Futuristic scenarios describe a brave new world of international banking without financial centers, without offices, and in some cases, without people.
Multipurpose computer workstations and communications networks will permit bankers and their clients to conduct business no matter where they are.
Processing centers will be based in the lowest-cost location, while wholesale business transactions will be booked where taxes are lowest, be it Gibraltar, Hong Kong, or the Cayman Islands.
Meanwhile, automation will eliminate large numbers of staff.
Does this mean financial centers like New York. London,. and Tokyo - together with a host of smaller centers such as Frankfurt, Paris, and Singapore - are doomed to disappear. replaced by herds of nomadic bankers armed with cellular phones and portable computers? Not at all, according to several leading bankers.
Location Will Still Count
Although technology has significantly changed the way banking is done, senior bankers and analysts predict that international financial centers will continue to play a major role in the future.
"It is occasionally suggested [that] homeworking, hot-desking, modems, faxes, video conferencing -- all the paraphernalia of the modern business environment - will enable us to operate without the hub of a financial center," says Lord Robert Alexander, chairman of Britain's National Westminster Bank PLC.
"Technology will play its part ... but the people responsible for creating products will still be located in major cities,"
There are a variety of reasons why banks will continue to operate primarily out of financial centers. "Most of us crave human contact as a stimulus for thought and progress," says Lord Alexander. "We need the creative stimulation that is found principally in cities where we thrive on face-to-face contact."
Magnets for Talent
Being able to readily draw on a pool of professionally skilled specialists is also important. Even luncheons, gossip, and good shopping ensure the future survival of financial centers.
"An interesting recent poll shows that for quite a number of private banking clients, the shopping possibilities play a role when choosing a financial center for banking activities," says Robert Studer, president of Union Bank of Switzerland.
Ask any Miami banker who, after advising Latin American customers how best to handle their money, also has to give tips on the best stores to shop in at the Dadeland Mall south of Miami or Aventura shopping center in Broward County.
There are equally important other reasons. "Many banking clients, especially private banking clients, feel very strongly about the privacy and anonymity .of their relationships," says Manuel Lasaga, a financial markets analyst with Strategic Information Analysis Inc. in Miami. "That's why much of the contact has to be done personally."
There is also no real standardization worldwide of market practices, financial instruments, legal systems, and accounting methods. So long as such differences remain, the notion of a single, seamless international banking market run by computers is highly unlikely.
As a result, financial centers are likely to flourish for a while to come. Indeed, technology is likely to rapidly spur the creation of new financial centers.
"New and smaller financial centers will provide a service to domestic economies and an opportunity for secondary trading activities, whilst the leading financial centers would remain the prime source of innovation and a hub upon which smaller markets thrive," says Lord Alexander.
But at the same time, the race is on to attract banking business away from older financial centers to new ones.
Within the last decade, for example, new financial centers sprang up in places as diverse as Miami, Madeira, Malta, Bangkok, and Dublin.
More Hubs Like Miami
More will likely emerge, either to serve the needs of the local market, bring in jobs or revenues. or serve as a liaison between existing international financial centers and local markets.
Tightening regulation, rising taxes. and even tougher controls over money-laundering centers are spurring the rise of new regional and offshore financial centers.
As new financial centers emerge, older financial centers like New York. Tokyo, and London are coming under pressure as more burdensome regulations, high taxes. and high operating costs push banks to other locations.
More than a few large banks in New York have already moved their back-office operations out of the city. The U.S. retail banking unit of National Westminster, has, for example, just moved its back-office operations to Scranton, Pa.
Florence Had Its Day
Although the world's major financial centers will probably be around for a while to come, they may have to work very hard in the future to retain their dominant position in international banking and finance.
Bankers note that Florence, Siena, and Augsburg once had their day as leading financial centers. They warn that nothing lasts forever, and today's financial center could well be tomorrow's backwater.
"The lessons of history are that established positions are never secure and the dynamic of the future is unpredictable," observes Lord Alexander.
"Somehow, I feel the rise and fall of leading financial centers is not yet a thing of the past."