The new telecommunications law does not mention banks, but Congress ensured the industry would be altered dramatically when it lifted restrictions on telephone and cable providers.

"It's really going to be epoch-making in terms of the banking system," said consultant Karen Shaw Petrou, president of ISD/Shaw Inc. "This will be as important as the Bank Holding Company Act in defining the industry."

Banks' new rivals are even better equipped to force technological change and create new consumer products than the formidable nonbank competitors already bedeviling the industry.

Now free of restrictions against entering new businesses, telecommunications companies can compete directly with banking, warned Ms. Petrou. "Now any company that chooses can offer any financial service. The telecommunications companies can now become unitary savings and loans," she said, referring to the law that allows a nonfinancial company to own a thrift.

The law was just signed Feb. 8, so telecommunications companies have not had time to gear up. But comparable rivals are already entering the market. San Diego Gas and Electric, for example, is testing an on-line service that would allow customers to pay bills via screen phones. Home banking is expected to be added to the service.

Telecommunications companies don't have to take deposits and make loans to pose a competitive threat, said Diane Casey, a financial services consultant with Grant Thornton. By taking charge of home banking delivery and other technology, telecommunications firms can steal banks' most precious asset - customer relationships.

"Banks should be concerned about who controls the transactions and who controls the information flow," Ms. Casey said. "If non-banks have control, they take it away from the banking industry."

While banks can't block competitive delivery systems, they can fight for control of some technologies - electronic money, for instance, said Washington bank consultant Edward Furash. If banks are smart, they'll ask Congress to designate them as the sole issuers of electronic money, he said.

"A strong case can be made that electronic money is no different than coinage and must be part of a strong financial system of which banks are the core," he said.

But banks may have to do some persuading to get regulators on their side. Comptroller of the Currency Eugene Ludwig said electronic money transactions are likely to be small and customers will insist on safety guarantees from issuers, making heavy regulation unnecessary.

"Rather than jump in here with a lot of regulations about a theoretical item, I think we're much better off looking at all the issues and then being ready as the technology develops," Mr. Ludwig said.

Mr. Furash suggested banks also seek to limit nonbank entry by demanding strict standards in safety, privacy, encryption, and security.

"If providers can't meet them, banks should say these are unsafe and we're not going to accept them," he said.

Unfortunately, the furious pace of innovation keeps bankers wary. "How do you take a chance on a technology when you're not sure it will continue to provide value in a market changing so rapidly?" asked Thomas J. Cirillo, a managing director at Citibank.

But if banks act now they'll get a head start, Mr. Furash said, because telecommunications companies are now focused on entering each other's businesses rather than breaking into banking. "Financial services is just one thing on their list," he said.

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