New entrants with new models are easier to find in developing markets than in mature ones, with M-Pesa the obvious example. Those new models are usually technology-driven but, in mature markets, technology can actually be a hindrance to new competitors.
The existing infrastructures are often effectively closed shops, governed by and guarded by the large banks. This excludes new and existing smaller players from segments of the market, restricting them in their scope and reach. As a result, they all end up in the same niches, without being able to challenge the status quo in others.
Legislation has a similar effect, sometimes creating artificial barriers that work against high-level aims to increase competition. Again, there can be a technology aspect to this if the regulators are too conservative when it comes to the systems that support new entrants. It is difficult for a new entrant to harness new technology that might support new ways of doing things if the regulators want to see them always using technology that is tried and tested in the market.
There is a balance, with the regulators having an understandably cautious approach and no one wanting to see a free-for-all in which consumers are at risk from unscrupulous operators or failed initiatives. Nevertheless, at times, it seems that things are too skewed towards the status quo. If you were being cynical, you might suggest that one reason for this is the lobbying power of those with a vested interest.
At least the issues are now being debated more openly, as reflected in changes within the UK regulatory landscape, for instance. The merits of the newcomers and smaller players are better appreciated as a result of the failings of the largest banks in recent years, as seen in the burst of enthusiasm for credit unions, for example. But such enthusiasm has to be backed up by structural and legislative reforms if anything is really to change for the better, with technology central to this, whether internal to the challengers or, externally, opening up existing structures or creating new ones.
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