The Future of Banking, Credit Cards, Mobile Payments and Mortgages

Credit card processing is likewise open to stiff competition from innovators, such as the simple, mobile platform called Square that enables businesses to accept and process cards in a store, at a restaurant, online or on the go, whether they are operating a booth at a craft fair or providing home repairs from the back of a plumber’s truck. While Square was launched as an innovative credit card charge system for small mobile businesses, it grew into a financial services giant with amazing speed. Today, Square offers an entire ecosystem of products and services, from customer management, invoicing and marketing tools to investments and the extremely popular Cash Card debit card.

Online lending platforms for small businesses, student loans and certain types of consumer loans have grown rapidly. This will include the efforts of loan companies like OnDeck and its competitors, as well as new online loan offerings by larger firms such as American Express and PayPal. (In 2020, American Express acquired small business online lending platform Kabbage.)

The rapid growth of smartphones on a global basis opened the banking industry to countless types of competition. Banks will continue to respond but will also continue to be subject to big competitive challenges. As consumers and businesses become more comfortable with banking online, they are more likely to respond to financial services offered by alternative online firms that are competing against traditional banks.

This level of competition, driven by evolving technologies, will open both challenges and opportunities that will drive significant changes. The biggest challenge is cybersecurity. Consumers, businesses and their financial accounts are under constant attack by hackers, phishers and con artists. This may become worse before it gets better. Technologies are struggling to outpace criminals, through the development of innovative ways to store and protect passwords and better ways to verify identities online, along with more secure log in methods (including biometrics such as facial, iris and fingerprint recognition).

Payment systems and credit cards will continue to evolve quickly, sometimes for convenience and sometimes for vital improvements to security. Thanks to Apple Pay and other advanced mobile payments platforms, Americans are finally becoming accustomed to using their smartphones to make payments at cash registers—something that has been popular and Europe and Asia for years. The stunning success of Alipay, a mobile payments and financial services platform launched by Alibaba in China, shows just how quickly a clever firm can turn a traditional market upside-down.

The mortgage market is also ripe for change and innovation by smart competitors. The best example is Quicken Loans, an easy-to-use, online way for consumers to apply for home mortgages. Fees may be lower and response times much faster than those of traditional mortgage brokers. The fact that closing costs, upfront fees and title insurance typically are extremely expensive makes the entire home mortgage market ripe for disruption by providers who can provide convenience while lowering costs.

Also, for the future, shadow banking will play an increasingly major role in lending and credit. Hedge funds and other companies are making corporate loans, thus taking market share away from commercial banks.

Walmart, the world’s largest retailer, now offers a variety of financial services in its stores. The discount store giant’s financial offerings are especially robust in its Mexico stores, but it also is making a significant stand in financial services in its U.S. locations. Walmart is investing heavily in its consumer bank-like financial services under the brand name “One.” Walmart sees this as a way to boost both store traffic and customer loyalty. One will expand to cover everything from BNPL (buy-now-pay-later) plans to debit cards, checking, savings, credit cards and probably investment services. This is illustrative of a major trend: traditional banks finding themselves more and more often facing competition from alternative companies outside the banking industry.

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