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>Financial services is particularly interesting as a study case as it is almost 100% information processing, hence fully "disruptable".

disruptability is inhibited by the amount of regulation in a sector, the more rules you have to follow the less likely you are able to find a profitable path to exploit that someone has not found before you because regulation limits the amount of paths available.

Many of the disrupters of industries over the past two decades are ones that managed to find a way to sidestep the regulation in the industry. When this occurs and regulation inevitably catches up the disruption turns out to no longer be as able to beat the incumbents as thought.

Sidestepping of regulation is often achieved because regulators don't care too much about regulating your disrupting innovation, the level of care that regulators have regarding innovations in their industry can be measured by how central the industry to the orderly functioning of society and the normal flow of power within it.

As an example - people don't care that much about the regulation of taxis and hotels because they don't really mean shit in the grand scheme of things. People care a lot more about regulating international trade or banking or investment, although from outside the industry, in the views of easily outraged observers, it might not seem like it.

Thus finance is one of the least disruptable fields, appearances to the contrary.

on edit: fixed typo

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.

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).

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

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.

  Financial services is particularly interesting as a study case as it is almost 100% information processing, hence fully "disruptable". Why is it not happening?

Never underestimate mass opinion shaping by incumbants. There is a well known answer to your question that many scoff at because they've read a lot of negative articles about it.

Assuming your refer to cryptocurrency, in a way it already disrupted financial services. I disagree with negative articles being the reason why people "scoff" at them. I think specific cryptocurrencies have a lot to genuinely criticize.

Cryptocurrencies didn't disrupt anything though. It was supposed to liberate us from banks and their fees. They reinvented banks and the entire financial system on top of crypto, exchanges are literally unregulated banks. It was supposed to free us from government currencies. It turned into stocks instead. A good currency like Monero that actually works for transacting quickly, cheaply and anonymously? Nobody cares about it or uses it.

It's pretty depressing really.

Crypto fueling the Golden Age of Fraud doesn't help.

One silver lining is the Fed got off it's fat ass and conjured up FedNow as an alternative to the slow ass ACH system.

I couldn't care less about fraud. I would put up with it if it meant real change in the rotten status quo. What happened instead is just banks all over again and it emboldened governments to rob us of even more autonomy by pushing their centralized digital currencies. In many ways we are worse off than before and I don't mean scam coins or the negligible energy consumption of proof of work.

The rotten status quo is not a result of any technological limitations but of human greed and the financial incentives our economic system provides. You can't "disrupt" that, short of a cultural or political revolution. Something like this outcome was inevitable.

XRP was meant to disrupt the SWIFT network, but doesn't seem to have made a dent so far as the incumbent (SWIFT) improved performance and lowered fees (IIRC) and has maintained its position.

> For as long as there is a racket that gets a 30% cut of all action there will be an eerily ominous quiet in the marketplace.

I guess you are referring to App stores, and it is true there. Tech also includes websites, and they are not affected by this tax.

> Tech also includes websites

Alright, let me check how people access websites. Oh wait, > 90% controlled by three entities. In the EU this phenomenon has been termed "gatekeeping".

In effect the digital transformation of every other sector (the vast majority of the economy) must flow through this choke point.

> Financial services is particularly interesting as a study case as it is almost 100% information processing, hence fully "disruptable". Why is it not happening?

I'm not sure I agree finance has not been disrupted. I can immediately think a few financial industry disruptions, some even outside incumbents. Fractional reserve banking, credit cards, asset backed securities, online payment providers, regulation, hedge funds are some things that have changed dramatically how financial business (some aspect of it) is done during the last century or two.

One thing that may hide all this is is that the ones currently shouting loudest about disrupting finance seem to have a serious lack of understanding what finance actually is and how it works, and until they do, I don't think they disrupt anything.

You missed the most insidious innovation of all, derivative contracts and markets :-).

Yes, fully agree that over a larger horizon financial services have been evolving and innovating (not always in a controlled or beneficial manner).

It is also true that previous digital innovations (databases, spreadsheets and... powerpoints) have been adopted (as in bought / licensed) and were instrumental to enable all these innovations on the financial side.

What the financial sector did not realize is that as the information universe coelesces and, e.g., advertisers or retailers come to invent and dominate technological platforms innovation cannot happen with rented tools.

> the ones currently shouting loudest about disrupting finance seem to have a serious lack of understanding what finance actually is

the disconnect between (digital) technical and domain knowledge is exactly what I think is the problem