selling some traditional banking services -- like credit cards and payment services -- to consumers, Philadelphia Federal Reserve President Edward Boehne told a Bermuda audience yesterday.

Intuit Inc., Microsoft Corp. and other US companies are taking advantage of technological developments, including the rise in the use of the Internet, to create products that offer individuals new banking tools.

For example, Microsoft already sells software that allows consumers to use their personal computers for much of their banking business.

Banks feel heat from competition In addition, commercial firms also own a large number of the automated teller machines that many customers use to access their bank accounts, according to Mr. Boehne.

"Changes in technology and delivery systems are simply making it easier for all types of financial firms to compete on what has traditionally been banks' turf,'' said Mr. Boehne, in a speech to The New Jersey Bankers Association's annual convention at the Southampton Princess. "Also, nonbank-sponsored credit cards are increasingly competitive with bank cards.'' So, the Federal Reserve is examining the potential impact commercial firms could have on the US financial system by offering banking services. For example, Mr. Boehne said federal regulators must ensure that commercial firms don't undermine the stability of the US banking system.

In October, Federal Reserve Chairman Alan Greenspan appointed a new committee to review developments in US retail payment systems, and the Fed's large role in the process. The Federal Reserve is the largest US clearinghouse, processing cheques and wire transfers of funds for banks. The central bank confirms the transfer of funds between banks and other institutions that accept deposits. For example, when an individual writes a cheque the Fed can confirm that the payment is made.

The new committee is looking at what would happen if the Fed altered its existing payment system. The panel is weighing what would happen under a wide range of scenarios, from the Fed privatising its payment responsibilities to providing payment services to expanding its operations, according to Mr.

Boehne.

The committee, chaired by Fed Vice Chair Alice Rivlin, will hold a series of public meetings across the US in coming months to solicit comments from banks and consumers on payment issues.

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