Electronic Finance: Reshaping the Financial Landscape Around the World

Technological advances are rapidly changing the financial services industry. However, these changes require re-assessment of the approach to financial sector development, particularly in emerging markets. The paper suggests the following measures:

• Financial sector safety net and prudential regulations for supervising banks should be put in place;
• Authorities should be wary of extending guarantees to new deposit substitutes as the risk of moral hazard is very high.

According to the authors, competition policy for financial services should include the following:

• Free trade in financial services for consumers;
• Markets should be clearly defined as non-financial products are taking on the properties of financial contract;
• Competition policy should be harmonized worldwide and different regulators should be able to coordinate sanctions for violations.

The paper proposes ways of assuring consumer and investor protection:

• Providing continuous oversight to security issues;
• Ensuring global standards and protocols for enforcing privacy levels.

Some of the areas in which global e-finance public policy interventions are required, according to the authors, are:

• Cross border investor protection and transparency for less informed consumers who will gain access to markets as a result of the e-finance expansion;
• Increased coordination to cope with enhanced globalization;
• Recognition of weak governance and institutions, scarce human resources and simplified ownership structures to enable the entry of foreign financial institutions in developing countries.