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Why Driverless Cars Matter to Credit Unions

Last week I spent three days in San Francisco.  Soon after arriving I had my first sighting of a driverless car – it was negotiating rush hour traffic near Market Street.  Then I saw another, and then another.  I took the photo above of an autonomous vehicle operated by Cruise, which GM recently acquired for $1 billion to accelerate GM’s move into the autonomous vehicle market.  


I had been hearing about autonomous cars for some time, but as they say: “Seeing is believing.”  This is a technology sector that has attracted massive capital and is developing at light speed.  Friends who live in Palo Alto tell me they see ten to twelve autonomous cars on the local streets every hour.  Key players in this evolution include Volvo, Uber, GM, Apple, Google and Baidu.  


Why should this matter to a credit union?  Simon Kuiper of the Financial Times said it best in a recent FT article (10/19/16) titled “Driverless Cars Will Change Everything”.  Among the anticipated benefits he notes the following:


  • Auto accidents could decline by 90%.  This is a huge societal benefit given the fact we currently experience 36,000 auto fatalities each year, just in the U.S.  Globally the number of fatalities is 1.3 million.


  • Pollution and carbon emissions will drop, because driverless cars will be electric.


  • Congestion will diminish because autonomous cars will follow intelligent routes optimized to current traffic conditions.


But perhaps the biggest game changer for a credit union is the forecast that cities could reduce total vehicle numbers by up to 90% while still moving the same number of passengers. You are probably thinking: “There is no way I will ever give up my personal car.”  But Kuiper notes:  “If you think personal cars will survive as status symbols, remember horses were once status symbols.”


A second huge shift will be the negative impact on certain job categories. At the top of the list is the truck driver.  NPR’s Planet Money last year (2/5/15) noted that “truck driver” is currently the number one ranking job category in 29 of the 50 states.  NPR commented: “Driving a truck has been immune to two of the biggest trends affecting U.S. jobs: globalization and automation.  A worker in China can’t drive a truck in Ohio and machines can’t drive cars (yet).”  


Another major victim of autonomous cars is likely to be the insurance sector, which currently derives more than half its total revenue from auto insurance. And the list goes on.  Morgan Stanley estimates that automobiles directly or indirectly account for 13% of total global GDP.


And of course, don’t forget the impact on the automobile manufacturers themselves.  During my SF visit I met with the CEO of a firm deeply involved in the development of software and systems that will form the basis of the navigation grid for autonomous cars and fleets.  He noted that a major German luxury car manufacturer now views the physical car as a commodity. The real value now lies in the intelligent network that will move passengers and freight from point to point.


How soon might this happen?  Probably sooner than you might think.  Many observers in the auto industry expect driverless cars will be on the road by 2020.  Seems far-fetched?  Again, as Kuiper notes:  “A decade ago hardly anyone saw the smartphone coming.”  


I believe autonomous cars will have an impact on society similar to that of the Internet – in other words, the change will be transformative.  It is an overused term, but this will be a true paradigm shift.


What should your credit union do about this?  It is too soon to make specific changes, but it is certainly not too soon to begin to educate your management team and Board regarding the potential impacts of this impending sea change.  Begin by asking some key questions:


  • Do we live in a city that will be on the leading edge of this shift?


  • How will this impact our direct and indirect auto lending?


  • What about credit insurance sales?


  • How will this impact our members’ lives?


  • Do we see any new opportunities emerging from this shift?


Bill Gates once said:  “We tend to overestimate the pace of change in the short term, but underestimate it in the long term.”  Driverless cars won’t happen tomorrow, but sooner than you think possible, your next car could be autonomous!

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