The report will discuss in detail about the greater influence of IT in the banking sector. The complete banking based industry has further introduced many kinds of new consumers based services as well as products that are using IT. This industry is going through so many transformations as an outcome of the introduction of information technology. As a matter of fact, the overall structure of the industry is constantly modifying since there is quick development in the structure of IT (Gatautis, 2015). The constant amount of success of applicants of IT refers to certain restriction of the present IT computer based systems in banks must be developed again to meet the need.
Need of IT in banking
The banking sector has been impacted by IT in a most radical manner along development in the banking based systems. The IT has also become a vital resource of business since its overall absence can result in poor decision making and failure in the business. Technology has also opened up so many new opportunities in markets and in terms of product, services and right as well as effective delivery solutions. Electronic banking and mobile banking are some of the example. IT has also providing the industry with right kind of wherewithal to many deals with varied issues posed by the new economy. Information technology has also been a cornerstone in the current financial based sector related to reforms which mainly aims at rising speed along with trust on finance based operation. It is also based on taking right kind of initiatives to strengthen the sector further (Heeks et al., 2015). The evaluation of IT has also set the whole stage for rise in so many finance based functions all across the world. Overall progresses of the technology and growth all across the world have decreased the cost of international funds transfer.
Importance of IT for business survival
- The concept of technology impacts the overall competition along with degree of contestability in the organizations. Because of the development in technology, superiority in bank based on information can further be deteriorated. The barrier to enter in the industry is decreasing and many new competitors are coming up with new concepts. There are some financial products as well as services that have become more transparent by nature where customers are willing to show all the unbundled demand for the finance based product as well as services (Sassi and Goaied, 2013). Everything further leads to a more competition based market culture. Since the entry has lowered and along with existence and further deconstruction for some of the markets with proper contestability in banking can be raised further.
- Technology also impacts the concept of economy of scale: there is constant competitive based pressure along with force based banks in order to decrease the cost. Banks at the same time also look for the economy of scale in procession of bank despite being becoming a huge bank. Banks also look for saving the business structure and also save the competitive imperative associated with the concept of economy of scale. There are other alternatives as well like joint venture as well as confederation of many finance based companies. There are many other kinds of alternatives as well to get the economy of scale which will also consist of joint venture as well as confederation of many finance based companies (Tarut? and Gatautis, 2014).
- IT also impacts the economics based on delivery: technology plays a vital role in impacting on the way the banking as well as finance based services are provided. There is also a wide range of option in present delivery methods like online banking or ATM. All these tools reduced the overall dependence on the branch related network as main delivery methods.
Requirement to apply IT in Banking
Following are the tools used as requirement to apply IT in banking: -
- Establishing computerized software in bank: it is a known fact that there is a lot of development in so many banking applications and the process in bank further become faster and trusted. The records are kept in an organized manner and the process of retrieval is becoming must simpler (Mihalic and Buhalis, 2013).
- Developing core solution in banking: the computerized systems in bank provide greater as well as trusted services however with the expansion in the Internet; the overall concept of the core banking comes into picture.
- Introduction of MICR cheque processing systems: with technological advancement, the Magnetic Ink, the MICR system has been developed and also implemented in a strategic manner. The technology has further revolutionized the system by clearing the overall process from over the counter and a more systematic process which is quick as well as effective (Mention and Bontis, 2013).
How banking uses IT
Following are the methods through which baking uses IT: -
- Establishing the concept of plastic money: the recording via magnetic data technology has been used with strips which are magnetic b nature and are in form of plastic cards. Therefore, the concept of ATM as well as debit or credit cards are utilized along with many ATM based machines that are actually decreased to the needs of account holder in order to visit the branch within the banking time to withdraw the money from the account easily and at any time (Asongu, 2014).
- Developing internet based banking solutions: the data is becoming centralized by nature and rise in reach of internet, the concept of Internet Banking Solution was introduced and not it is provided by all the banks. The platform also provides many transactions and makes proper inquiry about working online without visiting the bank.
Benefits of IT in banking
Following are some of the benefits of IT in banking: -
- Comfort: the biggest advantage of technology in banking is that it permits the customer to handle the work as well as monitor the bank statement at any given point of time. Customers can easily access the account on the computer or any kind of smart phone all the time whenever it is comfortable for them (Asongu, 2014).
- Fewer visits to bank: another advantage is newly introduced technology called as Remote Deposit Capture. It is an online based service that helps in scanning and also depositing the cheque from home only with office and other kind location without having to go through the bank.
- Fast transactions: when customer conducts the banking functions on internet, the transactions are being processed rapidly. For instance, customer can make the right kind of purchase or even make payment with debit as well as credit card despite cheque and the complete transactions being shown up on the account immediately (Asongu, 2014).
- Functioning with accounting based software: in a small scale business, management normally uses accounting software. There are so many banks that in present time have started tying the information in bank account directly to accounting software. This provides an accurate as well as updated financial statement in the company. It also helps in understanding the opinion of the financial statement quickly without adding any kind of bank account number (Khan and Fasih, 2014).
Types of risks in IT while implementing in Banking
It is understood by now technology has become a great enabler for the banking sector however; there are some high impacted risks as well most importantly cyber risks. These risks are actually in the form of theft of data which is later compromised files along with accounts or degraded systems. At the same time, there are many more risks related to IT which concerns the top management. There are so many financial companies that face constant risk from misalignment that exist between the business as well as IT based strategies along with management related decisions that can enhance the overall cost and make the process even more complex in the present IT environment (Gossart, 2015). There are so many mergers as well as acquisition that can further create complication in organization and its IT environment. At the same time, there are number of technology based startups as well as financial technology which is disruptive by nature based on answers that are challenging in the present business model. Technology related risks are based on financial, operational, financial as well as reputational impacts. In order to deal with the board members who do not need to become an expert in IT however need to be clear about the IT structure properly to manage challenges properly.
Following are some of the important risks in technology in financial based services as well as banking: -
- Strategic risk associated with IT
- Risk of cyber security and risk of incident response
- Resiliency in IT along with continuous risk
- Risk of third party and technology base vendor
- Management of data risk
- IT based program execution risks
- Risk related to ineffective management of risks
- Operational as well as technology based risks (Gossart, 2015)
Methods to maintain and monitor IT in banking
It is important that banks invest properly in order to defend business accounts since they are not completely liable for any losses or frauds as there are so many consumer based accounts. Large as well as domestic or local banks normally have the best kind of security systems but community banks tends to lose the market since they often outsource the present technology based systems to many third party payment along with processors (Soja and Cunha, 2015).
The best kind of company protection is in an agreement in writing claiming that the banks can easily absorb any kind of theft or fraud.
It is well known fact that advancement in technology has become a necessity in the present era. Businesses also require being more adaptive as well as being able to embrace newer base of technologies in order to perform better and accomplish set goals. The banking industry is not an exception as associated with any kind of adaption. Therefore, it is actually worth advising that the current banking industry requires spending more IT and also apply to improve the overall operations along with proper customer services and products (Soja and Cunha, 2015).
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