Curb Your Enthusiasm: The Fintech Hype Meets Reality in the Remittances Market

IMF Working Papers, December 2, 2022

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Fintech is widely discussed among policymakers and experts and is commonly described as “disruptive”.
Many predicted fintech would upend the remittances market by making financial services faster, cheaper, and more efficient, addressing perceptions that remittances are too costly and remittance service providers are inefficient, opaque, and outdated.
The paper investigates how those disruption predictions have fared to date.
Key conclusion: instead of disrupting incumbents, fintechs have increasingly been entangled with them; there is no evidence of disruption, and disruption is unlikely in the foreseeable future.
Despite the lack of disruption, the paper argues fintechs play an important role in the remittances market.

Contrary to expectations, fintechs have not displaced incumbent remittance service providers; rather, fintechs and incumbents have become more entangled.
The evidence does not support the hypothesis that fintechs have disrupted the remittances market.
The paper assesses the remittances market as a particularly relevant setting for evaluating fintech’s disruptive potential given concerns about cost, efficiency, opacity, and outdated services.

Fintechs contribute meaningfully to the remittances ecosystem even without disrupting incumbents.
The interaction between fintechs and incumbent providers is a central dynamic shaping current market outcomes.