Outline of Future of Financial Services Can Be Discerned in the Trends of Today; but Technological and Social Changes Will Be Felt, World Future Society Told
Kahn, Ephraim, American Banker
WASHINGTON -- The future of America's financial services industry won't stray too far from the path indicated by currently visible trends. But the social and economic environment in which financial institutions compete will be significantly different.
That was the view expressed by several advocates of major reforms to the current financial system who spoke at the recent World Future Society's WorldView '84 here.
Among the roster of speakers was M. Danny Wall, majority staff director of the Senate Banking Committee; Roy Green, executive vice president, the U.S. League of Savings Institutions; and Jerome Svigals, manager for growth planning, financial services industry marketing, at International Business Machines Corp., Palo Alto, Calif.
They made it clear that no radical changes in financial services can be expected, and they agreed that rate deregulation will continue, as weill regulation for safety and soundness.
Mr. Wall, interpreting the mood of Congress, asserted that "we are in a plug-the-loophole [mood] in Washington today" -- a protection-minded prospect he finds a "frightening" alternative to progress toward increased reliance on the forces of a free market. In his view, "deregulation on the asset side is not going to happen" for financial institutions.
Mr. Wall also observed that the dual banking system is "a god worshiped in Washington," and he predicted that it -- and the political support for states' rights it represents -- will be preserved. As he sees it, "The House cannot and will not deal with interstate banking." Indeed, he thinks interstate banking, "in a legislative sense, is not really on the table." Tailored to the Consumer
But interstate banking is "here in a market sense, and in this town they won't even talk about it," he said.
Tomorrow's financial services will be tailored to consumers' needs, Mr. Green asserted, and they "will never again be narrowly defined to be a checking account, an auto loan, and a mortgage loan." Consumers will demand "convenient access to fairly priced, comprehensive financial services."
Citing the success of Merrill Lynch & Co.'s Cash Management Account, which combines banking, brokerage, and consumer credit services, Mr. Green predicted further permutations of asset management service to reach broader markets. The U.S. League, he noted, "is publishing later this summer a comprehensive research monograph that will assist savings institutions that wish to offer this kind of service."
He implied that competitors in the financial services arena will leave their original products as their primary products, and he asserted that "for savings institutions, the strategy is likely to be 'financial service-plus.' For others, it may be 'securities-plus' or 'insurance-plus.'"
In Mr. Green's view, "the financial services firms that survive the 1980s will be those that recognize that they are selling financial information and not checking accounts," and do so at the right price. He thinks nonprice competition will wane and that "rate will achieve an increasingly dominant position in the consumer's mind."
Technology will become ever more important in delivering financial services, Mr. Green predicted, reducing dependence on brick-and-mortar branches. Electronic networks will drastically change some of the methods of processing and making home loans over the next five to 10 years: They may have a role in searching for lenders nationwide, prequalifying loan applicants, and processing or originating loans.
Saying that government policy is "probably the most important of all" influences that will be felt in the future, Mr. Green asserted that "unchecked deficit spending will inflict heavy damage on financial institutions and the public." The U.S. League, he said, "is making a major lobbying effort to raise the awareness of the public and Congress to the seriousness of the deficit issue. …