Bank of England executive director of financial stability Andrew Haldane says increasing use of technology in organising loan finance could see intermediaries become “surplus links in the chain”.
In an interview with the Independent, Haldane said improvements and innovation in technology, such as peer-to-peer lending and crowd-funding sectors, could see execution-only become a “a more realistic possibility”.
He said: “The banking middle-men may in time become the surplus links in the chain. It has happened in the liberal arts, music and publishing, and there is no reason it should shouldn’t in finance.
“Ebay has shown that with transparency, it can be done. Why can’t you have an open market for loans? With an information-based web, the disintermediated model of finance becomes a more realistic possibility.”
Haldane also said he is “optimistic” peer-to-peer lending and crowd funding can solve the credit drought to small and medium-sized business and could replace the high street banks.
He said there is a “more diverse eco-system” springing up with new non-bank lenders offering peer-to-peer lending and crowd-funding, offering businesses an avenue to access credit when it might not be available from the mainstream banks.
He says: “I am congenitally pessimistic about most things in life but on this I am really optimistic: it’s a time of opportunity knocking for finance. Hopefully, the growth of peer-to-peer lenders, such as Zopa, Funding Circle and Thin Cats, and those involved in crowd-funding, such as Crowdcube, will help solve the problems we have in the UK with lending for SMEs.”
Crowd-funding is where businesses sell equity to a large group of investors, normally via the internet, whereas peer-to-peer lending is when one individual lends to another at an interest rate agreed up front.