1. Copyright © Cengage Learning. All rights reserved Recent Changes in the Banking Industry Financial Services Modernization Banking Act (1999 ) –Allows banks to establish one-stop financial supermarkets where customers can get a variety of financial services, including banking, buying and selling securities, and purchasing insurance –Competition will increase and consumers will have more choice Anticipated changes –More emphasis on evaluating the creditworthiness of loan applicants as a result of the recent financial crisis –An increase in government regulation of the industry 18 | 1

2. Copyright © Cengage Learning. All rights reserved Recent Changes in the Banking Industry Anticipated changes (continued) –A reduction in the number of banks, S&Ls, credit unions, and financial institutions because of consolidation and mergers –Globalization of the banking industry –The importance of customer service as a way to keep customers from switching to competitors –Increased use of credit and debit cards and a decrease in the number of written checks –Continued growth in online banking 18 | 2

3. Copyright © Cengage Learning. All rights reserved Online Banking Advantages –Convenience of electronic deposits –Ability to obtain current account balances –Convenience of transferring funds –Ability to pay bills –Convenience of seeing which checks have cleared –Easy access to current interest rates –Simplified loan application procedures –For banks—lower processing costs Disadvantages –Not being able to discuss financial matters with a personal banker 18 | 3

4. Copyright © Cengage Learning. All rights reserved Online Banking (cont’d) Electronic funds transfer (EFT) system –A means of performing financial transactions through a computer terminal or telephone hookup –Changing how banks do business Automated teller machines (ATMs) Automated clearinghouses (ACHs) Point-of-sale terminals 18 | 4

5. Copyright © Cengage Learning. All rights reserved International Banking Popular methods of paying for import and export transactions –Letter of credit A legal document issued by a bank or other financial institution guaranteeing to pay a seller a stated amount for a specified period of time –Banker’s acceptance A written order for the bank to pay a third party a stated amount of money on a specific date Currency exchange 18 | 5