Financial intermediaries are institutions providing indirect means for funds from a party that wants to lend or save to a party that wants to borrow or invest. These are commercial banks, government programs, pension funds, mutual funds, investment banks, rating agencies, etc. Some experts note that advances in computer technology could cause financial intermediaries to become extinct. However, it is possible that financial intermediaries will stay but change their shape and gain new functions.
Financial intermediaries obtain two key functions: informational function, related to information collection and processing, and communicational, connected with establishing relationships and providing distribution services. The development of technology created a new challenge – the overabundance of communication opportunities and data. Therefore, financial intermediaries are developing to meet the needs of the clients, adjusting innovative technologies. A variety of services and platforms on the Internet could be called new financial intermediaries because they earn their profits on the markup.
The fear of financial intermediaries’ elimination emerged from the fact that the number of personnel involved in financial intermediation is significantly decreasing due to automation. Certainly, traditional models of financial intermediation could become a thing of the past, but some forces are limiting such tendencies. For example, the business model of banking might give way to the new one when banks function as upstream suppliers of maturity transformation services, but this transformation could pose some disadvantages for the corporate section: they will need new resources to perform the intermediary role.
Nowadays, recent trends in financial intermediation are the inclusion of non‐financial information and artificial intelligence in the process of decision-making with the use of digital platforms and mobile applications. Digital platforms could become new intermediaries between banks and clients, including browsing histories and online shopping behavior analyses. Such services are less costly as lesser people are involved in their maintenance and updating. In addition, today, people more often turn to online banking without visiting brick-and-mortar organizations. All these tendencies could be called “reshaping” but not “extinction.”
Therefore, technological innovations are unlikely to result in the extinction of financial intermediaries. The probable outcome is that they will undergo tremendous changes. Traditional financial intermediaries will be altered to maintain their functions as financial information and communication leaders: to monitor risky investments and efficiently allocate financial resources.