Fintech: Is This Time Different?   A Framework for Assessing Risks  and Opportunities for Central  Banks 

Nice policy research paper by Bank of Canada economists:

Fintech is likely to increase competition and improve financial inclusiveness, which could reduce the cost of financial intermediation. If financial intermediation changes fundamentally, the traditional tool kit of central banks might be at risk. In this paper, we provide a framework to analyze the economics of various fintech solutions by focusing on the component technologies and underlying frictions that they solve. Moreover, we study the business models that some fintech firms are employing to understand which characteristics will likely lead to broad adoption of their technology. Our framework is meant to be general enough to use as fintech advances. Going forward, central banks and regulators will have to monitor whether these new technologies and business models are fundamentally changing money demand and the industrial organization of financial intermediation.

In this paper we focus mostly on banks and DLT. With respect to banks, we conclude that fintech firms will have incentives to either find new economies of scope or exploit the traditional economies of scope of banks by becoming regulated entities. Banks, on the other hand, will acquire or adopt the fintech innovations but might be hindered by their current business models. Lastly, we conclude that fintech might bring more change by creating new financial
intermediation applications than by changing the ones that exist today.

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