic consumer financial services. … That affords an opportunity to bring in the billions of people across the world who are outside the system right now.”
- The onslaught of data is not going to stop – The growing volume of data presents privacy and security challenges for companies, but managed properly it can be a game-changer. “Algorithms are the weapon of the digital company and if they are the weapon then the ammunition is data.”
- Industry and product lines are blurring – The business is of finance is not a realm consisting of only bankers. Other industries have long been trying to break into segment of financial services, but Shulman says the competition has grown fierce when it comes to consumer facing services. Shulman cites his world of digital payments as an example: Heavyweight tech companies, mobile carriers, handset manufacturers and merchants are all exploring ways to carve out a slice of the digital payments pie.
- Security – “Everybody’s password has been compromised. That is the truth of the matter,” Shulman says. Because there is so much data out there, bad guys are going to be able to access accounts using actual, accurate login info rather than hacking techniques. Companies need to leverage the data they have on customers to create walls that stay in place even after an account has been accessed. Shulman says those very same walls will allow companies to identify abnormal behavior and limit the damage bad guys can do should they gain access to a customer account.
Ultimately, Shulman doesn’t see a winners-and-losers outcome when it comes to the competition between establishment banks and fintech disrupters. “Partnerships are going to be important for everybody,” Shulman explained.
Perhaps the most concise words of wisdom Shulman shared during his session in Davos is something he says he learned earlier in his career when he worked for American Express. “The biggest impediment to our future success is our past success. A lot of big companies extrapolate from what was and don’t re-imagine what could be.”