How quickly will banks adopt new technology?
This question might be answered by looking back at what happened, when new technologies were introduced or were made commercially available, in the past.
If the past is any indicator, we might be able to predict how technological innovations in banking will be adopted in future.
The following graphic illustrates the pace at which past technologies such as IVR, e-banking and bank websites were diffused – gained traction (10% adoption), reached maturity and achieved saturation (80%).
Interactive Voice Response Systems (IVRS)
In 1981, Citibank and three other major banks in New York City provided home banking access to their customers. This was an early version of what was considered online banking.
Within a year, 10% of the banks in the USA had made home-banking access available to their customers. It took 2 decades for 90% of the banks to adopt this technology.
Towards end of 1984, Stanford Federal Credit Union became the first banking institution to offer internet banking to its customers. Presidential Bank followed suit a year later.
Internet banking adoption peaked between the years 1996 and 1998 and by the start of the new millennium more than 80% of banks were providing customers access to their accounts online.
Around 1994 banks started launching websites, though they were used as a brochure featuring pictures of the bank buildings, offices, phone numbers, etc. Interactive banking on a bank website started in 1995 with Wells Fargo.
By 1996, 10% of the banks had a website and by 2005 80% of the banks had their own websites.
Historically, consumer tech adoption rates have been a significant driver for adoption by businesses and this is especially true in the financial services space.
Our prediction for Artificial Intelligence (AI) technology Adoption:
AI adoption started in 2016 and by end of 2018 we expect at least 5% of the US banks to have some form of AI tech supporting their fundamental workflows and processes. We expect AI adoption to gain traction in early 2019 and peak between 2021-24.
Earlier we talked about consumers driving technology adoption by businesses and that is going to be true for AI tech adoption too. Consumer digital adoption rates are higher, by a considerable margin, in China and India than in the USA.
While US and UK have been leading the adoption curves for earlier technologies, it remains to be seen if they will lead the AI fintech curve.
Cronin, Mary J. (1997). Banking and Finance on the Internet, John Wiley and Sons.