THE FUTURE OF THE

FINANCIAL SYSTEM
AND THE MONEY AND
CAPITAL MARKETS
LEARNING OBJECTIVES
1. To explore the economic,
demographic, social, and
technological forces reshaping the
financial system today.
2. To learn about recent trends in the
financial system and how they may
affect us in the future.
3. To understand how the problems the
financial system faces today may
affect its future, leading to a new
financial marketplace.

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INTRODUCTION
• Powerful forces are reshaping financial institutions
and financial services today.

• These forces for change include powerful new

trends within the financial sector itself, major
changes in the structure and functioning of the
economy, and new social and demographic trends
that are altering the public’s need for new financial
services. 

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FINANCIAL FORCES RESHAPING THE MONEY AND CAPITAL
MARKETS TODAY 
Financial innovation - the development of many new financial services
and instruments.

Service proliferation - the expansion of the menu of financial services

offered.

Competition - the intense struggle for the customer’s business.

Consolidation - mergers and acquisitions have created financial giants

out of numerous smaller financial-service providers.

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FINANCIAL FORCES RESHAPING THE MONEY AND CAPITAL
MARKETS TODAY 

Deregulation - the lightening or elimination of government rules

brought about by a strategy of privatization of the financial sector

Convergence - the blurring of the traditional distinctions among

different types of financial-service institutions

Homogenization - the growing similarity in the service menus offered

by financial institutions

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FINANCIAL FORCES RESHAPING THE MONEY AND CAPITAL
MARKETS TODAY 

Globalization - the global expansion of operations and the falling of

geographical barriers.

Market broadening - the expansion of traditionally local markets to

become regional, national, or even international in scope.

Securitization - the pooling of loans and the issuance of securities as

claims against the loan pool.

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SOCIAL, ECONOMIC, & DEMOGRAPHIC FORCES RESHAPING
THE FINANCIAL SYSTEM

Aging population - there is a greater need for retirement, tax and

estate planning.

Changing basic family unit - the rise in the proportion of single-

parent households, parents and children living apart, immigrants,
and well-educated working women will increase the demand for
new forms of housing, daycare facilities, flexible work schedules,
and less expensive medical care.

Displacement of manufacturing industries by service industries

in more developed economies
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SOCIAL, ECONOMIC, & DEMOGRAPHIC FORCES RESHAPING
THE FINANCIAL SYSTEM

Technological innovation - the dissemination and storage of

information today is broader, cheaper, faster, and more accurate.

Internationalization of markets - such as the emergence of the

European Union

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NEW TECHNOLOGY : THE CHALLENGES AND
OPPORTUNITIES
• The technological revolution in information analysis,
storage, and transfer is moving at an accelerating pace.
• Global integrated electronic networks are changing the
design and delivery of financial services:
- Internet or World Wide Web
- Cellular telephones and hand-held computers
- Smart cards

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NEW TECHNOLOGY : THE CHALLENGES AND
OPPORTUNITIES
• However, the adjustment of the public to the unfolding
technological revolution will probably be slower than the
revolution itself.
• The areas to watch include:
- friendliness of the user interface
- operating costs and service prices
- ease of technological upgrades
- data integrity and system security

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THE CHANGING MIX OF FINANCIAL-SERVICE SUPPLIERS:
CHALLENGES AND OPPORTUNITIES

• Financial-service firms will face increasingly

intense competition and price-sensitive
customers.
• Financial institutions with extensive service
delivery systems will have a competitive
advantage.

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THE CHANGING MIX OF FINANCIAL-SERVICE SUPPLIERS:
CHALLENGES AND OPPORTUNITIES

• The unfolding new markets will require new

financial institutions and instruments, such as
credit risk derivatives and additional secondary
markets for loans.
• New institutions will also be needed to
facilitate the continuing trend towards
securitization of many of the credit-related
assets held by lending institutions and other
corporations.
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CONSOLIDATIONS AND CONVERGENCES: THE CHALLENGES
AND OPPORTUNITIES
Proponents argue that:
1.The elimination of duplication will bring about substantial savings in
operational costs.
2.The broadening of services and customer segments will accelerate
the growth in revenue.
3.The greater diversification will reduce overall risk.
4.The combination of expertise will result in higher-quality products
and services.
5.The greater economies of scale will increase the affordability of the
latest technologies.
6.The greater efficiency in joint marketing and cross-selling will help
tie in customers.
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CONSOLIDATIONS AND CONVERGENCES: THE CHALLENGES
AND OPPORTUNITIES
Opponents points out that:
1.The greater complexities of the firm may increase its operating
costs.
2.The public’s demand for “one stop” financial shopping may have
been overestimated.
3.Smaller financial-service companies may have their own competitive
advantage.
4.Smaller financial-service companies may compete effectively in
terms of the range of services available by outsourcing part of their
operations.

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FINANCIAL SERVICES REGULATION
• The growing consolidation and convergence of
financial-service companies poses major new
challenges for the regulatory agencies charged
with maintaining a competitive, yet safe and
stable, financial system.
• This dual concern has led to the development of
several different regulatory approaches.

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FINANCIAL SERVICES REGULATION
• The difficulties of coordination and control in larger and
more diversified financial institutions call for:
- employees who are well trained in coordination and
control skills,
- strong internal auditing procedures and management
information systems, and
- continual evaluation of subsidiary firms, profit centers,
and service functions for their contributions to the goals of
the financial firm.

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THE FUTURE OF THE PAYMENTS SYSTEM
• Tomorrow’s economy and financial marketplace will
depend crucially upon the continuing ability of the
world’s payments system to function efficiently,
speedily, and accurately.
• In the U.S., the retail payments system lags behind
the wholesale payments system in converting from
expensive paper transactions to electronic systems.

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THE FUTURE NEED FOR REGULATION OF FINANCIAL
INSTITUTIONS
The recent trend toward deregulation is likely to continue,
leading to:
- reduced barriers to geographic diversification,
- reduced restrictions on the portfolio choices made by
financial institutions,
- reorganization of regulatory agencies,
- reduced barriers to product-line diversification, and
- greater reliance on firms’ self-assessments of financial
risks.

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THE FUTURE NEED FOR REGULATION OF FINANCIAL
INSTITUTIONS
However, there are some regulations which will be
maintained or even re-emphasized:
- financial disclosure regulations,
- privacy protection regulations,
- regulations pertaining to social responsibility, and -
regulations that promote a level playing field.

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SOME POPULAR E-COMMERCE SITES IN THE PH
www.b2bpricenow.com– A trading portal with close to 8,000 members
that are mostly from cooperatives. The Philippine Congress officially
endorses it as the Philippine e-Marketplace for Agriculture and Fisheries.
This site is a trading portal that provides up to the minute price update on
market information for agriculture, consumer goods, and industrial
manufactures.

• https://e-order.asiarx.com/– Caters primarily to the pharmaceutical

and medical supply industry have a regional scope, multilingual
capabilities, tight real-time integration with supplier systems, and focus
on the customer’s perspective and business processes. AsiaRx takes
control of the entire procurement process from finding the product to
availability check, to order status verification.
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SOME POPULAR E-COMMERCE SITES IN THE PH
• http://philippines.tradekey.com – A B2B marketplace connecting Filipino exporters
with overseas buyers. It connects traders with global wholesalers, buyers, importers
and exporters, manufacturers, and distributors in over 240 countries.

• www.philippinecompanies.com – A Philippine business directory with 413,282

registered companies. This website builds its database from publicly accessible
directories such as Business Registrations from various municipalities.

• http://philippines.tradeford.com – Provides global importers with information on

products, exporters, suppliers, manufacturers, and wholesalers. TradeFord’s buyers
and suppliers’ database covers major industries such as apparel, fashion, chemicals,
construction, electronics, furniture, food and beverage, health and beauty,
machinery, transportation, and more.
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SOME POPULAR E-COMMERCE SITES IN THE PH
https://www.kenresearch.com – Global industry research and
information service company. Provides industry intelligence,
equity research reports and business consulting services
covering several sectors.

• https://www.carousell.ph/ - Global online marketplace

open in 45 countries in world used for buying and selling of
goods and services.

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Online Payment

The increase in online shopping and access to online bank transactions is

increasing payment in the Philippines. Vendors are turning to online
payment as a convenient buying method. However, the security concerns
over platforms and a cash-based society’s culture limits its effectiveness.

Mobile eCommerce

Data from Globe Telecom and the Philippine Long-Distance Telephone

Company shows that there are 163.7 million mobile subscribers in the
Philippines[6] [7]. Most Filipinos access the internet through their mobile
phones, providing cost-effective and consistent access. Philippine and
international businesses sell products and services through mobile that has
direct access to online consumers. The Philippines is the fastest growing
app market in Southeast Asia.
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