Tech Meets Finance

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Digital innovation in finance often begins with a radical idea but requires hard work, sufficient investment, and user adoption to realize benefits.
Over the past decade, fintech firms, big techs, crypto assets and stablecoins, and AI adoption have challenged traditional intermediaries such as banks, insurers, and asset managers (Ben Naceur and others 2023).
Digital innovations can both complement and substitute for traditional financial services; short-term substitution often evolves into medium-term complementarity, increasing competition and diversity in the financial system.
Harnessing benefits of digital innovation typically requires forward-thinking public policy; innovations do not always lead to optimal outcomes on their own.

Payments are the gateway to financial services; transaction accounts often a prerequisite for access to credit, insurance, and saving/investing.
Fast or instant payment systems have spread widely in the past decade, especially in emerging markets (see Chart 1 referenced in source).
Fast, 24/7 payments are provided by fintechs, big techs, and existing banks using smartphone apps, QR codes, and even lower-tech phones.
Examples of public infrastructures and outcomes:
- Pix (Brazil): introduced in November 2020; now, over 90 percent of Brazilian adults use the service for daily retail payments and recurring payments.
- Unified Payments Interface (UPI, India): operated by the National Payments Corporation of India and regulated by the central bank; promotes services by incumbent banks, fintechs, and big techs on one platform.
- PromptPay (Thailand): privately run with a key role for the central bank.
- SINPE Móvil (Costa Rica): operated by the central bank.
Fragmented private-sector fast payment systems can create “walled gardens”:
- US example: Venmo users cannot pay Zelle-only users.
- China: competing wallets Alipay and WeChat Pay.
- Peru: competing wallets Yape and Plin.
Policy intervention was needed in cases such as China and Peru to make payment systems interoperable.
Net effects: cheaper, faster payments can support financial resilience and higher economic growth, improve inclusion, and push incumbents to enhance offerings.

New lending platforms (crowdlending, alternative-data credit scoring) initially seemed poised to replace many bank functions; big tech lending (merchant lending by Amazon in the US and Alibaba in China) saw booming volumes (Cornelli and others 2023).
Fintech and big tech have narrowed credit gaps and enhanced financial inclusion:
- Argentina: Mercado Pago supporting small merchants spurned by banks.
- China: big tech credit less sensitive to home prices than bank credit.
- US: fintech small business lenders targeting high-unemployment and high-bankruptcy areas underserved by banks.
Responses by incumbent banks and challengers:
- Banks adapted business models to operate more like platforms and to use alternative data.
- Challengers such as Revolut (UK) and Nubank (Brazil) obtained licenses and became banks themselves.
Overall impact of fintech and big tech credit varies widely across countries.

Crypto and DeFi sought to reimagine finance based on trust in code rather than institutions; global crypto adoption is rising again, driven mostly by speculative investment and political support in some countries.
Despite decentralization claims, crypto markets are often intermediated and centralized through exchanges, banks, and investment funds.
Unbacked crypto assets frequently have limited usability due to extreme volatility.
Stablecoins:
- Tie value to fiat currencies and are often issued by centralized entities holding assets such as US Treasury bills and bank deposits.
- More than 98 percent of stablecoins by value are tied to the US dollar, which can undermine monetary sovereignty in many jurisdictions.
- Stablecoins fall short of providing necessary elasticity in the monetary system.
Risks in the crypto sector include widespread fraud, scams, money laundering, and terrorism financing.
Potential functional benefits:
- Programmability and tokenization could improve functions within the existing monetary system, with central banks at the core and commercial banks interacting with clients.
- In cross-border payments, tokenization could enable messaging, reconciliation, and asset transfer in a single action, as well as atomic settlement and enhanced collateral management—laying groundwork for a tokenized financial system.

Radical ideas are necessary but not sufficient; public infrastructures, sound regulation, and practical experimentation are also needed to harness innovation and mitigate risks.
Forward-looking public policies and public–private interplay enabled major breakthroughs in payments and access to accounts (e.g., UPI in India and Pix in Brazil), bringing hundreds of millions of people into the financial system.
Emerging risks could erode financial stability; for example, shocks from the crypto sector could spill over to the traditional financial system and potentially pose risks to the US Treasury market (Ahmed and Aldasoro 2025).
Recommended elements to guide innovation:
- Build public infrastructures that enable broad access and interoperability.
- Implement sound regulation to address fraud, money laundering, terrorism financing, and other stability risks.
- Encourage practical experimentation in both public and private sectors to inform investment and policy.
- Coordinate public and private sectors to direct digital technologies toward beneficial applications.
Example of coordination: Project Agorá brings together central banks and commercial banks to explore a unified ledger to leverage tokenization for cross-border payments.

IÑAKI ALDASORO, JON FROST, VATSALA SHREETI. F&D Magazine. September 2025.

Tech Meets Finance
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