Technological Revolution in Financial Intermediation

The chapter presents current issues in the innovative modernization of financial intermediation. Development of financial innovation has in recent years led to significant structural and functional changes in the system of financial intermediation. New technologies open broad prospects, allowing the radical reduction of the costs of information transmission and processing, while exacerbating competition and stimulating the emergence of new financial intermediaries. This chapter analyzes the debate on the theoretical understanding and analysis of financial intermediation; how disruptive technologies influence the economy with a focus on organizational changes in financial markets; the use of digital currencies; and exploration of block-chain technologies applications. The chapter discusses how technologies have changed the market. Customers are also a focus: how they are perceived as they foster entrepreneurial creativity and as they disrupt existing financial markets through the introduction of innovative business models in the modern credit institution. Digital transformation in financial intermediation shows the possibility of “survive” for finance-credit institutions (which would be receptive to technological innovation), to maintain financial stability and to focus on the client. The authors do not share the views of those experts who predict that banks, in the context of digitalization, will lose their market share and field of action as a result of Fintech companies’ competition. The banks’ practice of distance-based working with their customers will create the conditions for reformatting the business model of banks, which will become more secure and familiar to customers.