Are we witnessing the slow death of the account? As the traditional walls around them fall, some financial services companies are focusing on services rather than long-term relationships and giving a new framing to their offerings.
This is more than just an issue of semantics. In a new report, ”Disappearing” Accounts and the Future of Payments, Javelin Strategy & Research Analyst/Content Specialist Craig Lancaster explores how the long-term erosion of the account could change the way our financial services interact with each other. Could the breakdown of these silos lead to more efficient payment decisions—including the possibility of machines or AI-enabled agents making those decisions for us?
Redefining the Concept of an Account
Legacy banks have historically said to their customers, “Open an account, and we’ll always be there for you.” Digital-only neobanks like Affirm, Stripe, and other fintech solutions are talking to customers in a different way. They are trying to build relationships on the idea that they are presenting opportunities to make people’s financial lives better and easier.
“Everybody knows that these services are offering accounts,” Lancaster said. “If an entity is going to hold somebody’s money, they need to have a ledger on it and track the inflows and the outflows and be clear about what can and can’t be done. But they’re layering that under an experience or ease of use or whatever their pitch happens to be, and that’s what feels different.”
Lancaster noted that accounts moving to the background is just one element of the fragmentation happening in banking and payments. Financial institutions are grappling with ways to acquire customers, then fortify those relationships and be in position to sell a variety of services and products.
The longer-term desire for many of these entities is to exercise more influence on their customers’ payment decisions. As things stand now, a shopper has to make a conscious effort to make a payment with a bank-issued credit card or debit card. The consumer has to make the decision to pull the card out of her wallet or open the digital wallet app on her phone.
The goal for financial institutions, one that remains a white stag, is to automatically choose the payment rail the consumer uses based on whatever their predefined desires or the particulars of the purchase are.
“That’s the idea,” said Lancaster. “It’s a ways off In the future. Among six of the biggest banks in the country by assets, not one can do it now.”
The attraction for the payment entities seems obvious. They can remove the friction and the mental work that transactions now require, keeping the consumer from having to grapple with the decision of what card to use or what offer to accept for maximum financial efficiency.
Will AI Do This for Us?
The next step would be for the consumer to be absented from the decisions surrounding a purchase. In this version of the future, once a shopper decides to buy something, they can then allow a tool in the background to make the decisions about how to conclude the transaction.
Such an entity would be able to assess everything about the consumer’s situation and maximize the efficiency of the decision. Which credit card gives me the strongest rebate for this purchase? Will the value of the credit card points outweigh the costs if the consumer cannot make the full monthly payment on time, incurring interest? Would a buy now, pay later plan allow the consumer to extend the payments without any additional costs?
“I have to figure all that stuff out, which I can–it’s not like I’m solving some graduate-level theorem or anything,” Lancaster said. “But it still requires effort on my part to decide how I’m going to deploy all my options. As things become more mixable and interchangeable, it’s likely to reach a point where I don’t have to think about it quite so much.”
There’s no doubt that artificial intelligence is making big strides in aggregating the options and services we have. With unparalleled insight into pricing and decisions and rewards, it’s easy to say that AI is likely to someday make purchasing decisions for us. But Lancaster said that scenario is a little cloudy right now.
“There are several factors that could keep it from happening, or make it a farther-off feature,” he said. “The real questions are, who builds it and who monetizes it? Banks aren’t going to want to offer such a system, because they want to steer you toward using their products. If the eventual tool doesn’t have fiduciary responsibility, then no one will be willing to pay for it. Then it just becomes kind of this whizbang thing, like, ‘Watch what my app can do!’ In that scenario, it’ll probably free, because free is easier to scale.”
Goals at Cross-Purposes
The diminishment of the concept of accounts is nevertheless helping to lead us down this path. As the silos break down between individual products, which may be offered by several different organizations, consumer have more leeway to pick and choose from different providers.
Digital wallets are probably the most likely tool that consumers could deploy to take control of these payment decisions for them. Their great advantage is that they are card-agnostic: Whatever you can load into your digital wallet is happy to surface on your command or, presumably, the AI agent of the future’s command.
But the reality is that there isn’t a single financial provider that would benefit from offering such a service to its customers right now. The goals of payment entities and consumers are too often at cross-purposes. For that reason, the demise of the account may push us closer to this scenario—but it won’t get us all of the way there.
“I don’t know any payment entity right now that would want the consumers out of that decision chain,” Lancaster said. “They want to make their case: You should do BNPL because you can pay it in four chunks at zero interest, or no, you want to use your bank-issued credit card because the rewards are so good.
“The cross-purposes of payment entities and consumers will hold this back,” Lancaster said. “Banks want what they want. Merchants want what they want. Alternative payment options want what they want, and I’m not sure anybody’s ready right now to give it up to the machine to make the choice.”
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