Eric Grover writes- “nonbanks are leading the way in payments innovation because banks are stifled with overregulation”. He mentions part way through the article that “Apple Pay, Google Wallet, Samsung Pay, ModoPayments and Mozido all seem to have stolen a march on banks”. Below is the a bit more of Eric’s article and a link to enjoy the whole thing.
With the advent of Apple Pay and Android Pay, Bitcoin and EBay spinning off PayPal, payments are in the spotlight. But you’ve probably noticed that nonbanks have spearheaded most of this innovation, which wasn’t the case historically. Why is that?
Banks in the modern form have existed since Renaissance Italy, when they evolved to play the central role in the payments system. The problem is that politics determines who can obtain a government charter to be a bank, the operating environment and associated rents. In Fragile By Design: The Political Origins of Banking Crises and Scarce Credit, Charles Calomiris and Stephen Haber describe this as the “Game of Bank Bargains,” by which banks negotiate the terms of banking with the political powers, whether under democratic or autocratic systems. As a result, banking is among the most heavily regulated and politicized industries, which puts a damper on innovation and makes the system more prone to crises. The aftermath of the 2008-2009 financial crisis provides a good example, when Washington’s regulatory grip tightened, putatively to prevent future crises.