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Regulation definitely raises some barriers (e.g., you can't bootstrap an amazing new banking concept in your garage - not a legal one anyway) but fulfilling the

Regulation definitely raises some barriers (e.g., you can't bootstrap an amazing new banking concept in your garage - not a legal one anyway) but fulfilling the criteria for a banking license is not a major obstacle. Much of regulation is also by-and-large needed, as it is easy to implement and abuse new "schemes" (cite: explosion of crypto scams). The cost of this type of regulation is really just the cost of delivering a safe product. If anything, meeting regulatory requirements should be more efficient with a fully digital operation. There are some further reasons that do provide a "moat" to incumbents (thus protecting against disruptability). Many parts of the financial and monetary system are effectively backstopped by the state/collective. The combination of poor oversight, confidence games, recurring bailouts and desire for political leverage means that over time the preferred pattern is to have a few opaque behemoths that operate in a close symbiotic relationship with the state. Yet all these factors are minor in the scheme of things. Finance is like 15% of the economy. It is a huge sector with plenty of opportunity to innovate. Imho, the main reason financial services have not been digitally disrupted is that the sector is devoid of embedded technical DNA, the more so the higher up in the hierarchy. Even though it works exclusively with information, "IT" was always something outsourced to a department in the basement (and nowadays increasingly to the "cloud"). Combine that structural human capital weakness with big (ad) tech completely shaping the digital agenda, from AI chips to devices, to OSes, applications and network information flows and you get the current calm before the storm.

RandomLensman 3y ago
Well, if you want to open a bank (assuming you have the capital), in most countries you will not be allowed to run said bank unless you have sufficient experience. IT wasn't (and isn't) always something that sits on a basement, maybe for all the also-run banks. Global Markets has been and is full technology, for example (in banks and non-banks). And there has been a huge amount of disruption in financial services, it is just a lot more self-disruptive than perhaps other sectors (and the US has a particular poor retail banking/payments system but don't assume that that is globally an issue).
- nologic01 3y ago
  There are definitely various exceptions. E.g., high frequency trading was the result of a technology arms race that was quite ahead of its time. (Maybe one day adtech will be also limited by the speed of light [1] :-) Also proprietary trading was quick to link to social media and mine "sentiment". But in core financial services (payments, savings and loans), covered by buzzwords like "fintech" or neobanks there has not been much qualitative change. See also the failure of much hyped "innovation" in the form of the various blockchain projects (which pressumably will now be followed by various "AI" projects). Trying to belatedly join the latest hype instigated by others is precisely the behavior of a sector that does not understand and own its information technology. [1] https://www.nature.com/articles/518161a https://www.nature.com/articles/518161a
  - RandomLensman 3y ago
    I'd agree but it is also not clear what actual "innovation" customers might want. Depending on where you are, you already have instant transfers, dematerialized credit cards, some real-time credit approval, etc. You also need to see the nods to hypes at least partially as signalling not as necessary acknowledging a lot of value there.

RandomLensman 3y ago

Well, if you want to open a bank (assuming you have the capital), in most countries you will not be allowed to run said bank unless you have sufficient experience. IT wasn't (and isn't) always something that sits on a basement, maybe for all the also-run banks. Global Markets has been and is full technology, for example (in banks and non-banks). And there has been a huge amount of disruption in financial services, it is just a lot more self-disruptive than perhaps other sectors (and the US has a particular poor retail banking/payments system but don't assume that that is globally an issue).

nologic01 3y ago
There are definitely various exceptions. E.g., high frequency trading was the result of a technology arms race that was quite ahead of its time. (Maybe one day adtech will be also limited by the speed of light [1] :-) Also proprietary trading was quick to link to social media and mine "sentiment". But in core financial services (payments, savings and loans), covered by buzzwords like "fintech" or neobanks there has not been much qualitative change. See also the failure of much hyped "innovation" in the form of the various blockchain projects (which pressumably will now be followed by various "AI" projects). Trying to belatedly join the latest hype instigated by others is precisely the behavior of a sector that does not understand and own its information technology. [1] https://www.nature.com/articles/518161a https://www.nature.com/articles/518161a
- RandomLensman 3y ago
  I'd agree but it is also not clear what actual "innovation" customers might want. Depending on where you are, you already have instant transfers, dematerialized credit cards, some real-time credit approval, etc. You also need to see the nods to hypes at least partially as signalling not as necessary acknowledging a lot of value there.