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

By Arnoud W.A. Boot, Peter Hoffmann, Luc Laeven, Lev Ratnovski

August 7, 2020

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Arnoud W.A. Boot, Peter Hoffmann, Luc Laeven, and Lev Ratnovski. Financial Intermediation and Technology: What’s Old, What’s New?, (USA: International Monetary Fund, 2020) accessed October 6, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Banking, Communications in revenue administration, Credit, Financial services, Financial statements, Money, Public financial management (PFM), Revenue administration, Technological innovation, Technology

Keywords: Adverse selection, Bank, Bigtech firm, Communication, Communications in revenue administration, Credit, Customer, Customer interface, Europe, Financial Innovation, Financial Intermediation, Financial service, Financial statements, Financial system, Fintech, Firm, Information, Legacy bank, Market power, Monetary policy, Natural monopoly, Provider, Technological innovation, Technology firms information, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/161
Stock No:

WPIEA2020161
ISBN:

9781513552491
ISSN:

1018-5941

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