"information highway," "paradigm shifts," "converging technologies," and the "third wave" of change. The word "revolution" is definitely overused, especially in the context of computer technology. Nonetheless I'm going to use it, because it accurately describes the changes that are occurring in financial services today. A real revolution is under way in the financial services industry, a worldwide revolution that has implications for both banking institutions and consumers of their services. It is opening a new competitive frontier populated by nonregulated financial and nonfinancial institutions that perform some aspect of the banking function - all of which are trying to capture business once controlled almost exclusively by banks. And it is a revolution driven in large measure by advances in information technology. For businesses today, technological change is a constant. Formerly distinct technical disciplines such as computing and communications are in fact converging, with an impact on all industries, not just financial services. Information technology has so penetrated the banking business that it is part and parcel of virtually every product and service, and of every method of creating and delivering those products and services. Information technology has changed all the rules, and is changing them still. The impact of information technology on financial services, and the general feeling of upheaval within banking today, are, I believe, emblematic of an industry in transition. This transitional period is leading the financial services industry out of the industrial age of banking, where the cliche of 9-to-5 banker's hours was born, to the information age of banking, where the new standard is delivering any service, to anyone, anywhere, at any time. And the enabler in this new world is technology. Advances in information technology have made it possible for financial institutions to move trillions of dollars across the country and around the globe every day. The use of information technology has enabled financial institutions to offer consumers hundreds of new financial products and services, including ATMs, debit cards, and home banking services such as electronic bill paying. Banks also rely on management information systems to make business decisions, manage risk, and ensure that they are meeting the needs of their communities. Technology has also empowered individual consumers, giving us all more options for financial services delivery. Technological capabilities such as PC/home banking give each of us the ability to inquire about, preview, and purchase financial services at our convenience. We the consumers are able to pull products we want rather than select from whatever is pushed in front of us by our institution of choice. But the ground broken by technology also offers a whole new set of competitive challenges for today's banks. In this new competitive frontier, the manufacturing of the product or service - which was the crux of the industrial age - is subordinate to its delivery. Technology is enabling nondepository institutions to replace the classic industrial age competitive model - that is, manufacturer, distributor, mass market - with a new Information Age model that often eliminates banks as intermediaries. As those of us in the industry well understand, this has had a devastating impact on banking's traditional sources of revenue. But, most importantly, technology is changing the very nature of banking. So much so that the business of banking is no longer taking deposits and making loans. The business of banking is managing information. Think of it this way: a bank's measurable assets are not stashed away in a vault, as was the case even a few decades ago. The physical movement of currency is no longer the method of delivery; instead, assets are represented by the zeros and ones of computer code, and funds are moved electronically via communications lines - between departments in one bank, from one bank to another, crossing state lines as well as continents. A bank's business is more than just the electronic movement of funds; it is the movement of information. Today the bank's single most valuable asset is not gold, or currency, or brick-and-mortar. It is customer-specific information. And, again, it is dependent on technology. Information technology is indisputably the backbone of today's financial services industry. Or, to paraphrase something a banker told me recently: It is becoming increasingly difficult to tell where technology ends and financial services begin. It seems clear that, regardless of what Congress does with financial services reform, technological changes will continue to drive the evolution of financial services. Financial transactions across state and international boundaries will increase in speed, frequency, and dollar value. More and more financial transactions and services will be initiated at and delivered to homes, offices, and other locations that are remote from the brick-and-mortar locations of financial institutions. The number of targeted financial products will multiply, increasing both the value of the services provided and the potential risk to individuals, corporations, and financial institutions. As the business of banking converges increasingly with the business of other industries - such as retail, travel, transportation, and health care - information services will become even more critical to the delivery of services to consumers and business enterprises worldwide. In light of the convergence of industries and technologies, it is self- evident that the current laws governing the financial services industry - some of them written more than 60 years ago - need to be modified to allow banks the flexibility to compete in the new competitive frontier, and to bring greater value to their stockholders, customers, and communities. Mr. Clark is a corporate vice president and group executive in the financial industry group of Electronic Data Systems Corp., a General Motors Corp. subsidiary.
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