The next decade could be the most transformational period the financial services industry has ever seen, and new payments technology such as digital wallets can help institutions compete in the years ahead, says American Express' Dan Schulman.

 “We are entering the era of the nonbanks—a time when you’ll have all the power of the bank branch in the palm of your hand,” said Schulman, American Express' group president of enterprise growth at American Express during the Michigan CU League’s annual meeting on June 6 in Grand Rapids, Mich.

It is incumbent upon financial institutions, he continued, to find ways to better serve the underserved, and digital wallets can be a key part of that.

The reason there’s so much competition in the mobile payments space is the value of the data that accompanies digital wallets, Shulman said.

“Data is the holy grail of software companies in terms of their marketing weapon,” said Schulman. “The marketing weapon that is going to be used against all of us going forward is the algorithm, and the most famous algorithm is Amazon’s ‘If you like this, you will like this.’ ”

Schulman compared an algorithm to a weapon, and the ammunition that feeds that weapon is data, he said. “The more data you have, the more powerful your algorithm is. People want as much data as they can possibly get, because they can serve consumers better.”

Shulman opened his remarks by discussing offering companies that are no longer the major forces they once were—if they exist at all—such as Bethlehem Steel, Kodak and RCA.

 Part of what sealed those companies’ fates, according to Shulman, was situational bias

 “Everyone suffers from situational bias,” he said. “We think what was will continue to be going forward. That leads to a lot of very bad decisions. It’s easy to go and do it that way; it’s courageous to do it another way. And we all suffer from that.”

Similarly, he said, banks have created a massive branch infrastructure that is unsustainable in the long-term, leading to a significant portion of unprofitable customers and the decline of services like free checking. Along with declines in personal lending at the banks, all of that has led to more than 70 million Americans living on the margins of the financial system, said Schulman.

The solution to that problem lies in technology, he continued. Financial exclusion “is a solvable problem rooted in technology. You can take everything you used to do in a branch and do it through software now.”

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