Electronic Finance: A New Approach to Financial Sector Development?

This paper reviews recent developments in electronic finance (E-finance) and their implications.

E-finance such as online banking and brokerage services has reshaped the financial landscape in recent years. It is spreading quickly and changing the structure and nature of financial services. The paper states that:

• E-finance will lead to much lower costs and greater competition in financial services;
• Technological advances are changing the face of the financial services industry, with new providers emerging within and across countries;
• Electronic trading and communication networks have lowered costs of trading and allow for better price determination;
• Underdeveloped financial systems can leapfrog on the opportunities that E-finance offers;
• Public policies towards financial services and government’s role in the financial sector must be reformed to realize gains of E-finance;
• Government could improve the way it shares information, and existing infrastructure can provide access to E-finance services.

The paper states that E-finance offers many opportunities, but is not a panacea. Its benefits can only be realized if complementary reforms are made in communications infrastructure, security, contract enforcement, corporate governance, and other areas.