With experience as a top executive at Sprint, American Express and now as the CEO of Paypal, Dan Schulman had much to say about the future of financial technology at the NYU Stern FinTech Conference on November 9. Labeled as “A Conference for the Future,” FinTech brought together researchers and business leaders to discuss the dynamic industry of financial services.
As a featured speaker, Schulman predicted some sweeping changes in financial services within the next decade alone.
“In the next five to ten years, you’re going to see commerce fundamentally change,” said Schulman.
He cited the past five years as an example. In 2010, $2 billion was invested in technology. In 2015, between $20-25 billion was invested, and now technology and financial services are essentially one and the same, said Schulman. With that in mind, Paypal is focusing on using technology to redefine financial services.
Due to the rapid expansion and distribution of mobile technology such as smartphones, the lines between online or offline transactions are beginning to blur, and he believes the retailers who are willing to go beyond the online/offline distinction and find new ways to provide an intimate connection with the customer are going to come out on top.
Schulman said that’s why companies like Amazon have such a supreme advantage over the competition: they know their customers inside and out. Through a vast collection of data, online retailers like Amazon can create algorithms to provide a unique shopping experience for each individual, and in-store retailers who are meeting their customers for the first time as they walk in are at a major disadvantage.
Schulman has brought up the next few years of the financial services industry as the “era of the non-bank,” which has turned some heads. For him, though, this simply means a shift to a reality where smartphones and software reign supreme, and the majority of transactions take place through those mediums. In coming years, smartphones will become tremendously powerful and inexpensive, leading to more and more users.
Another reason for this dramatic paradigm shift is the changing demographic. As members of younger generations flood the market, they bring a new mindset with them, and it’s the responsibility of FinTech companies to adapt to that mindset.
Schulman juxtaposed the older generation versus the Millennial generation as an example. While the former trusts maybe three or four close friends, Millennials have upwards of 1,000 Facebook friends, and consider hundreds of them to be “close.” In the same way, this younger generation who’s grown up in the digital age trusts technology much more, and so companies like Paypal have to reimagine how they approach privacy and security.
Put into practical terms, this changing mindset represents a move away from usernames and passwords and a move toward more advanced security features.
“We’ve put in place walls to keep people out, but through sophisticated algorithms, we can figure out if it’s you [online] based on your behavior,” said Schulman.
More than anything else, Schulman repeatedly stressed one message: don’t just focus on efficiency, but rather on reimagining the entire process.
“Being efficient isn’t enough,” said Schulman. “If you keep doing the same thing, someone else can come in and take over.”
For Paypal, this means forging more and more partnerships with companies like Uber and Visa to become an increasingly integrated platform company. And with over 192 million users on the platform and 1.5 billion transactions per quarter, he’s hoping this mindset keeps them on the cutting edge of the FinTech industry.
There’s plenty of room to grow from here, though. According to Schulman, Paypal accounts for only 10 percent of e-commerce, and e-commerce accounts for only 10 percent of retail, so the room to grow is massive.
The tech industry is moving forward at a rapid pace; as Shulman put it, “If the automobile industry kept pace with the tech industry, a Lexus would cost $1, go the speed of sound and travel 600 miles on a thimble of gasoline.”
It’s ever-important, then, for Paypal and other FinTech companies to not only become more efficient, but to reimagine and redefine the entire industry as they usher in a new generation of users and technology.