The Incumbents Are Still Winning
A new BIS Bulletin published Monday offers a timely reality check on the fintech disruption narrative. Retail payments have digitalized rapidly, and fintechs and big techs have expanded consumer choice, but incumbent banks and card networks have retained dominance in key markets.
Visa and Mastercard together account for roughly 95% of all card transactions outside China, a share that has barely moved in a decade despite a wave of new entrants. Their revenues and profit margins have grown, not shrunk, in the same period.
The BIS identifies a structural reason why disruption is harder than it looks. Retail payment markets are two-sided: a wallet is only valuable if merchants accept it, and only valuable to merchants if consumers use it. Network effects entrench incumbents and create natural barriers for new entrants, regardless of how good the product is.
The geographic picture differs sharply. In advanced economies, card payments dominate and fintechs have largely built on top of existing card rails rather than replacing them. In emerging markets and developing economies, account-to-account transactions dominate, driven by fast payment systems like Pix in Brazil and UPI in India. Fintechs therefore have had a more genuinely transformative impact. Where card infrastructure was weak or absent, new entrants could build fresh rails. Where it was already entrenched, they could not.
As we watch banks issue their own stablecoins, and the plumbing of financial infrastructure globally starts to transform, the BIS opens questions for competition and contestability, and whether it requires deliberate intervention.
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Robinhood weighs its first ABS bond backed by credit card receivables
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The move follows the standard path taken by fintech lenders, including Affirm, Upstart, and Klarna, as they mature: originate credit, securitize it, and sell to institutional investors to free up capital for new lending.
Visa partners with Ace Money Transfer to reach South Asian and African diaspora corridors
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The deal gives Ace faster delivery rails and Visa a distribution footprint in remittance corridors where card-based volume has historically been low.
Mastercard is weighing a sale of Vocalink, one of the UK’s most critical payment infrastructure assets
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VocaLink operates the UK’s Faster Payments system and BACS direct debit network, processing more than £7T in transactions annually. A sale would mark one of the largest divestitures in UK financial infrastructure history and raises questions about ownership concentration in payment rails that are now broadly considered national critical infrastructure.
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UK’s 54-firm wholesale tokenization taskforce publishes its first roadmap, with Ripple at the center
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Eligible purchases between £100 and £30,000 also gain Section 75 protections comparable to credit cards. Experian data found 98.5% of 100 million-plus BNPL transactions last year were repaid on schedule.
BIS: banks still dominate retail payments despite fintech surge
A BIS Bulletin published Monday finds that despite rapid digitalization, incumbent banks and card networks have retained their dominant positions in key retail payment markets even as fintechs and big techs have proliferated, with central banks playing different roles as operators, overseers, or market catalysts depending on jurisdiction.
The paper notes competition dynamics differ significantly between advanced economies, where card networks dominate, and emerging markets, where mobile money and QR code systems have made faster inroads. Regulatory frameworks and interoperability decisions are identified as the primary variables determining whether new entrants can sustain competitive pressure on incumbents.