Financial Intermediation and Technology: What's Old, What's New?
32 Pages Posted: 28 Jul 2020 Last revised: 16 Aug 2020
Date Written: July 2020
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.
Keywords: communication, financial innovation, Financial Intermediation, Fintech, Information
JEL Classification: E58, G20, G21, O33
Suggested Citation: Suggested Citation