Banks lose remittance battle as fintechs gain ground, say execs

• Debate on future of finance
• ‘Stuffy banks’ under threat
• SMEs may shift to fintechs next

Gulf banks have lost the battle for remittances and could cede small-business payments to fintechs and blockchain networks, industry executives have said.

Speaking at a closed-door roundtable in the UAE, the business leaders also said, however, that mainstream lenders remained indispensable as providers of credit and institutional finance.

The discussion, attended by bankers, fintech executives and digital asset specialists, explored how blockchain and digital assets are reshaping finance, with payments seen as the most vulnerable area and lending as the biggest strength for banks.

“If you look at this market, which is a hub for remittances, banks hold [an extremely] low share compared to fintechs and exchange houses,” said Ramana Kumar, president of the stablecoin ecosystem at the ADI Foundation, an Abu Dhabi-based blockchain developer.

The gap, Kumar argued at the event hosted by Standard Chartered Ventures, was also filled by card networks that spotted an opening and launched payment apps.

Visa and Mastercard “understood the issues within Swift’s multi-correspondent layers, so they launched Mastercard Send and Visa Direct”, Kumar said. Swift is a network used by banks to send secure cross-border payment instructions.

“Payments have left the banking ecosystem. The remittance game is over for banks,” he said.

But Alex Manson, founder and CEO of Standard Chartered Ventures, told AGBI that writing off the banks misreads their role.

They ultimately do three things, he said: safeguard assets, move assets and, most importantly, facilitate growth by financing it. “That role doesn’t go away.”

What has changed and will continue to change is the infrastructure supporting that role, according to Manson.

“That’s evolved to where we are today, which is a mix of real vaults, but mostly digital and information, to where we’re going.”

This is “a hardware security module that has the evidence of ownership in digital assets, which are on-chain”, he said, referring to systems that are underpinned by blockchain technology.

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Blockchain, said Mason, will not replace banking so much as determine how it is delivered, embedding decentralised finance into traditional finance, rather than displacing it.

Stablecoins – cryptocurrencies whose value is pegged to real-world assets such as gold – are the clearest expression of that shift, Manson argued. “The expectation is going to be 24/7 global liquidity and stablecoins enable that,” he said.

Remittances are among the most tested use cases for stablecoins. Instead of relying on correspondent banks, funds can be converted into stablecoins, transferred almost instantly across borders and exchanged into local currency at the destination.

AGBI reported last year that stablecoin issuer Circle was in early talks with money-transfer operators in the UAE to plug its USDC stablecoin into one of the world’s busiest remittance corridors.

The battle for small businesses

Small and medium-sized enterprises would be the next customers to drop traditional banks, Kumar said at the roundtable. Despite accounting for more than 94 percent of companies operating in the UAE, SMEs receive less than 10 percent of total bank lending.

“Every SME will look at new fintechs and new on-chain solutions. That’s the segment that will leave banks fastest,” he said.

Corporations, by contrast, are likely to stay put, tethered to banks by the wider machinery of credit, trade finance and identity that blockchain has not yet replicated.

Manson pushed back on the idea that this spells the end of deposits or lending. Money moving on-chain does not mean people stop banking, he said. “You will need financing in a decentralised finance environment, just the way you need financing in a traditional finance environment.”

The bigger obstacle, in his view, is not competition from crypto, it is that digital assets are still finding their footing and in the very early days of institutional adoption.

Infrastructure remains underdeveloped, practical applications are still emerging and many businesses have yet to see a compelling reason to adopt digital assets, said Manson. “We can predict that money moves on-chain, I agree with that prediction. But I don’t think it’s quite endangering the financial system yet.”

For Manson, the opportunity sits in building custody, trust and on-chain lending as assets migrate between traditional finance and blockchain-based systems.

Kumar was clear on how he sees the divide. “Agile banks will become fintechs and come on-chain,” he said. “Stuffy banks will remain pure-play balance sheet and credit players.”