I will issue precisely one prediction: The vast majority of 2017 payments predictions you read elsewhere will prove to be wrong.
The payments crystal ball is far too murky for glib prognostication. If it weren’t, our jobs would be a lot easier—and possibly obsolete.
Progress in payments tends to come incrementally; a slow slog spiked by the occasional unexpected meteor. By next December we’ll be talking about at least one event no one saw coming (OK, that’s two predictions).
That said, here are the items I’ll be tracking in the coming months.
September’s headlines regarding unauthorized account-opening practices seemed to hand the Consumer Financial Protection Bureau (CFPB) a pad of blank checks with which to extend its rulemaking clout. At the time, most bankers would have settled for the status quo on the regulatory front.
Now with Republicans in command of the White House and both chambers of Congress, talk has shifted to the rollback of existing regulations.
Given President-elect Trump’s emphasis on security and populism, it’s hard to imagine anti-money laundering or the CFBP’s core protections going away.
The Durbin Amendment and other restrictions on financial institution fee income may be another matter. It will be fascinating to watch this give-and-take play out early in the next Congress.
2. Net-interest income
The industry has been waiting in vain for 15 years for net-interest margins to return to something resembling a state of normalcy.
With the Federal Reserve having finally embarked on a path of rate increases and the incoming administration’s fiscal policy pointing to higher inflation, signs are strong we may actually turn the corner this time.
Don’t expect a return to “3/6/3” banking: pay 3% for deposits, charge 6% for loans, and head to the golf course by 3 p.m.
The actual impact on 2017 income statements may well be limited. But for bankers yearning for the “old normal,” establishing a solid foundation toward higher net-interest margins would be welcome news indeed.
3. Cross-selling begins to clear its name
Overreaction qualifies as an American pastime, and the demonization of cross-selling in the wake of bank abuses is only the latest example.
When executed properly, cross-selling serves a healthy purpose in a comprehensive financial institution business plan.
I’m already noticing the pendulum shift on this front in industry dialogue.
4. Merchant/card network battles
Last year saw years-old skirmishes between retailers and the card networks break further into public view.
Along with a new wave of lawsuits, Wal-Mart expelled Visa from a growing number of its Canadian stores, while in the U.S., Kroger was willing to endure some level of grocery cart abandonment in its effort to steer debit card transactions from signature to PIN.
Stateside consumer impact has been limited so far, but if retailers become further emboldened things could get quite interesting.
Changes to the Durbin Amendment would roil these waters as well.
5. Chase Pay and Zelle get real
Chase’s long-promised mobile wallet entry finally makes its debut in early 2017.
Chase’s model holds some inherent advantages, including network effects across both consumers and merchants. Time will tell whether it’s worth the hype.
Ditto for Zelle, Early Warning System’s financial-institution-led answer to Venmo’s popular person-to-person app (Zelle has been actively courting credit union participation).
Don’t expect either solution to set the world on fire immediately. But their trajectories will be key indicators for a pair of persistent stubborn corners of payments innovation.