Technology and the future of the financial services industry

Abstract

The causes of the much discussed revolution in the financial services industry are generally listed as inflation, technology and deregulation. In fact, technological progress in data processing and communications has been the primary driving force for change, since it has made possible new products and services, sometimes through non-traditional suppliers, that were responsive to the consumer's heightened awareness of the value of money in a period of high inflation, and enabled participants in the industry to evade or avoid some regulatory restrictions. These improvements in technology have made feasible truly international money and securities markets. Legislators and regulators have failed to understand the implications of this new environment, and are still trying to deal with change by modifications to existing rules, which generally mean an allocation of “turf” among various segments of the industry, rather than a reordering of regulatory priorities to serve the need of the consumer for honest and full disclosure and the needs of the nation for stability and soundness in its financial institutions.