FedFin Assessment: Policy Implications of Deposit-Disintermediation Products
As we have recently noted, the Basel Committee forecasts a new financial system in which banks are “distributional,” still more relegated to infrastructure tasks, or simply disintermediated (see FSM Report FINTECH13). The FSB has a similarly troubled forecast for the future of retail finance facing new AI and platform competitors (see Client Report FINTECH15). In this report, we consider outgoing Amex CEO Chenault’s warning that traditional financial institutions are facing precisely these challenges, which he views as a far more immediate threat than conveyed by the global agencies’ measured tones. We assess in detail the policy challenges posed by a start-up banking and brokerage venture, “Jiko,” to explore these critical questions. While Square, SoFi, and others are exploring direct entry into deposit-taking (see FSM Report FINTECH11), Jiko’s approach is more of a category-killer even if its current scale is miniscule.

FINTECH16.pdf