The announcement by the country's de facto central bank was made Friday by Tharman Shanmugaratnam, deputy managing director of MAS's financial supervision group, at the fourth LawAsia Business Law Conference 2000.

"These [guidelines] will set out principles and best practices that apply more broadly to the provision of financial services via electronic networks and delivery channels based on Internet technology, including wireless and Web-based applications," said Shanmugaratnam.

The announcement of the new guidelines comes two months after the MAS gave notice that financial Web sites that offer investment advise of an interpretive, selective or subjective nature will need to be licensed with the Authority sometime next year. The requirement also applies to sites and portals that provide facilities for accepting or relaying orders to securities brokers, or which specifically target Singapore residents.

At the LawAsia conference, Shanmugaratnam warned his audience that while technology and the Internet have opened up new opportunities for the financial services industry, the very same forces unleashed by the Internet will reduce the profitability of financial services.

"First, consumers are becoming more sophisticated as they gain access to a rich array of information previously available only to financial intermediaries, or to large, sophisticated players. Consumers will increasingly exercise choice, in saving or borrowing. They will seek out the best product for their needs, and will often want to do so with little advice. Fundamentally, therefore, the Internet is shifting sovereignty from the producer to the consumer in financial markets," he said.

Deregulation and technology have also brought more competition to the financial industry, the MAS official said, with the new players sometimes using loss-leader strategies to win customers. Banks and other traditional players are responding by investing in new technologies and systems, new distribution channels and, in some cases, new business models that compete with their existing ones.

Available information, though, suggests that the high initial costs of technology investments, particularly in Internet banking, may not be matched by adequate revenue gains over the short or medium term, Shanmugaratnam said.

"There will be winners, and potentially big winners. But profitability in the industry as a whole will be at risk for some time. The Internet offers great promise in finance, but like other disruptive technologies we are likely to see significant restructuring of the industry and some shake-out of weaker players, before we see the winners, or those with viable and profitable strategies, emerge."

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