As recently as a year ago, ceos of banks, brokerage firms, and insurance companies worried mostly about competition within their own industries. Today, however, personal financial services providers see themselves pitted against a whole set of new players: information, software, electronic payment, transaction processing, and multimedia companies. Microsoft, First Data Corporation, ADP, and AT&T are poised to become major financial institutions. Dozens of alliances have been struck between credit card companies, banks, software houses, and other information businesses. A slew of entrepreneurial startups—including Mondex, First Virtual, DigiCash, and CyberCash—have emerged to provide financial services and electronic payments.

Bill Gates, Microsoft’s CEO, is now talking about the future of electronic banking in his industry speeches, and recently followed up his words by attempting to buy Intuit for $2 billion. With 7 million users, this 12-year-old software firm has more customers than all but a handful of US financial institutions.

Traditional financial institutions are beginning to sense the threat. Many have struggled to adapt delivery systems that are difficult for both themselves and customers to access; to transform costly and cumbersome business processes; and to increase their limited resources and reach more...