Jason Brown, CEO of debt consolidation startup Tally, just wrote a guest column for TechCrunch revisiting thesis that fintech startups will be able to offer better financial services at scale than banks.
Brown thinks banks are toast once startups perfect automation to the point where financial services become “invisible” and start to take over consumer financial decision-making.
When this level of automation becomes common, banks lose any infrastructure or service edge that their large workforces and incumbent positioning provide, he estimates.
At a high level, I reject this model because consumers don’t think like first adopters.
People want increased efficiency and easier financial processes, but when it comes to complex transactions, we want to slow down at certain points and talk through things with a human. Most of us don’t want an absolutely “frictionless” process (Brown uses the dreaded F word three times in a five-sentence span).
The idea that “specialized fintech companies [will] swoop in and use their data expertise to make decisions for people and execute on those decisions” (emphasis mine) is something people want is what happens when you think every customer is a first adopter who goes for technology first.
What about customer choice? Or consumer protection?
People like Quicken Loans’ Rocket Mortgage because it’s easy, but also because they’re in control of their decisions. Imagine if you just hit a button on your phone and the entire mortgage process was complete for you—no way to pause and ask a loan officer whether you’re getting the best rate.
Or worse, imagine if pre-decided offers came at you even faster? What if Alexa piped up this weekend and said “I heard you talking about needing to refinance your home. You’re all approved for our lowest rate, so just reply Yes to move forward,” then you find out the lowest rate is a short-term ARM instead of your desired long-term fixed rate.
That’s how “make decisions for people and execute on those decisions” manifests with a tech-over-human mindset.
Maybe finance is too well-regulated to allow complex transactions like mortgages to happen without human touches. But if fintech founders think people want every decision made for them, they need to do what they do best and re-think.
For someone in Brown’s position, the focus on automation makes sense. His product helps people pay down credit card balances. That’s a process that should totally be automated. But it’s an ominous leap to say that fintech will become this financial Panopticon that sees all and does all for you.
What will happen with automation? Sure, the hard parts of processes or relatively minor processes will be automated. The success of companies like Acorns shows people like automating certain parts of saving and investing.
But big transactions will continue morphing into a hybrid of easy-to-use digital interfaces with human advice along the way. Lots of banks are good at this, and a whole different sector of fintech is powering banks to become great at it.
Or maybe I’m dead wrong on all this and we’ll all just buy what we’re told to buy. Think about the billions Google, Tesla, Uber, Ford and GM are pouring into autonomous vehicles even though less than a fifth of people like the idea. Sounds just like how people feel about banks!