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

Author/Editor:

Arnoud W.A. Boot ; Peter Hoffmann ; Luc Laeven ; Lev Ratnovski

Publication Date:

August 7, 2020

Electronic Access:

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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.

Series:

Working Paper No. 2020/161

Subject:

Frequency:

regular

English

Publication Date:

August 7, 2020

ISBN/ISSN:

9781513552491/1018-5941

Stock No:

WPIEA2020161

Pages:

32

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