Financial services could miss out on the benefits of the internet unless regulation keeps pace with ...
Financial services could miss out on the benefits of the internet unless regulation keeps pace with the online revolution, according to PriceWaterhouseCoopers.
The UK consultant has issued a report looking at factors surrounding the development of financial services on the internet, which is expected to be one of the sectors most impacted by the new medium.
The report, entitled Protect & Survive and released on 24 July, warns that the failure of regulators to keep up with advances in online technology could stifle the unprecedented opportunities for innovation, competition and growth presented by e-commerce.
Philip Gough, co-author of the report, said regulation of financial services in an online environment is characterised by uncertainty with patchy guidance and minimal precedence prevalent.
He added: "Regulators and the industry need to move fast to identify possible regulatory mandates and models of the future to avert the risks that undermine consumer confidence in buying over the internet."
In a recent PriceWaterhouseCoopers/CBI survey, 89% of respondents said that e-commerce was part of their business strategy but financial services and Government regulation were both seen as significant barriers to e-business development.
Gough also pointed out that the greatest challenge in terms of rule making certainly applies in the retail sector where conduct of business rules have been drawn up essentially to cope with the pre-electronic age.
Rapid growth in web-based online banking, security brokerage and insurance services has already been seen and is widely expected to continue over the next several years but this could lead to new entrants emerging into the market without the necessary guidance, according to Gough.
He added: "New entrants potentially pose the biggest risk as technology is breaking down barriers into the industry and challenging traditional methods of conducting investment business but there is no coherent global framework for them to operate under.
"The problem is that regulation is still being applied on a jurisdictional basis while the internet is a global medium. This means financial service providers are finding it difficult to operate in a global basis and, likewise, customers are uncertain which country's rules apply when they use a service."
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