Financial Intermediation in the Age of Fintech: P2P Lending and the Reinvention of Banking

Abstract

This article focuses on the rise of FinTech over the past ten years, particularly with respect to the role of technology-based platforms in the provision of credit. In this specific context, P2P lending has acquired an increasing importance, with a larger share of loans having been originated through P2P platforms instead of traditional banking channels. This trend has been welcomed by policy-makers as a move towards alternative market-based finance, which should contribute to better risk diversification by moving risks away from systemic financial institutions. At the same time, this shift presents a number of regulatory questions that have remained largely unexplored. This is so because the nature and role of P2P platforms has remained loosely defined, which means that it has been difficult to identify relevant regulatory challenges emerging from these channels of finance. This research tackles two inter-related questions. First, it addresses the conceptual redefinition of financial intermediation. This allows understanding the function of P2P platforms, and whether they have supplemented the intermediation role traditionally conducted by banks. Second, it explores the risks that arise in connection with P2P lending channels. This second enquiry highlights outstanding policy and regulatory issues that have remained unexplored or downplayed in current debates.