The Success Prime– Over the past decade and a half, a quiet structural shift has taken place in global finance. Non-bank financial companies such as asset managers insurance firms Pvt lenders broker dealers fintech and other intermediaries are now leading in creating loans and providing market liquidity without needing bank licence. Recent data from the IMF and financial stability board show that these firms hold nearly half of the global financial assets which is around 49%. In 2023 the non-bank sector expanded by 8.5% which is more than twice the banking sectors growth rate. It is pushing its global asset share higher.
This is not just a change in labels. It is a re‑wiring of who funds governments, how companies raise debt, and where households and small firms go when they need credit. Understanding the forces behind this shift has become essential for regulators, investors and corporate treasurers alike.
A new pillar of intermediation
The first point to grasp is scale. IMF analysis notes that nonbanks’ share of global credit and financial intermediation has risen from around 43 per cent during the global financial crisis to nearly 50 per cent by 2023. The FSB’s most recent monitoring exercise reaches a similar conclusion: assets of the broad nonbank sector are growing at roughly twice the pace of bank balance sheets, with investment funds and other “market‑based” intermediaries doing much of the heavy lifting.
Governments have found new lenders
One of the least discussed changes has been the rise of nonbank players as core buyers and traders of sovereign debt. In major markets such as US Treasuries and European government bonds, principal trading firms, large asset managers and other nonbanks now provide a significant share of daily liquidity, using technology‑driven, high‑frequency and algorithmic strategies to quote two‑way prices.
From a fiscal point of view, this additional pool of demand can help hold down borrowing costs by ensuring that new issues are absorbed smoothly and secondary markets remain deep. It also diversifies the investor base beyond banks and foreign official institutions. At the same time, the growing reliance on intermediaries whose risk appetite is not backstopped in the same way as banks introduces new sensitivities: episodes in recent years have shown that when nonbank dealers pull back simultaneously, even core sovereign markets can experience sharp dislocations that require central‑bank intervention.
Private credit is reshaping corporate funding
A second megatrend is the rise of private credit funds and other nonbank lenders as a primary source of debt for mid‑sized firms that sit awkwardly between bank and bond‑market funding. Many of these companies are too large or complex for standard small‑business lending templates, yet too small, too highly leveraged, or too unrated to tap public bond markets efficiently.
The growth numbers are striking. ECB research, for example, shows nonbank direct‑lending channels in Europe expanding steadily since the late 1990s, with nonbank credit to non‑financial corporates now accounting for a significant and rising share of total corporate debt. Globally, analysis by central banks and the BIS similarly highlights a persistent shift of long‑term, and increasingly complex, corporate credit into nonbank hands.
Households and small firms have more borrowing options
The third megatrend is perhaps the most visible to ordinary users: an explosion of new credit formats and distribution channels for households and small businesses, much of it delivered by fintech and big‑tech platforms that are not banks in the traditional sense.
“Buy now, pay later” products, app‑based micro‑loans, pay‑by‑installment options at checkout, and mobile‑money overdrafts have widened access to short‑term credit in many advanced and emerging markets. These providers lean on alternative data—such as transaction histories, mobile usage or platform behaviour—and heavy automation to underwrite and service loans at lower unit cost, making it viable to lend smaller amounts to more people.
In parts of Africa and Asia, mobile‑money and wallet‑based ecosystems have played a similarly transformative role for the unbanked and underbanked, with nonbank entities handling payments, savings and micro‑credit on top of regulated banking infrastructure. For micro‑entrepreneurs and sole proprietors, this has made it possible to accept digital payments, access working capital and build a rudimentary credit history without ever walking into a bank branch.
The inclusion benefits are real. So are the risks. Regulators are increasingly concerned about opaque pricing, over‑indebtedness and liquidity mismatches in some consumer‑credit models, especially where funding comes from wholesale markets or lightly regulated investment vehicles.
Diversification and passive investing have re‑weighted the system
A fourth driver has been the long‑running shift in how households and institutions invest surplus funds. Instead of relying primarily on bank deposits and direct holdings of securities, investors have piled into mutual funds, exchange‑traded funds, insurance‑linked products and other pooled vehicles that promise diversification and, often, low‑cost access to broad asset classes.
The nonbank sector, particularly investment funds, has been the main beneficiary. FSB monitoring shows that “other financial intermediaries”—a category dominated by funds—have grown rapidly, with assets increasing at rates well above their five‑year averages. Money‑market funds have attracted inflows as yields moved above those on bank deposits, while bond and mixed funds have provided exposure to credit and duration without requiring investors to pick individual securities.
Key drivers
- Technology: New technology like fast Internet service cloud storage computer trading and instant risk checks is allowing non-banks to do loans, sales and cash flow jobs with smaller teams and less money than some big financial institutions.
- Demographics: Eating populations and rich countries, plus use of super low dress traits are pushing big savers like pensions to non-banks for better returns on loans as well as investments.
- Regulations: Financial institutions such as banks are still running payments savings account and closing customer loans but these non-financial institutions are now handling a big share of matching money givers with borrowers.
Opportunity and caution in equal measure
None of these megatrends is inherently negative. Nonbank finance has expanded access to credit, deepened capital markets, diversified funding sources and offered investors more choice. It has also provided alternative channels when banks have been under stress, helping to keep finance flowing to households and firms.
