Trends in Banking technology – I.T Perspective


INTRODUCTION

                           The term Information technology (IT), broadly referring to computers and peripheral equipment, has seen tremendous growth in service industries in the recent past. The most obvious example is perhaps the banking industry, where through the introduction of IT related products in internet banking, electronic payments, security investments, information exchanges, banks now can provide more diverse services to customers with less manpower. Seeing this pattern of growth, it seems obvious that IT can bring about equivalent contribution to profits. In general, existing studies have concluded two positive effects regarding the relation between IT and banks’ performance. First, IT can reduce banks’ operational costs (the cost advantage). For example, internet helps banks to conduct standardized, low value-added transactions (e.g. bill payments, balance inquiries, account transfer) through the online channel, while focusing their resources into specialized, high-value added transactions (e.g. small business lending, personal trust services, investment banking) through branches. Second, IT can facilitate transactions among customers in the network.

Need for Improvement

                          The growing competition and increasing customer aspirations have led to increased awareness amongst banks on the potential and importance of technology in banking. The phenomena of Globalisation led to the arrival of  Multi national banks with their superior state-­of­-the-­art technology­ based services has pushed Banking fraternity to follow suit by adopting the latest technological advances so as to meet the threat of competition and customer expectations. Banking industry, today globally is in the midst of an IT revolution. A combination of regulatory and market forces has supported the implementation of technology and automation in the banking industry.

Role of  I.T. in Banking

                           Banks and financial institutions have recognised Information Technology (IT) as an enabler of sophisticated product development, better market infrastructure, and implementation of reliable techniques for control of risks. This helps the financial intermediaries to reach geographically distant and diversified markets. With continuous and rapid advances in technology, the banking sector has seen a revolutionary wave. Technology has changed the contours of three major functions performed by banks, i.e. access to liquidity, transformation of assets and monitoring of risks. Further, IT and the communication networking systems have a crucial bearing on the efficiency of money, capital and foreign exchange markets. The most important impact of IT in banking however has been the manner in which it has facilitated financial transactions across an entire spectrum of economic activities thus resulting in a sort of Economic Revolution. By introducing the possibility of online payments and other financial transactions, IT in banking has scaled up immensely the level of activity across sectors by making services and products easily available and accessible to an ever increasing net of people.

               Information Technology has basically been used under two different avenues in Banking. One is Communication and Connectivity and other is Business Process Reengineering. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. In view of this, technology has changed the contours of three major functions performed by banks, i.e., access to liquidity, transformation of assets and monitoring of risks. Further, Information technology and the communication networking systems have a crucial bearing on the efficiency of money, capital and foreign exchange.

·         I.T. in Banking Technology has opened up new markets, new products, new services and efficient delivery channels for the banking industry. Online electronics banking, mobile banking and internet banking are just a few examples.

·         Information Technology has also provided banking industry with the wherewithal to deal with the challenges the new economy poses. Information technology has been the cornerstone of recent financial sector reforms aimed at increasing the speed and reliability of financial operations and of initiatives to strengthen the banking sector.

·         The IT revolution has set the stage for unprecedented increase in financial activity across the globe. The progress of technology and the development of world wide networks have significantly reduced the cost of global funds transfer.

·         It is information technology which enables banks in meeting such high expectations of the customers who are more demanding and are also more techno-savvy compared to their counterparts of the yester years. They demand instant, anytime and anywhere banking facilities.

·         IT has been providing solutions to banks to take care of their accounting and back office requirements. This has, however, now given way to large scale usage in services aimed at the customer of the banks.

·         IT also facilitates the introduction of new delivery channels - in the form of Automated Teller Machines, Net Banking, Mobile Banking and the like.

·         Further, IT deployment has assumed such high levels that it is no longer possible for banks to manage their IT implementations on a stand alone basis with IT revolution, banks are increasingly interconnecting their computer systems not only across branches in a city but also to other geographic locations with high-speed network infrastructure, and setting up local area and wide area networks and connecting them to the Internet. As a result, information systems and networks are now exposed to a growing number.

Latest Innovations in Banking technology:

                       Many innovations are brought in day by day in the field on banking with reference to Information technology, here are a few outstanding applications used in global context;

·         Net Banking / Credit Card Online / One View / Net Safe

·         Phone Banking / Mobile Banking / Insta Alerts

·         e-Money / Electronic Fund Transfer / Online Payment of Excise & Service Tax

·         Shopping / Bill Payment / Ticket Booking – On line: Railway, Airlines & Cruises

·         Mobile top up & Re charge / Smart Money

·         Bank Anywhere / Funds Transfer (e Cheques)

·         Bank from Home (i) Express Delivery / Cash on demand: (ii) Normal Delivery

Conclusion

                      Most of these IT and e-Governance linked initiatives require an active banking interface for their success. It is only when the banking and financial system is completely IT enabled and effective that these financial transactions can be undertaken. Thus, the governance aspects of IT in banking are of extreme importance and it is imperative that all banking institutions introduce IT as a key element of their activities. IT is a strong enabler for all these initiatives and banks must play the vital position of a facilitator.