Fintech expert Jame DiBiasio, a true Sibos Insider, is a resident blogger for Sibos 2021, offering his unique take on this year’s event. This blog is part of a series released daily throughout Sibos week.</em></p> Fintech disruption is good at galvanising the finance industry, but it is no panacea.</p> In my day job I write about all things financial through the prism of technological change. But tech isn’t what matters. What matters is what it can help a business or a person achieve.</p> Technology companies have a knack for sniffing out the grossest inefficiencies in financial services and exploiting those. The smartphone, AI-powered analytics, and flexible cloud computing are some of the tools that made it possible for tech companies to meet user needs – especially at a time when banks, insurers, and asset managers remained geared around serving products, not people.</p> So, one goal for fintech.</p> Digitalisation is making financial services more accessible to the underserved, introducing competition, making institutions more efficient, and creating products that are cheaper, faster, and better.</p> Fintech 2, incumbents, um, er, 1?</p> But not everywhere, not all the time. The cost of sending a low-value payment across borders is still around six percent or more. “This is astonishing,” says Ulrich Bindseil, Director General Market Infrastructure and Payments at the European Central Bank.</p> The data required for me to check out Ulrich’s panel at Sibos via the internet is far greater than what’s required for someone in Germany to send me a payment in Hong Kong. Yet it costs me virtually nothing to connect to Sibos, or to do a Zoom meeting with Ulrich, but it would cost me six cents on the dollar to send him a few hundred euros.</p> Fintechs have been trying to tackle the big challenge of making cross-border payments cheaper and faster. They come in many varieties: Stripe for startups needing to connect to customers, Revolut for travelers, Adyen for enterprises, and the granddaddy fintech, PayPal.</p> These fintechs have shown that payments can be managed in real time. The age of the smartphone has made everyone, individuals and businesses, primed for instant gratification. That goes for payments, too, and fintechs can make it happen.</p> Another goal scored by fintech!</p> But only within their corridors and their business communities. And, as the ECB noted, they haven’t had a real impact on overall fees for cross-border payments.</p> No goal – sorry, Elon Musk was caught offside.</p> The crypto-community might disagree. They argue that Bitcoin, for example, can serve as an instant cross-border settlement network. It has become useful to people in some markets with terrible financial infrastructure.</p> However, the crypto world hasn’t adopted the true costs of doing business, which involves compliance to combat issues such as money laundering and sanctioned individuals.</p> Yellow card to FC Fintech.</p> In fact, there is a lot that fintechs can’t do about helping the world get closer to having a shared, universal means of making instant, low-cost international payments.</p> To get there – if we ever get there – requires a lot more than technical fixes.</p> Multi-currency, multi-market, real-time payments require final settlement of two or more legs, in different time zones, in different places; and instant foreign exchange bid/asks negotiated and transacted. Once you cross a border, you are adding new jurisdictions, with their own laws and regulations, from tax to reporting.</p> If all goes well, you are looking at vast quantities of transactions, which need some means of netting. This is an institutional question, as the technology already exists.</p> Nor is there any one solution to this. Remittances are nothing like high-value corporate payments, or bank-to-bank correspondent relationships. Each of these markets have their own infrastructure.</p> In principle, connecting domestic real-time payment networks could work. That is what the industry hopes to do. But getting there is incredibly complex. It’s about banks, infrastructure players and regulators finding common ground.</p> Fintech will continue to force banks, utilities, and regulators to scramble. Good! But for the big prizes, technology is humbled. It becomes just a tool. In the longer run, it is our ability to collaborate as an industry – as people, if not as a team then at least as a league, the World Money League – that leads to fundamental progress. On the pitch and off.</p>