Banking in the Digital Age - Who is Afraid of Payment Disintermediation?

59 Pages Posted: 2 Apr 2018

See all articles by Benjamin Geva

Benjamin Geva

York University - Osgoode Hall Law School

Date Written: March 31, 2018


Throughout the ages, banks have evolved as intermediaries taking deposits of funds, lending money, and providing payment services. In the process they became also suppliers of commercial bank money, now only in the form of bank deposits. Following a historical review as to how money changers and goldsmiths became bankers, the paper points out that money and payment digitization has brought some challenges to the traditional role of banks as intermediaries. First, the digital age is about to facilitate the availability of central bank money balances or their equivalent to the public. Second, cryptocurrencies and blockchains were born. Third, claim-check centralized digital currencies have been created. This paper argues that availability to the public of central bank money, in the form of either full-reserve banking or plain sovereign money, is unlikely to affect the role of banks other than in money creation. The paper goes on to argue that cryptocurrencies are mostly not a new form of money and that in essence blockchains do not pose a major threat to the traditional interbank settlement system; at most they spur improvements in legacy systems. Finally, the argument goes, the creation of claim-check centralized digital currencies will give banks enough space to continue their role in providing payment services and even create alternative currencies fully backed by fiat ones. Ultimately banks will retain their role as intermediaries; Fintech does not have a payment services model which will supersede banking so that, in order to competitively provide payment services, IT firms will have to become banks.

Keywords: Banking, Intermediation, Central Bank, Cryptocurrency, Blockchain, digital currency, money creation

JEL Classification: G21, G23, K22, N20

Suggested Citation

Geva, Benjamin, Banking in the Digital Age - Who is Afraid of Payment Disintermediation? (March 31, 2018). European Banking Institute Working Paper Series 2018 - no. 23, Available at SSRN: or

Benjamin Geva (Contact Author)

York University - Osgoode Hall Law School ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
416 736 5045 (Phone)
416 736 5736 (Fax)


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