Low Interest Rate Environment and FinTech: What Impact on Financial Intermediation in the Euro Zone?

This article assesses the impact of monetary policies and new technologies on financial intermediation in the euro area. Disentangling the effects of low or negative interest rates from those of FinTech activities can be tricky. These developments did arise more or less at the same time. For our study, we begin by statistically describing the main macroeconomic variables that are thought to represent the trends of the economic sectors related to financial intermediation. Three sectors are studied: banks, insurance companies and money market funds (MMFs). A simple statistical analysis shows that FinTech, combined with an environment of low, or even negative, interest rates apparently helped increase the returns of financial market assets to the detriment of bank assets. Moreover, traditional financial intermediaries have suffered from the ongoing erosion of their interest rate-driven profits. As a result, banks and insurance companies have shifted more towards market activities that are certainly more profitable but more volatile. Some have not hesitated to seek out less regulated non-bank financial entities. This shift from regulated to less regulated finance has been facilitated and accelerated by the technology used in financial sectors.