Disintermediation in Banking is a Positive for Advisers

Here’s a letter from rebuildingsociety.com’s Julian Wells, published in Mortgage Strategy’s 7th January 2013 issue:

I was interested to read that Bank of England executive director of financial stability Andrew Haldane argue that 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: “With an information-based web, the disintermediated model of finance becomes a more realistic possibility.”

A number of brokers took exception to Haldane’s talk of disintermediation on Mortgage Strategy Online.

But I think there’s some confusion here – the term ‘intermediation’ means something different in the banking industry than it does to all of us.

What Haldane is saying, if I have understood it correctly, is that Peer-to-Peer could drive banks out of the market. Who needs them if technology can connect borrowers and lenders directly?

That’s very different to taking advisers out of the equation. I am currently working with a peer-to-business provider, Rebuildingsociety.com, and I can assure you that advisers/introducers are fundamental to the business model.

I’m confident this is the case with the majority of providers in this fast emerging market. Fees are paid to advisers for introductions of borrowers and lenders, and if you look at websites there is a clear focus on brokers and a desire to deal with them.

So, although I’m not a broker myself, I’d encourage those of you who are to embrace P2P as it is not only a new form of finance for consumers and businesses but also a source of current and future revenue for professional advisers.

It’s the banks who need to be worried!

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