Infinite Financial Intermediation

Abstract

Intermediation is a fundamental fact of finance. Intermediaries like commercial banks, investment banks, stockbrokers, mutual funds, and stock exchanges form the fabric of modern finance. Yet despite all these financial links, entrepreneurs and innovators continue to endeavor towards the possibilities of fundamentally disrupting and disintermediating these existential financial ties, breaking apart from the financial main, and building new financial islands.

This Article offers a studied commentary of those financial links and those disengaging endeavors, the ties that thread the fabric of modern finance and the efforts to tear those threads asunder. It presents an examination of the functional evolution of financial intermediation, explains the difficulties of true financial disintermediation by revealing the underappreciated links that remain when traditional links are decoupled, and highlights potential implications and recommendations arising from such a revelation. Building upon a rich literature that spans law, economic, finance, and sociology, it seeks to explain the strong adhesiveness of financial intermediation and explore the looming challenges presented by future financial intermediation. Collectively, this Article provides a different perspective for thinking about financial intermediation and its wide-ranging effects on law, finance, and society.

Keywords: financial intermediation, financial intermediaries, financial technology, FinTech, financial regulation, disintermediation, peer-to-peer lending, systemic risk, financial networks, financial cybersecurity