LONDON: Research by the New Economics Foundation (NEF) in support of a U.N. investigation into the design of a future sustainable financial system has identified five drivers of disruptive change. If adopted by consumers they could be bad news for the traditional banking system.
The report authors say the use of technology combined with new business models is removing traditional intermediaries from financial transactions.
Savers can now connect more directly with borrowers through peer-to-peer landing platforms instead of using a bank. And they can use new forms of payment systems, such as Bitcoin, to challenge the existing banking industry.
In a further move to disintermediate banks from being the sole source of money, NEF says digital technology offers new possibilities for decentralised credit creation that can be directed to more social and environmentally beneficial outcomes.
The study also identifies two interlinked and overlapping technology trends ‒ the increase in volume and variety of data ('Big Data'), and the move towards everyday devices being connected to networks (the 'Internet of Things') ‒ that will require the current financial system to adjust its practices in order to remain relevant and profitable in the future.
The authors note that one common feature of these innovations is placing more market power in the hands of consumers by allowing them to choose directly which projects and companies to invest in. They say this poses an intriguing question for the future: "Will the collective decisions of empowered individuals lead to greener and more inclusive outcomes than the collective decisions of today's financial market professionals?"
The NEF research coincides with a Reuters report from credit ratings agency S&P that says some Eurozone banks "have insufficient liquidity and several will continue to require support from the European Central Bank after long-term funding help runs out at the start of next year". Read more: