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The emergence of digital currencies (including both central bank digital currencies, or CBDCs, and stablecoins), coupled with growing fintech competition — and the threat of “big tech” in the financial sector — are all trends that could unseat traditional financial firms from their role at the heart of the financial system, says Moody’s Investors Service in a new report.

As the provision of financial services increasingly moves online, “consumer expectations for the seamless user experiences provided by tech firms has never been higher,” Moody’s said.

To that end, tech firms are ramping up their involvement with payments, and lending and insurance, among other business lines.

“The massive increase in the online user base and new advances in technology are increasing the rationale for technology firms to incorporate financial services into their ecosystems and leading to innovative new business models which drive to the core of what financial incumbents provide,” said Stephen Tu, vice president at Moody’s, in a release.

At the same time, some of the advantages currently enjoyed by traditional banks, including their experience in managing credit risk, and their access to customer data, “will likely wane as technology firms access new kinds of credit-relevant alternative data not previously available to banks,” the Moody’s report said.

Additionally, the rise of digital currencies has the potential to “sidestep traditional financial middlemen and gatekeepers,” it added.

And, CBDCs could provide bank customers with “direct access to a faster, lower-cost digital form of money.”

“Incentives to develop CBDCs have gained in strength since the outbreak of the pandemic, and if carefully implemented could produce large economic gains by increasing financial inclusion and reducing financial friction within the system,” Tu said.