Fintech: What’s Old, What’s New?

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 historical trends towards an increased use of hard information and less in-person interaction, which are accelerating rapidly. We evaluate more recent innovations, such as the combination of data abundance and artificial intelligence, and the rise of digital platforms. We argue that 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 to the traditional bank business model, and the resulting policy implications.

Keywords: Financial Intermediation, Financial Innovation, Fintech, Information, Communication

JEL Classification: G20, G21, E58, O33

Suggested Citation: Suggested Citation

Boot, Arnoud W. A. and Hoffmann, Peter and Laeven, Luc A. and Ratnovski, Lev and Ratnovski, Lev, Fintech: What’s Old, What’s New? (December 29, 2020). Journal of Financial Stability, 2021, ADB-IGF Special Working Paper Series “Fintech to Enable Development, Investment, Financial Inclusion, and Sustainability”, Available at SSRN: https://ssrn.com/abstract=3756798 or http://dx.doi.org/10.2139/ssrn.3756798