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Financial intermediation versus disintermediation: Opportunities and challenges in the FinTech era

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Financial institutions are intermediaries that facilitate the flow of funds between two parties. The main advantage that they have is the ability to provide safety, liquidity and the economies of scale. On the other hand, financial disintermediation refers to moving funds between parties directly without a ...

Financial institutions are intermediaries that facilitate the flow of funds between two parties. The main advantage that they have is the ability to provide safety, liquidity and the economies of scale. On the other hand, financial disintermediation refers to moving funds between parties directly without a financial intermediary. FinTech (Financial Technology) has the capacity to make a substantial change to the financial intermediation structures (Demertzis et al. 2018) through the unbundling of financial products and processes. It can be used to provide banking services on different levels of efficiency with respect to banks, as FinTech can provide a direct match between lenders and borrowers, investors and investment opportunities. FinTechs may, therefore, disintermediate the flow of funds. Specifically, Fintech startups and companies are molding the financial services sector by providing services that combine flexibility, speed, forward strategies, and contemporary business models (Nicoletti B., 2017). In addition, FinTech is found to reduce the boundaries among the financial sector participants along with the entry barriers, and has the potential to improve international payments (Leckow et al. 2017).

The emergence of FinTech has already set a large pressure that is altering the financial intermediation process and the established financial institutions business models (Asia Pacific Foundation of Canada, 2016; EBA, 2018a). The Basel Committee on Banking Supervision (2018) state that FinTech has the potential to alter the business models of traditional banks, their structure, risks, and financial operations process. In addition, FinTech potentially will disrupt the investments industry and the wealth management value chain, especially that new competitors are able to digitally provide their products and services (Mellinghoff, 2016). Thus, financial institutions, such as commercial banks, have the motive to use FinTech solutions to improve and increase their competitive edge in front of their rivals, but the elasticity required to do so is being limited by the regulatory standards and by banks structured business model organization. The presence of such limitations mostly will encourage the FinTech industry to continue providing solutions that reduce the need for financial intermediaries and to further extend its processes towards financial disintermediation.

This Research Topic encourages submission that explore the impact of FinTechs on financial intermediation and disintermediation. Specifically, it aims to address the following questions: What is the impact of distributed ledger technologies (DLTs), Blockchains, smart contracts and virtual currencies on financial intermediation? How to use big data and machine learning in the predictive models for financial intermediaries’ networks, in terms of information asymmetry, information production, information security, the application of open banking, shadow banking, and the use of application programming interface? How to use cloud technologies to level up the performance of financial intermediaries? How will these technologies impact the risk governance of intermediaries also in relation to privacy issues and compliance to regulation? How is FinTech reshaping the traditional banking system business models and their risk exposure? Advancements, as designing the Robo-Advisor systems, and how they are changing the financial intermediation of investment companies? How to utilize FinTech applications as a competitive advantage for financial intermediaries?

This themed Article Collection aims at selecting high-quality papers in the above topics. High quality in the sense of containing original, relevant and has a potentially high-impact in the field of AI, finance and statistical modelling.


Keywords: #fintech, #intermediation, #disintermediation, #finance, #artificialintelligence, #bigdata, #statisticalmodelling


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