SOAS Research Online

Abstract

Technological change has contributed to recent changes in the conduct and character of banking, but its impact has been contradictory. First, money-dealing transactions have become cheaper, but investment costs have increased and a broader range of services had to be provided. The cost efficiency of banks has not improved. Second, banks have developed computatinally intensive, 'arms-lengh' techniques to assess creditworthiness and manage risk. Thus, they have been able to generate new revenue streams from lending to individuals and from fees for money market mediation. This shioft has signalled a decline in 'relational' banking. Third, new technology and related practices have facilitated the entry of foreign banks into developing countries, wehere they can exploit 'arms-length', technologically demandikng niches in domestic markets. This has not improved the efficiency of domestic banking systems, nor increased the availability of credit to the productive sector.