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BofE chief says loan technology could lead to disintermediation


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.


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. “I am congenitally pessimistic about most things in life”
    It will happen in some cases but most humans want a face to face contact. Is this the way banks will get their business in the new scheme of things?
    (congenitally pessimistic does this mean you are without something down there?)

  2. In the spirit of using one (very long) word to express a concept, bollocks.

  3. Is not this the grand plan under RDR? Allow huge commissions for non-advised sales, Force only advisers to agree fees on advised sales. Result: banks will launch huge non-advised platforms to continue to rape the country for huge commissions, banks still paying the major tax revenue and regulator fees, followed by a knighthood, The masses will DIY their money with no advice and make mistakes. There will be fewer ombudsman complaints as there is NO ADVICE anymore and there may be fewer advisers that will survive for the FCA to regulate. All neat and tidy. Dramatic I know, but this is the future, more D2C, less advice, less complaints, less advisers, same fact cat bank revenue, less areas for regulators to make a mess.

  4. Several years ago, I stumbled across peer-to-peer lender Zopa and pretty quickly realised that this could eventually result in the middle man, namely our deeply unloved retail banks, being cut out of the lending loop.

    Slowly, it is coming to pass.

  5. Nonny, yes it is, but as The noE know perfectly well Zopa have just loaned out its 250Millionth £., that would -were it a bank make it slightly bigger than the smallest building society. Mr Hadane will have long white whiskers before P2P lenders are any kind of a threat to the banks. Agreed they will grow and lts of people like them as they cut ot the middleman- as ew generations of internet savvy folk start saving many of them will use P2P sites.
    Firms can now discount their invoices over the net now, soon mortgages will become available. Of course he problem with P2P is that it has no intrinsic liquidity so is only suitable for longer term savings- instant access it ain’t!

  6. Is congenital crowd funding and peer to peer leveraging part of the Saville Inquiry?

  7. I read it again, I assume as he works for the BoE I’m paying for this twit at some level.

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