I find the idea that the only innovation we’re likely to see in consumer finance will come at the front end to be a little depressing, but it is broadly compatible with the thesis of Amar Bhide’s A Call for Judgment, that we need far more tightly regulated narrow banks and a less regulated securities market. Felix Salmon explains the barriers to disruptive innovation in finance, and he makes a case against it as well:

To a large degree startups perform the important role of being able to innovate in a largely unregulated environment, and create products which can then be tailored to meet regulators’ requirements. In that sense, it’s good news that the startups aren’t truly disruptive in the sense of replacing the old business models, because otherwise we’d be looking at something which was fundamentally a regulatory arbitrage and which would move even more of the banking system into the regulatory shadows.

And at the end of his post, Felix suggests that a new initiative from Visa that will allow for peer-to-peer cash transfers (“Wait, isn’t that just handing someone a wad of cash?” “Yes, but electronically”) could prove transformative. It is easy to imagine a lot of neat applications built on top of Visa-as-a-platform, though there is the added danger of further entrenching Visa’s dominance.