Digital Banking and Market Disruption: A Sense of déjà vu ?

The paper assesses the threat posed by digital banking as seen in the context of a long series of innovations in the banking sector that includes telephone banking, payment cards, the development of capital markets, internet, smart-phones, and cloud computing. It focuses on the economics of banking services and banks’ two main functions – as providers of liquidity and loans – and analyzes whether these could be displaced by peer-to-peer and marketplace lending. Digital banking is currently one of the main strategic issues faced by banks in terms of threats and opportunities. It raises also public policy issues: its impact on the profitability and solvency of banks, the protection of borrowers and investors, and the systemic importance of the new players, the Fintechs starts-up specialized in financial services.