The Ghost of Banking Future: What Lies Ahead for the U.S.?

The United States has one of, if not the, most complex banking system in the world. From the large number of institutions serving a huge diversity in populations to the simple size and disbursement of the country, a one-size-fits-all approach simply does not work. But is this a good thing, a bad thing, or something in the middle? At the 2024 Money Experience Summit, industry experts came together to discuss the banking system and asked the question — “What should the U.S. banking system look like?”

Covering the pluses and minuses of the banking system today— and what they would change if they had a magic wand, here are some key takeaways from this panel of experts:

The Role of Fintechs: Disruption and Augmentation

Being competitive as a fintech means finding ways to either augment or disrupt the banking system. TTV Capital’s Lizzie Hartley gave her take on where she looks for that competitive edge. “We have invested in both fintechs that disrupt and support the current system. More than anything we look to invest in companies that solve problems that exist today.”

Financial services have, in large part, operated on a “if it ain’t broke, don’t fix it” model. However, this can lead to stagnant innovation and groups of underserved consumers. Financial providers and fintechs should focus on seeing and solving problems to reinvigorate the competition needed to drive innovation forward and deliver better outcomes for consumers. 

Filling the Gaps with Niche Products

While the banking system in the United States is large and complex, it is not comprehensive. The system we have now hits the broad strokes, but it has holes around certain groups and services. These holes have been where fintechs have historically found purchase in a banking system not inclined to change. 

Alex Johnson, founder of Fintech Takes, notes that given the complex nature of the U.S. banking system, there will always be people who have more niche needs to be solved by their financial providers.

The problem, as Alex puts it, is when products that solve for these niche needs are proposed, banks and venture capitalists are reluctant to invest. Niche products have traditionally been hard to make work at scale, making investors wary of standalone niche products. However, these products can be successful in a co-opetition model. By designing products that can be used by several smaller or regional financial institutions that serve similar niche populations, issues of scale can be solved for and financial products that people need can be more easily introduced to the market. 

While offering niche products is not always feasible at scale, both Alex and Lizzie expressed the importance of keeping underserved populations in mind when looking to the future of the U.S. banking system.

The Role of Branches in an Age of Digitalization

Artificial Intelligence (AI) and machine learning have been quietly operating in the background for years. But, they have yet to replace human interactions. Why? In part, this is because banking requires a level of trust, and consumers are still not fully ready to trust AI. MX research shows that 43% of consumers say they do not trust the use of AI to help them track and manage their finances. 

Financial providers should consider how technology and humans can work hand-in-hand to deliver the best experiences for consumers. Jeff Otero, Vice President of Experience Design of Ent Credit Union, suggested that physical branches can be a strength in reaching customers. 

“Something that is really cool about our opportunity, wherever we are, is having boots on the ground,” said Jeff. To him, it’s more than just a physical presence, but rather a community presence. Living and working in the community and building up a branch manager who is a part of the community creates a unique opportunity to support the specific needs of customers. 

Looking Ahead to 2025

The discussion ended with everyone’s wave of the magic wand: if you could immediately change something, what would it be? While every panelist had different perspectives, every road led to the same place — the consumer. 

From better leveraging data to simplifying experiences for consumers to Open Banking, there are a myriad of trends on the horizon that can help meet consumer needs. As the new year approaches, join us in looking ahead to the top trends that can drive growth and engagement in 2025. Register today for our webinar on January 23 at 9 a.m. PT for a look into MX’s predictions for the financial industry.