“Fintech Services” and the Future of Financial Intermediation: A Review

The aim of this paper was to review existing literature on Fintech services and their potential impact on traditional financial intermediary practices. The review is significant and timely as banks and customers are gradually familiarizing with these services showing a significant growth of Fintech utilization in Sri Lanka in recent times. Utilizing a qualitative approach, the paper has examined two most significant usual practices of banks including: (a) banking practices on credit, deposits and capital raising and payment services, and (b) banking practices on clearing and settlement services, because of the emergence of two major Fintech services; namely, peer to peer (P2P) lending, and digital wallet and crypto currencies. The review considered both national and international studies on ‘Fintech’ adaptation in financial institutions. It is observed that there is no compelling threat from P2P lending to banking activities, in general, though there will be migration of lenders from banks to P2P platforms that will result in banks to lose some segments of customers in the future. The review also identified that growing usage of smartphones tends to replace physical wallets with digital wallets which will bring potential disruptions to traditional operations of the banking industry. Adoption of Fintech in the banking industry, however, will not result in a complete financial disintermediation given the monopolistic nature of money creation by the banks, and risky and unreliable nature of these innovations.