Financial Services Integration Worldwide: Promises and Pitfalls

Will financial services integration lead us straightaway to a brave new financial world in which operational and marketing efficiencies and innovation ensure ever greater consumer value and choice and a safer financial system? Or will it result in a handful of financial giants exercising their market power to sell high-priced products unsuitable for all but their wealthiest customers, while abusing customer privacy and exposing the entire financial system to greater risk? This paper attempts to summarize and synthesize the current discourse on these and related issues. I begin with a discussion of the many meanings ascribed to the phrase “financial services integration.” I then offer a brief summary of the existing economic literature on the subject and of the key issues that managers of integrated firms face. To provide context, especially for the U.S. audience, there follows an overview of financial services integration in selected countries. Next I attempt to classify and summarize the numerous public policy concerns that have been raised with integration. The paper closes with some speculations about the future of financial services integration.