Information Technology and Financial Services - Essay Example

? IT & Financial Services Contents Introduction 3 Financial transaction 4 Information technology and its development 5 Introduction 5 Development 6 Security in the financial transactions 7 Conclusion 8 References 10 Introduction An individual or a member of a family needs to take decisions in order to budget their expenses. The person needs to save money for future and also make arrangements to serve the daily needs. Such types of decisions are known as decisions regarding personal finance. In order to make planned expenditures, two different strategies can be adopted namely investment and insurance. For this, the needs of financial transactions arise on a regular basis. In these days information technology is the biggest invention that contributes to the welfare of humanity. It not only speeds up the mode of everyday life but also makes life easier. “Time” is the most precious element in today’s life. The value of time is the biggest concern for everyone. Digitalization and introduction of information technology in the field of financial transactions help mankind to a great extent (Mann & Mann, 2011, p.264-320). Initially it needed some specific computer or web based knowledge to pursue such transactions. However, once a person got the access to knowledge of computer and information technology systems, it turned into the most desired mode of transaction. The online banking facility is one such application of information technology which emerged as the best way to transfer money in short time (Stathopoulos, 1995, pp.56-79). People used to save money in banks not only for getting interest but also for its security. The implementation of information technology in personal financial transactions, however, gave rise to questions on security. The online banking system depends on a username and password to access an account. So it will be very crucial to make all the transactions in a safe and secured way. Different measures are taken to ensure the security of financial transactions. The measures include generation of one-time passwords, alerts for password changes at periodic intervals, provision of net-secure codes in financial transactions (Glaessner et al., 2002, p.145). Financial transaction When a transaction in terms of money is carried out between two people namely the buyer and seller in the market, such transactions are known as financial transaction. As the transaction is done, the financial position of the two parties gets altered. In most of the cases, a financial transaction is done on account of receipt of different items which can create value in the form of information, goods, and services. In ancient times, there were no concepts of financial transaction. People used barter system in order to exchange goods and services. The traders faced problems in this system as they may not have needed such items or services in a certain swap. Next, valuable metals like gold and silver were introduced to carry out the transactions. With the advent of civilization, the monetary coins and printed flat money were used for the transactions. These are referred as financial transactions. In the 20th century floating currency gradually got replaced by fixed currency. In recent times, the computer networks are used for electronic mode of money transfer which increased the speed of transactions. However, the advanced mode of electronic money transfer has its own complexities as well (Friedland, 2010, p.245). The money which can be exchanged electronically by using computer networks and internet is known as electronic money or e- Money. When the money is transferred from one account to another through computer using the software and applications of information technology, it is referred to as Electronic Fund Transfer (EFT). The other modes of financial transaction include the use of wire transfer, payment card, debit card, direct deposit, online banking electronic benefit transfer, etc. (Friedland, 2002, p.287). Wire transfer- It is also known as credit transfer. Wire transfer involves transfer of money from one bank account to another by a virtual electronic wire connecting the two accounts. An example of wire transfer is the case of transfer of money through Western Union. More than bulk payments, individual transactions are preferred in case of wire transfers. Credit card- The credit card is mainly used for purchase of goods and services on credit. It helps the cardholder to pay for the goods and services according to the terms and conditions. In this case, the cardholder borrows money from a merchant for payment and subsequent repayment could be done in installments or as a whole. It can also be used as cash advance. Debit card- It is a mode of payment of money through the use of a card which provides the cardholder an electronic access to the bank account for carrying out the financial transactions. Online banking- In online banking facility, the customers carry out financial transactions in the official website or portal of the institutions. The official websites are often maintained by their own management or outsourced to other institutions which can be retail or virtual bank, a credit union or a budgeting society. A person needs to have his own internet access through specific username and password which could be obtained through registration with the banking institution. Online banking should not be confused with phone banking which is a different mode of financial transactions. Information technology and its development Introduction Information Technology is the concept related to use of computer networks. Several computer related terminologies are part of information technology such as software, hardware, programming, software design, development, maintenance and support, administration etc. Information Technology is a boon in the modern world. IT reduces human efforts, saves time as well as increases profit for any organization through invent of new advanced technologies. IT brings the whole world inside a small box. People can book railway tickets without standing in long queue. The banking transaction has become very easy and quick. Maintaining different kinds of records for crucial businesses, security and many more things which were not so easy in past have become smoother (Stoyles et al., 2003, p.76). Previously organizations maintained their employee records in huge chunk of copies where maintenance was very difficult but now all the data could be captured into the computer in a day and maintenance of those data have also relatively become simpler. IT has made these things possible. Not only in its own fields but also in areas like telecommunication, coal industries, medical, insurance and petro chemical industries, IT has made its place everywhere. Many organizations are running their business solely based on IT services by engaging themselves in software design, developments, testing, support, hardware administration and networking etc. IT plays a major role in the development of the financial condition of any country. In India, there are many organizations to which foreign operations have been outsourced and almost of all of those are IT companies (Doyle, 2000, p.254). Development The concept of IT emerged almost at the same time when computer was invented. In the early years computers were ran in big rooms where the hardware sizes were as big as an almirah. The storage capacity was also very less where only few kilo bytes of data could be stored. Only concepts like mainframe computer was prevalent and that was extensively used to store huge chunks of data. However, continuous development and invention brought revolution and now a computer has become just a small handhold device where terra bytes of data could be stored easily inside a chip which is as small as a matchbox (Rajaraman, 2004, p.223). IT got the boost in the market when the companies like Intel, Microsoft brought their hardware and software respectively. People like Dennis Ritchie, Ken Thomson came with the concept of computer language such as C, UNIX that gave extra edge to the IT system. Based on the above discussed languages, further languages like Java by Sun came into the market. Oracle came with their database which is used in most places to store and maintain data. This is one of the major languages which are widely used at present in software development. During these period misuses of computers or theft of data was also observed that could not be protected by physical presence of anybody. With the aim to keep storage of data confidential the companies like Norton, AVG came up with the idea of anti viruses. Due to the developments of information technology, the aspect of banking transactions, storage of personal data, movement of the administrative departments and many sensitive and confidential works can be carried out easily. Companies are achieving larger goals by involving lesser resource and thus the profit margins are increasing. Security in the financial transactions The aspect of security is highly significant in case of financial transaction. At present most of the consumers avail the internet banking facility for tax declaration through websites as well as for investment of money in shares. Information Technology brings these features to us. When we purchase goods from online store, we need to pay the money either through internet banking or using debit or credit card. This is another benefit of the advent of information technology. In this transaction if something goes wrong in between the payments due to network glitches or unavailability of the web site server, the money is rolled back to depositors account automatically. The financial organizations provide top security in their online system so that information can be kept secured and confidential. Despite the consideration of the aspect on security, illegal access of consumer data takes place. With the aim to stop such actions, the financial service providing firms continuously send alert messages to the consumers and also provide guidelines for accessing the online services. Many organizations generate run time access code so that unauthorised use of confidential information can be restricted. With the help of Information Technology, we can easily transfer money from one account to other account in situations of emergency. Financial transactions made by any consumer can be easily tracked. Illegal acquisition of money without paying tax can be easily detected through software programs (Khadraoui & Herrmann, 2007, p.283). Not all consumers are accustomed to the use of online financial transaction. The mindset of people is gradually changing. During the time of transition to the use of information technology in case of financial transactions, lot of discrepancies were observed where people lost their funds or transferred money to wrong accounts. In many occasions organizations were forced to pay the penalties. The hackers also sent illegal information to the consumers in disguise of a reputed company asking for sharing passwords or other account information. These kinds of harassments are very hard to be controlled by firms providing financial services. In order to prevent these illegal activities, the company circulates notice through email, sends messages to the registered mobile numbers to increase the consumer awareness. Information can be leaked through call centres and helpdesks as well. Many fraud cases have been found where consumers are cheated with heavy amount of money. The organizations that provide financial services avail contracts with companies like Symantec that have expertise in this domain and monitor the latest threats in their system. Consumers also provide wrong data which lead to acute problems. In countries like India most of the people still visits organizations and complete their work with pen and paper (Oliva, 2004, p.56). Awareness is gradually being developed and people are tending to move towards online financial transactions. Still today research is under progress on a continuous basis for building a better system that enhances the security aspect so that consumers can avail the benefit of safe and secured transaction. Banking organizations also outsource their operations to IT companies in order to maintain their online systems. The list of IT companies which handle such operations include like TCS, HCL, Wipro, etc. Many companies provide financial services where they engage themselves to manage the financial transaction. Design, development, maintenance of financial domain helps to provide better service and high security to the consumer. Conclusion From the above discussion, it can be concluded that IT has improved the financial transaction domain. Despite the risk of hacking, Information Technology makes financial transactions easier and saves time for the consumers. Consumers can make the required transactions in quick time without being required to be present physically at the bank branches. To protect the consumer’s data, IT firms who manage the financial domain of any organization spread awareness messages through different medium. With the help of the software programs, large numbers of bank accounts are processed, interest is calculated for the accounts and fixed deposits are tracked for maturity. The use of information technology has quickened the calculation of interest for repayments of loans and the system also prompts date of repayment for tracking purpose. Financial transaction supported by IT eliminates the risk of manual mistakes or human error. Another beneficial aspect of IT is that it reduces global warming to a large extent. People used to keep records in passbooks, used chequebooks for financial transactions which caused cutting down of trees for the requirement of paper. Now a day’s similar sort of jobs can be done from the websites. Account statements can be downloaded in soft copies. This resulted in decline for the need of paper and as a result deforestation was stemmed thereby controlling the aspect of global warming. As the world is now suffering from global warming, the concepts of E-money and Electronic money transfer method have become more popular. These are known as green money. However, the initial setup cost may be high but the return from the projects surely contributes to a better future. Therefore, it can be concluded that digitalization in personal finance in near future has the potential to emerge as the only way of transaction. In financial aspect, the advent of information technology has helped to reduce the human error. Also constant developments of information technology in the field of personal finance has helped to tighten the security and helped to eliminate financial frauds. Thus efficiency in terms of time and risk management has made personal financial transactions more complete and secure. References Doyle, S., 2000. Understanding Information Technology. 1st ed. U.S.A.: Nelson Thornes. Friedland, J.A., 2002. Understanding international business and financial transactions. 1st ed. U.S.A.: LexisNexis. Friedland, J.A., 2010. Understanding International Business and Financial Transactions. 5th ed. U.K.: LexisNexis. Glaessner, T.C., Kellermann, T. & MacNevin, V., 2002. Electronic Security: Risk Mitigation in Financial Transactions : Public Policy Issues. 1st ed. U.S.A.: World Bank Publications. Khadraoui, D. & Herrmann, F., 2007. Advances in enterprise information technology security. 1st ed. U.S.A.: Idea Group Inc (IGI). Mann, R.J. & Mann, 2011. Payment Systems and Other Financial Transactions: Cases, Materials, and Problems. In A. Publishers, ed. Aspen casebook series. 5th ed. U.S.A.: Aspen Publishers. Oliva, L.M., 2004. Information Technology Security: Advice from the Experts. 1st ed. u.s.a.: Idea Group Inc (IGI). Rajaraman, V., 2004. Introduction To Information Technology. 1st ed. U.K.: PHI Learning Pvt. Ltd.. Stathopoulos, M., 1995. Modern techniques for financial transactions and their effects on currency: general and national reports. In M. Stathopoulos, ed. for financial transactions and their effects on currency: general and national reports. 1st ed. U.S.A.: Kluwer Law International. Stoyles, P., Pentland, P. & Demant, D., 2003. Information Technology : Science Issues, Science Issues. 1st ed. U.S.A.: Black Rabbit Books. Read More