Key Concepts
1.Explain the role of financial intermediaries in transferring funds from surplus units to deficit units.
2. Introduce the types of financial markets available and their functions.
3. Introduce the various financial institutions that facilitate the flow of funds.
4. Provide a preview of the course outline. Emphasize the linkages between the various sections of the
course.
POINT/COUNTER-POINT:
Will Computer Technology Cause Financial Intermediaries to Become
Extinct?
POINT: Yes. Financial intermediaries benefit from access to information. As information becomes more
accessible, individuals will have the information they need before investing or borrowing funds. They will
not need financial intermediaries to make their decisions.
COUNTER-POINT: No. Individuals rely not only on information, but also on expertise. Some financial
intermediaries specialize in credit analysis so that they can make loans. Surplus units will continue to
provide funds to financial intermediaries rather than make direct loans, because they are not capable of
credit analysis, even if more information about prospective borrowers is available. Some financial
intermediaries no longer have physical buildings for customer service, but they still require agents who
have the expertise to assess the creditworthiness of prospective borrowers.
WHO IS CORRECT? Use the Internet to learn more about this issue and then formulate your own
opinion.
ANSWER: Computer technology may reduce the need for some types of financial intermediaries such as
brokerage firms, because individuals can make transactions on their own (if they prefer to do so).
However, loans will still require financial intermediaries because of the credit assessment that is needed.