Financial Intermediation and Technology: What's Old, What's New?

34 Pages Posted: 7 Jul 2020

See all articles by Peter Hoffmann

Peter Hoffmann

European Central Bank (ECB) - Directorate General Research

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Lev Ratnovski

International Monetary Fund; European Central Bank, Financial Research Division

Date Written: July, 2020

Abstract

We study the effects of technological change on financial intermediation, distinguishing between innovations in information (data collection and processing) and communication (relationships and distribution). Both follow historic trends towards an increased use of hard information and less in-person interaction, which are accelerating rapidly. We point to more recent innovations, such as the combination of data abundance and artificial intelligence, and the rise of digital platforms. We argue that in particular the rise of new communication channels can lead to the vertical and horizontal disintegration of the traditional bank business model. Specialized providers of financial services can chip away activities that do not rely on access to balance sheets, while platforms can interject themselves between banks and customers. We discuss limitations to these challenges, and the resulting policy implications.

JEL Classification: G20, G21, E58, O33

Suggested Citation

Hoffmann, Peter and Laeven, Luc A. and Ratnovski, Lev, Financial Intermediation and Technology: What's Old, What's New? (July, 2020). ECB Working Paper No. 20202438, Available at SSRN: https://ssrn.com/abstract=3642562

Peter Hoffmann (Contact Author)

European Central Bank (ECB) - Directorate General Research ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Lev Ratnovski

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://ratnovski.googlepages.com

European Central Bank, Financial Research Division

Germany

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