This vendor-written piece has been edited by Executive Networks Media to eliminate product promotion, but readers should note it will likely favour the submitter's approach.
While it's still difficult to imagine a driverless car navigating the traffic of Singapore's Orchard Road on a Friday night or Queen's Road East in Hong Kong at rush hour, robotic cars will be a part of our future.
Obviously autonomous vehicles to other industries will transform how we think about transportation, but it will also have a knock on effect in financial services - from insurance to loans and payments.
It's all happening faster than you may realise. In addition to auto companies ranging from Tesla to BMW trialing driverless cars and Google and Visa experimenting with Internet of Things connectivity, we're now at the stage of nations testing viability: Singapore has already tested driverless shuttles and Australia is trialing driverless buses in Perth. In March this year, South Australia became the first jurisdiction in the country to allow on-road trials of driverless cars, following estimates the industry will be worth $A90 billion within 15 years.
Yet, while the future of driverless vehicles looks bright, the quest to achieve full vehicle automation still has challenges, ranging from regulation to how driverless cars co-exist with semi-autonomous and fully-autonomous vehicles. There are also questions on how financial services will pivot to the initiatives.
- Insurance. Driverless cars are expected to be much safer on the road, dramatically reducing road fatalities as a result. Recent research by Swiss Re and HERE indicates driverless technologies could wipe US$20 billion off insurance premiums globally by 2020
- Real estate values could change - with the need to live closer to business districts becoming less important as commuting time could become more efficient and pleasurable. Inner-city housing prices could fall as a result; properly values in outer and rural suburbs could increase and banks' existing mortgage books could be significantly impacted. Regardless of the exact influence of driverless cars on the real estate industry, some level of property value equalisation is likely to take place.
- Car loans. Ride-sharing companies have already transformed consumer attitudes towards car ownership. According to various studies, car ownership is one of the most inefficient assets people own, as cars often sit unused for approximately 95 per cent of their existence, particularly within urban areas.
If driverless cars increase opportunities to car-pool on-demand driverless vehicles, it's likely more people will question why they need to own a car, which impacts financial service providers of car loans and insurance.
But there are also opportunities. Expect opportunities to arise for people to invest in and have part ownership of driverless vehicles. These automated vehicles may be used exclusively by investors or put to use on the road for others to hire, opening up a new market of shared assets that incur expenses and generate revenue.
A whole new way of thinking about transportation means a whole new set of questions and opportunities for banks and insurers. The financial service providers who think this through now are best poised to lead the new market.
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