-
-
The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
Do you have a request for information and records? Learn how to submit it.
Learn about the history of the New York Fed and central banking in the United States through articles, speeches, photos and video.
-
-
-
The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry.
Need to file a report with the New York Fed? Here are all of the forms, instructions and other information related to regulatory and statistical reporting in one spot.
The New York Fed works to protect consumers as well as provides information and resources on how to avoid and report specific scams.
-
-
-
The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
The growing role of nonbank financial institutions, or NBFIs, in U.S. financial markets is a transformational trend with implications for monetary policy and financial stability.
The New York Fed offers the Central Banking Seminar and several specialized courses for central bankers and financial supervisors.
-
-
-
We are connecting emerging solutions with funding in three areas—health, household financial stability, and climate—to improve life for underserved communities. Learn more by reading our strategy.
The Economic Inequality & Equitable Growth hub is a collection of research, analysis and convenings to help better understand economic inequality.
The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry.
-
March 13, 2000
NOTE TO EDITORS
The Emerging Role of Banks in E-Commerce, the latest edition of the New York Fed’s Current Issues in Economics and Finance, is enclosed for your review.
In a study of how banks are responding to the rapid growth of on-line commerce, New York Fed assistant vice president John Wenninger identifies certain trends and potential strategic risks that could change the basic business mix of banking.
According to Wenninger, banks have already begun to use the Internet as a supplementary channel for delivering traditional credit and deposit services by establishing transactional web sites where individuals can check balances or transfer funds and where small businesses can apply for loans or take advantage of cash management services.
In addition, Wenninger reports, some large banks are investigating how they might expand their current offerings to include some products designed specifically for e-commerce. These products include electronic billing and collection services, the issuance of electronic money and checks, and the verification of identities for e-commerce participants. A few of the largest commercial banks have undertaken to help firms automate their transactions with suppliers, distributors, and retailers, according to Wenninger. The success of these products, according to Wenninger, could prompt some banks to scale back the size and scope of their branch networks and devote more resources to the development and maintenance of computer networks and e-commerce software.
Wenninger reports that banks will face new forms of competition in the electronic marketplace. One potential rival—banks that operate exclusively on the Internet—may be able to offer more attractive deposit and loan rates than many traditional banks because they do not need to support a costly branch network. Other competitive pressures will arise as electronic "information aggregators" search out the most favorable rates on deposits and mortgages and release their findings on-line. According to Wenninger, the ability of consumers to comparison-shop for the best rates across institutions and across geographic areas may weaken banks’ market power in local regions.
Banks also will encounter new strategic risks according to Wenninger. In particular, he notes the danger that banks will misjudge the degree to which electronic banking will substitute for more traditional forms of banking. Currently, it is unclear whether on-line banking will supplement the existing "brick and mortar" branch networks or substantially replace them. According to Wenninger, the uncertainty of the outcome means that it is difficult for banks to make decisions about scaling back their branches. He reports that banks that adjust the size and scope of their branch networks too quickly or dramatically run the risk of alienating those segments of their customer base that are not ready to rely fully on electronic banking.
Wenninger also finds that banks’ entry into the electronic arena will bring with it increased exposure to technological problems such as computer and network breakdowns that could result in customer dissatisfaction and lost business for banks.
Contact: Douglas Tillett
