IT Evolution in Global Banking - Essay Example

IT Evolution in Global Banking Introduction Developments in information technology have brought new opportunities for banks. Information technology has facilitated banks to efficiently reach customers all over the world with less overhead costs. With technology, most of the banking operations are now going towards electronic service and there is a substantial reduction in the number of customers that require physical banking services (Kamel 2005). Technology in the recent past has allowed customers to open accounts even when they do not have banks within the adjacent vicinity. The customers can also access their bank accounts, withdraw cash, pay bills, get bank statements, deposit cash and even buy products without having to visit their bank branches. Indeed, what technology has facilitated is the reduction of physical conduct between the customer and the banker bringing in a new phenomenon known as virtual banking. Information technology can offer a bank a competitive edge over other banks (Singer, Ross & Avery 2005) The internet invention was the greatest breakthrough for banks in carrying out their transactions with customers (Wanderi 2012). As internet access is enhanced, more and more banks are turning to online banking services. Such services are more convenient to customers and the banker, they also save time and costs and increase efficiency. Banks that do not adopt technology are likely to be unpopular among the customer base. Automated teller machines, television banking, virtual banking, internet banking, mobile banking, online pay bill, mobile commerce, social media payments, credit cards and debit cards are some of the examples of how technology is changing the banking industry (Kendrick 2011). This paper will discuss the evolution of information technology in the banking industry with emphasis on internet banking, growth of e-commerce and virtual banking and new delivery channels such as PC banking, mobile banking and TV banking. Discussion The most important concept is the internet. In early years of internet, banks normally used the internet for internal purposes such as publishing of corporate data and offerings. At this time, internet was mainly used in banking as a tool of information dissemination to customers and the general public. This was then followed by banking internet services such as checking account balances online, paying utility bills online and online transfer of funds. Many banks feared transacting over the internet because of the security threats. However, with the growth in software and information technology infrastructure many banks have embraced this technology (Vaidya 2009). Internet has enabled banks to open up websites where customers can now access their products and services. The banks do not need to put up advertisements in the media or do customers have to go to the banks in order to learn about the products and services of banks. All they need to do is just access the website and learn about the banks products and services. These calls on banks to embrace information technology because not doing so might make their products and services unpopular. Internet has facilitated a new concept called virtual banking in the banking industry. In this case, the banks offer their products and services only through electronic means without any physical contact with their customers. This is gaining popularity as the global economy grows and access to the information technology is enhanced throughout the world. This model normally operates without many branches because they do not need to physically interact with customers. Given that they do not require many personnel and the maintenance costs are low, they normally offer competitive prices for their products and services. The people around the world are getting busier and have no time to spend on bank transactions and hence there is a shift from traditional banking to virtual banking. However, customer satisfaction is a key challenge to this technology. Technology systems are subject to technical failures and since all operations are done online, there is nobody to explain the error or apologize. This lack of physical contact calls for more efficient service delivery systems in order to win customer confidence. Over the years, the banks are shifting from over the counter banking system to other banking channels. Many banks have adopted the automated teller machines (ATM) that enables customers to access their accounts and carry out transactions at any time convenient to them. The credit card is another evolution in the banking industry that enables customers to carry out cashless transactions. Availability of infrastructure such as personal computers, access to internet and other hand held gadgets have also produced an evolution in the banking industry where customers can now access their accounts more easily and carry out transactions at their own convenience. The banks have also established call centres and phone banking services that are meant to serve the customers better (Finacle 2012). Electronic banking has necessitated easy access to customer accounts, provided efficient service and increased transparency in the banking industry (Frame & White 2009). The banks are even offering incentives such as low transaction charges to customers who use non-branch channels such as ATMs. This has reduced the number of customers that walk into the banks’ branches seeking service and consequently it has improved service at branches. Another significant evolution in the banking sector is e commerce. This is where payments have been made electronically from the customer’s bank account. Customers can now use credit cards and debit cards to buy products. The customers can also access the electronic pay bill services that enable them to pay their debts from their accounts. The banks have facilitated payments between buyers and sellers. Some large banks have also established websites where buyers can see the products of various sellers and they normally facilitate the transaction between the sellers and the buyers (Wenninger 2000). Information technology has also enabled banks to offer a wide range of products. The banks have partnered with other companies through online interconnection and acted as an intermediary between the sellers and buyers. This has revolutionized the gate keeping role of banks. Another IT evolution is the introduction of mobile banking. This has been facilitated by many people owning phone handsets. In this case, the customers can get their account details and bank services through the phone. The mobile website enables customers to get information about the banks such the locations of ATMs, hours that the banks operate and rates, all in readable format. To access the mobile website, your phone need to be internet enabled. Many phone models are in the markets that have internet access and with introduction of smart phones many people are likely to access this service (Anyasi & Otubu 2009). There is also text banking where the customer can send a text to a certain specified number and get information about his account (Marshall, 2010). We have also mobile banking applications. With these applications, customers can get details about their accounts, get directions to banks and also locate the ATMs. All this has made banking very flexible, convenient and more efficient. However, mobiles are small gadgets and they are more vulnerable to theft than the PCs. Conclusion Information technology has really revolutionized the banking industry. It has saved the banks and their customers, time and costs. The number of branches is becoming less and less and the number of customers visiting the branches is also reducing. This has led to reduction of administrative costs on the banks and also the customers save much costs on transport and transaction costs. The banks must adapt to the technology needs of their customers. The customers in the modern time would like to access their funds and account information anytime and anywhere. This calls on banks to embrace information technology. Branch banking is losing popularity because most customers would like to save on the time for other activities. Paper transactions are also being replaced by electronic transaction because the latter is easy to keep track of the transactions. It is important for banks to adapt to information technology in order not to be pushed out of business by their technology savvy competitors. Bibliography Anyasi, F & Otubu, P. 2009, ‘Mobile Phone Technology in Banking System: Its Economic Effect,’ Research Journal of Information Technology, Vol. 1. no. 1, pp. 1-5. Finacle 2012, Banking in India: Evolution in Technology, viewed 18 May 2013, < http://www.infosys.com/finacle/solutions/thought-papers/Documents/banking-in-India-evolution-in-technology.pdf> Frame, W. & White, L 2009, Technological Change, Financial Innovation, and Diffusion in Banking, Federal Reserve Bank of Atlanta Working Paper 2009-10 Kamel, S. 2005, The Use of Information Technology to Transform the Banking Sector in Developing Nations, Information Technology for Development, Vol. 11. no. 4, pp. 305–312 Kendrick, K. 2011, Banking Evolution: Technology, First Bank and Trust Company, viewed 18 May 2013, < http://www.handshake20.com/first-bank-and-trust-company/page/2/> Marshall, J. 2010, The Evolution of Mobile Banking, USA: Illinois Banker Singer, D., Ross, D. & Avery, A. 2005, The Evolution of Online Banking, viewed 18 May 2013, Vaidya, S. 2009, Internet Banking Channel: A case for comprehensive usage, Tata Consultancy Services Wanderi, M. 2012, Internet Banking Adoption in Kenya: The Case of Nairobi County, International Journal of Business and Social Science, Vol. 3. no.18 , pp. 246-252 Wenninger, J. 2000, The Emerging Role of Banks in E-Commerce, Current Issues in Economics and Finance Journal, Vol. 6, Issue 3, pp 1-6. 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