The Rise Of The Machines

How automated automobiles threaten to disrupt American society and the credit union business.


The most disruptive technological change of the 21st century will be the widespread adoption of self-driving cars. And it’s not a matter of if, it’s when.

Each day brings with it yet another news story, another update in the progress toward fully automated automobiles. The adoption of this technology will carry both benefits and drawbacks, but what are they, really?

The Benefits

In 2015, there were 38,300 motor vehicle-related deaths in the United States and 4.4 million serious injuries. The death total represents an 8% year-over-year increase, the largest percent increase in 50 years, according to the National Safety Council.

Vehicle traffic deaths rank second to poisoning as the leading causes of accidental death in this country, and the adoption of fully automated automobiles offers an attractive promise: Remove flawed human decision-making from driving and allow inter-vehicle communication to make roads safe.

Automation also brings with it the promise of increased speed and convenience. In a fully autonomous world, there’s no need for stoplights or stop signs. Remove erratic human behavior, which rules to regulate the flow of traffic are meant to address, and there’s potential for unfettered travel at higher average speeds.

Finally, transportation costs will dramatically decline. A large percentage of fares for cabs and ridesharing services go to pay the driver. Eliminate this cost and that $20 ride falls by 50% … or more.

What other forces are changing the credit union marketplace? Callahan’s Strategy Lab helps credit union leadership teams take a step back and focus on issues of strategic importance for their organization. Learn more today.

The Drawbacks

For consumers, the adoption of fully autonomous automobiles undoubtedly creates advantageous market forces: fewer deaths, lower commute times, and reduced transportation costs.

But there will be consequences that are easy to underestimate.

For example, how soon will automated vehicles hit the public road? In Pittsburgh, Uber has already launched a self-driving fleet of vehicles, and Moody’s predicts the commercial release of automated vehicles by 2020. The financial services company further predicts that automation will become a standard option in vehicles by 2030, will be standard in all new cars by 2035, will represent the majority of vehicles on the road by 2045, and will be universal by 2055.

Yes, 2055 is four decades away, but people will have to deal with the implications of automated vehicles within the next decade. Change might occur so rapidly that those who work in related industries won’t have time to adjust careers and enter new fields. Plus, there’s no guarantee other industries will have the room to absorb millions of workers.

In the short term, taxi businesses and ride-sharing services like Uber and Lyft are the most ripe for disruption. But they're not the only ones whose futures are at stake.

Consider the American trucking industry. At face value, it would be safer and cheaper for companies to adopt automated trucks that can drive all night at a quicker pace. If that happened, the 191,000 jobs the American mining industry has lost since late 2014 would represent approximately 5% of the 3.5 million American truck drivers whose jobs would be made obsolete by automation.

And the disruption doesn’t stop there.

Insurance, Home Prices, Credit Unions, And More

In the age of autonomous vehicles, what happens to auto insurance? In June 2015, KPMG published a study that estimated the insurance industry would shrink by as much as 60% within 25 years, a loss of some $75 billion. And local governments, which recover hundreds of millions of dollars in traffic fines and vehicle registration costs, will need new revenue models or taxation venues.

Automated vehicles might even cause home values to drop. One of the largest drivers of home price is location — people pay for convenience. But in a world where an eight-mile ride takes eight minutes, is it any less convenient to live 20 miles away? Of course other factors also drive home value, but today’s borrowers might not be willing to gamble that in 10 years their home price will hold steady or increase.

Credit unions face unprecedented changes, and responses to competitive pressures that might have worked in the past might not lead to success in the future. Contact Callahan & Associates to learn more about team learning experiences developed to help credit unions succeed in a changing world.

Automated cars affect credit unions, too. Maybe not in the short-term, but certainly within the next few decades, the rise of automated vehicles will require credit unions to find a way to replace their auto loans. As of third quarter 2016, they made up more than 34% of the credit union balance sheet, according to data from Callahan & Associates.

Nationally, auto loans make up 34.2% of the credit union loan portfolio, representing $293.2 billion.

The strategic question for credit unions is: If you believe automation is a matter of when and not if, where do you focus your resources?

Student loans? Business loans? Lifestyle financing?

The good news is this change is not a short-term problem. But the bad news is, it is a problem.


Jan. 23, 2017


  • Scott, this is fascinating and a highly relevant topic I'd like to see my team and board to start thinking about. Can you help with this sort of presentation and conversation facilitation at our credit unions? If so, please call me. Thank you.
    Bob L.
  • Yes, we offer an engagement solution called Strategy Labs where this is a features topic that is popular. You didn't leave an email address so please call our offices or feel free to email me at .
    Scott Patterson
  • Agree with Janene, interesting article, and it is not clear how car loans will be affected. Who will own the driverless cars? Will there be no need to own a car just because you don't need to drive it? Please explain, and thanks!
  • Yeah, I believe that for A to B purposes most people will not need to own a car. You can argue how long it will take to realize that -- but I predict it will happen. See reply I just posted to Janene. Certainly there will be some people that want to own -- hobbyists, people that live in very rural areas, etc. Outside of that, for the majority that will be served by fleets of these CAAS cars, there will be no need -- certainly not a financial one. This is where the money is going and bets are being make about the auto industry's future. The prediction is that because of this, the auto industry itself will be transformed radically -- if all cars are operating 24x7 (like airplanes as leveraged assets for the airlines), the world will not ultimately need nearly as many cars produced as we do today. Remember, today, most cars sit idle >95% of the time. So, with drastically less cars produced, what does that mean for the manufacturers and their revenue streams? Certainly, a few will win but many will go under. They won't be needed as the purchasing (demand) market will shrink substantially. This is why you see GM investing heavily in Lyft and most others (Ford, Toyota, Mercedes, BMW, etc) are investing in these CAAS platforms globally. They need to reinvent themselves within this inevitably in order to be relevant in the future.
    Scott Patterson
  • Interesting article. Are you saying that vehicles (driverless or not) will no longer be privately owned? I find that very hard to believe in at least the American suburban auto loans will continue. I also agree with Kathy's comments below. Yes, this may be coming, but it won't be without governmental challenges...and the inevitably slows down revolutionary changes like these.
  • yeah, good point. I should have addressed that head on in the article as it is a central part of this disruption argument...especially where credit unions are concerned. The predictions from those investing in this space are pretty clear -- they anticipate CAAS (car as a service) will be the model by which most people get from point A to B. Think Uber but without the driver...and at a fraction of the cost you pay for an Uber driver today (no driver, and a fleet of cars that are always running...just like how the airlines use planes). Want an SUV, Truck, luxury car, van with a desk, van with a bed for an overnight trip, problem. This will be the model by which the majority of people will subscribe to inevitably. Why own a depreciating asset that sits idle 95% of the time that has no adaptability to your shifting needs in life -- a terrible investment when autonomous fleets abound and can come get you at your beck and call. BTW, these fleets will be owned by investors that include the likes of ride sharing companies and the auto manufacturers themselves -- look at the investments all major auto manufacturers are making in not just autonomous tech, but also in ride sharing platforms. Talk about vertical integration...
    Scott Patterson
  • Great article Scott. Very insightful and informative. Thank you.
    Brad W.
  • All this talk about 2020 and driverless cars fails to mention the trillions of dollars needed to upgrade 4.1 million miles of roads in America so the cars and roads can communicate (not to mention there's currently very few roads available to drive them on). And, that there is no set standard for the car makers and tech companies to follow for the communication; so how will the road be upgraded?. With the struggling (and diminishing) middle-class, I believe the year 2020 can be pushed out by a decade.
  • Hi Kathy. It is very interesting to see how fast the technology has evolved over the last few years. I agree that just ~5-10 years ago it was assumed that the actual road and highway infrastructure would need to be changed to accommodate "driverless" cars. Predictions of magnets, RFID and other equipment needed in the road to accommodate. However, today, the "autonomous" cars being pushed forward are intended to be completely capable of driving in today's infrastructure -- aware of the lanes, intersections, obstacles, other vehicles, and events in the same way that we human drivers use our senses and brains to navigate and make decisions. We're still a few years off, no doubt, but it is coming. Regarding your comment about the struggling and diminishing middle-class -- you won't get an argument from me on that front. But, I don't see that argument or concern having much impact on the speed at which this technology will be here and in use (for better or worse). This is a global opportunity that businesses are pursuing with billions of dollars being invested and billions to make. Every government wants their country to be a leader, participant, and beneficiary on this inevitable front -- the US is no exception to that. Writing is on the wall so to speak. So, if one agrees that it is inevitable, the question isn't "how do we prevent" or "push it out" further...but, how do we benefit from this disruption and minimize the negative impacts that will come with it.
    Scott Patterson
  • One other related point that is pretty interesting (to me anyway!). Many are predicting that expenditures in road/highway infrastructure will go down significantly over time once autonomous cars are ubiquitous. If you take the human out of the equation, you should be able to eliminate traffic -- which is caused entirely by human behavior. No need for more and more lanes on the highway to accommodate angry constituents. etc. Now, potholes are another matter...
    Scott Patterson