Technology in Banking
Technology and information, as well as knowledge, have become the major engines of productivity and economic growth in modern times. The creation and diffusion of knowledge concurrent with the advances in information technologies is changing the way goods and services are produced, distributed and consumed. The business environment and market demand are changing rapidly. Markets are opening up, with freer flow of trade, capital, technology, goods, services and people. With the advent of the internet, the world is now connected, wired up and border-less.
Technology is the traditional stimulus to change, and it is as powerful in financial market as anywhere else. The technological revolution inspired by computers has had an obvious impact in the field of finance. For example, it would be impossible to have automated teller machines without computerization of the deposit or withdrawal functions. Computerization and information technology have also been crucial in the development of credit cards to the advanced level they have reached. Modern computer-generated methods of information storage, retrieval, and transmission underline many of the changes that have taken place in the financial services industry.
Technological change is generally considered as a major source of improvement in economic welfare. Technological innovations expand the proverbial economic pie, allowing everyone to have more without forcing any one to have less, thereby making it possible for everyone’s standard of living to rise. Financial innovations have similar effects. In the case of financial innovation, however, the main areas of welfare gain are improvements in the ability to bear risk (future markets), lowered transactions costs (ATM), and increased liquidity (the growth of the commercial paper Market fuelled by money markets mutual funds). In all these financial innovations, it seems necessity becomes the mother of innovation. For example, the new financial institutions, products and markets came into use and remained there because of a demand for them, a need that kept them in existence. Credit cards, introduced during the 1950’s and 1960’s, could not have become so widespread without technological computer base that enabled them to function so effectively. Nevertheless, no matter how advanced the technology, credit cards would not have become so popular if they had not fulfilled an underlying consumer need. People simply enjoy the ability to spend without paying up immediately. And credit cards facilitate the process. On the basis of such evidence, we can conclude that someone perceives the need that is currently not being fulfilled and can invent a way to satisfy that need, chances are such an innovation will prove successful
Indeed, technology is a dynamic force. As it becomes an increasingly vital element in the competitive landscape of the financial service industry, technology is changing the very nature of selling and delivering financial products. As bankers face the certainty that technology will increasingly influence the development of the banking industry, technology firms also have come to realize that banking is one of the largest and most sophisticated markets for their products. Consequently, the needs of the financial industry, among others, are a driving force in the development of new information-based technologies.
To be continued...