Magazine article American Banker

The Global Financial Services Revolution: Threat or Promise?

Magazine article American Banker

The Global Financial Services Revolution: Threat or Promise?

Article excerpt

Not so long ago, banking, insurance, securities, and other areas of finance each spoke their own special dialects, isolated from one another. But no longer.

Old divisions within the financial world are disappearing. An exciting new industry is being born, uniting all the financial services. This is a global change of such impact that it has been called a revolution.

Now, some may not like the idea of "revolution." I'm reminded of a great American skeptic and humorist who described "conservatives" and "revolutionaries" this way: a conservative is someone who wants to preserve existing evils, while a revolutionary aims to get rid of these evils, and replace them with new ones.

For whatever reason, some participants in the international financial industryperceive the revolution as a threat to their survival. I don't agree with that view. I believe the changes we are witnessing offer very real opportunities to all financial institutions, including those here in Europe.

I would like to give you an overview of this global financial services revolution and answer the question of whether it poses a threat or offers a promise.

One of the keys to understanding what is happening today can be found in the historical origins of our economic systems. The development of financial institutions through the centuries has followed the flow of trade. Banking and other forms of finance have had an international dimension as long as goods and services have moved across national borders. Growth of Financial Services

Today, the internationalization of financial services is taking a quantum leap. One reason is our unprecedented interdependence. The relaxation of trade barriers in the last few decades, combined with economic growth, has resulted in a virtual explosion of trade. A second factor is technology, which is making the transfer of information and resources across national borders far easier than ever before.

Just as other institutions had to adapt to earlier changes in trade patterns, so too are financial institutions today faced with the necessity of adapting. Historically, the institutions that have anticipated and embraced change emerged as winners. The institutions that recognized the impact that shipping, for example, would have on trade patterns made fortunes. The London financial capital was founded on the basis of shipping links with the rest of the world.

The lesson for us in 1984 is that change is inevitable. It always has been, always will be.

Those who are successful make change work for them. Change may look like a threat, but it always offers a promise -- if we are clever enough to find it. The losers are those who attempt to resist, or block, the inevitability of change. They are swept away by the crush of history.

So it is today. We are undergoing a period of profound change. I have witnessed that change in my own country, where, I believe, the financial services revolution began. This revolution is now well-advanced in the United States and is moving quickly to Japan and to the London financial market. I believe it also is beginning to advance on continental Europe.

I hasten to add this is an oversimplification. In some important areas -- like electronic funds transfer technology -- the Europeans have been ahead of the Americans and Japanese. But wherever it has appeared, this revolution has served the consumer well. Financial services institutions now provide the broadest variety of products, at some of the most competitive prices in history. Competition Breeds Acquaintance

Competition among institutions has forced us to get to know our customers better than ever before. As a result, those customers now receive highly specialized products and services, tailored to their ages, incomes, personal expectations, and differing lifestyles.

Customers can use our products and services with a degree of convenience that was almost unthinkable 10 years ago. …

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