These costs can include evaluating the firm, coordinating financing for the firm if more than one investor is involved, and monitoring managers. So, by researching many firms and allocating credit to the best ones, intermediaries can improve the allocation of society's resources. Intermediaries can also diversify risks and exploit economies of scale. For example, a firm may want to fund a large project with high expected returns, but the investment may require a large lump-sum capital outlay. Such profitable opportunities can often go unexploited without intermediaries to mobilize and allocate savings.
Intermediaries can initiate the creation and transformation of firms' activities.
They also provide payment services. In addition to improving resource allocation, financial intermediaries stimulate individuals to save more. Intermediaries also tailor financial instruments to the needs of firms. Growth can also spur the development of financial services. Improvements in computers and communications have triggered financial innovations over the past 20 years.