The technology revolution in banking & financial services--notably innovation that allows the generation, manipulation, storage and transmission of information--has prompted radical industry change posing significant challenges for banks. Even more, the rise of banking's electronic frontier has created a keener awareness of the public policies surrounding the sector, according to "The Challenges of the New Electronic Technologies in Banking: Private Strategies and Public Policies," a recent study conducted by New York University professor Lawrence White and University of Houston professor Paul Horvitz.

Although technology is no stranger to banking--wire transfers,telephone-based balance inquiries, magnetic ink coding and computerized reading of checks and ATMs have been prevalent for many decades--the study's authors argue that newer technologies such as stored value and multi-application smart cards, electronic bill payment, and PC and Internet banking have dramatically altered banks' retail transactions and front-end contact with customers. Different from the back-office and efficiency issues raised by innovations before them, these rapidly emerging technologies elicit questions regarding competition among banks and nonbanks. A crucial economic aspect of these developments, study findings suggest, is that "they are occurring in an environment in which changes in bank costs are fairly rapidly reflected in the prices that are charged to bank customers.

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