Banking Industry and the Impacts of Technology

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The current paper seeks to investigate the significant impact that technology has had on the banking industry, which continues to be the foundation of every major economy. The authors emphasize how information technologies completely changed how banks performed and raised the bar for customer care within the banking industry. In addition, the use of IT and technologies in banking sector helped the industry to catch up with global development, advance the quality of customer service, and decrease transaction costs. In this respect, banks have invested considerably in ICT, and have adopted ICT networks in order to be able to provide customers with a wide range of value added products and services (Abubakar Aliyu and Rosmaini, 2012). The authors highlight that there are numerous resources demonstrating the role of ICT in banking sector is immense, since the IT has improved the way of service delivery, security of personal data of the customers and increased their satisfaction. There are still scholars who assert that since 1970s to the time there was a huge deceleration in growth, because the technologies were becoming omnipresent (Abubakar Aliyu and Rosmaini, 2012). However, the biggest part of scholars are still sure that IT are beneficial for banking industry , because the perception of customers and their respect to banking sector have been improved after introduction of IT technologies. Customer service delivery has increased after the banks have started to implement IT into their everyday work. With the increase of Internet and technology services and availability of cash machines in different locations, the most frequent problems have been effectively solved. As an effect, the volume of customer services increased and become more comfortable.

The findings, presented in the article are significant for the researchers and scholars, who are investigating the topic of IT impact on the banking sector and its positive influence of service and value delivery. In addition, the findings, demonstrated in the research are very important, as they demonstrate what specific problems of customer service delivery have been mitigated and resolved after implementation of IT in the banking sector. In general, baking sector has been showing little market orientation and poorly fulfilling services with little or no regard to customer needs. Therefore, the findings of the article show that with the help of IT in the banks, customer needs have been met and range of issues, such as long lines, transaction time and costs, were eliminated. As a result, it can be said that the source is credible with reliable information, taken from a wide range of secondary materials.

Taking into account that the topic is broad and open for further investigation, the article of Abubakar Aliyu and Rosmaini fits perfectly into other sources, related with the topic. The results of investigation of the authors can be used as backed up source for future works. In addition, this article can be fit into the conversation about security in baking sector, improvement of customer service or discussions of banking sector issues and ways of their resolution.

Berger A. N. (2003), “The economic effects of technological progress: evidence from the banking industry”. Journal of Money, Credit, Banking, 35 (2): 141-176.

The authors of the article examine the available facts on the way technological progress and IT influence the banking industry. Innovations in information processing, introduction of telecommunications, and other related technologies help fuel consistent growth of the US banking sector, however, there is always a dispute about importance IT versus other factors. The present article sheds light on the general understanding how IT has impacted banking sector and improved customer service. The author also mentions that Depository and Nondepository Financial Institutions category remains the most IT-intensive industry in the U.S., according to the mount of computer equipment and software. Therefore, positive and important role of IT in banking sector is hard to deny. In addition, the article tells that banks heavily use financial technologies that employ economic and statistical models in order to create new securities, estimate distribution of returns and create financial portfolios. These financial technologies are greatly dependent on the use of IT, utilized to gather, process and evaluate data. Despite underlying significance of IT in the banking sector, the author states that there are certain issues to consider. For example, taking into account high competiveness of banking sector, the importance and evaluation of IT is possible to make only in combination with analysis of general economic conditions, since all sectors are interrelated. It is incorrect to state that success of the banking sector is attributed to IT, as there are other factors. There are several sections of the article, where the first one shows background statistics on positive role of IT in banking sector; the second one is the review of macroeconomic research; the third section shows the research of two major consequences of IT use in banking sector.

The findings of the article are very significant, since except discussion, literature review and demonstration of facts, there are statistical data, showing evidence on how successful the use of IT in baking sector is. In addition, the article is significant since it demonstrates some of the general problems, with which scholars and economists face in the process of measuring the effects of technological progress. Therefore, the source is credible for being used in the researches about the role of IT in the banking sector, because it does not provide general information, but contains statistical data and counter arguments, stating that it is impossible to measure the importance of IT in the frames of one industry solely.

Considering that the article discusses potential problems of the IT in the banking sector and issues, with which the economists and financial analysts face in measuring the effects of technological progress, it can be fit into the sources and researches about the security in banking industry and discussion of issues, connected with the implementation of IT in the banking sector and other related industries.

Eyadat, M. and Kozak, S. (2005). “The role of information technology in the profit and cost efficiency improvements of the banking sector” Journal of Academy of Business and Economics, 5 (2): 1-12

The article investigates the relation between the progress of information technology and profit and cost efficiencies of the banking sector in 1992-2003 financial years, when IT only started to deeply penetrate into the banking sphere. Therefore, the authors investigated the level of implemented technology and related it with the effectiveness and profitability of banks. As a result, it was demonstrated that there is positive relation between IT implementation and assets profitability and cost savings (Eyadat and Kozak, 2005). Despite the efficiency of all US banks has increased, cost efficiency did not witness much improvements related to profit efficiency. As a result, the article shows that on the one hand, introduction of new technologies in the banks leads to increase of revenues, however, increases cost changes, on the other hand. Writers underline that increasing a range of banking services may lead to strong increase their cost processing. It, in its turn, raises a question, whether economy is possible to improve if banks provide such type of new services, based on technologies. In the Section 2 the background information on the way, in which recent IT innovations reshaped banking sector, are presented. Section 3 demonstrates findings about the effects of the IT use and technological progress on efficiency of US banks. Lastly, section 4 includes empirical studies, demonstrating all the positive outcomes and possible drawbacks from the use of IT in banks.

Although, it is clear the IT has a positive impact on US banking sector, the article provides the other side of the coin, stating that cost efficiency was not considerably positively changed. Demonstration and detailed discussion of the major drawbacks are very significant. Stating that technological progress enabled to execute deregulation of the banking sector, removed barriers in intra- and interstate banking and branching and provided more flexibility in introducing new services makes the article a significant source of information. However, investigation of lack of preparation in most US banks for implementation of new technologies is another fact that makes the article a valuable source for research. The source is credible, as it discusses relevant problems of banking sector.

As it was mentioned, the article discusses the positive role of IT in US banking sector, therefore it can be used in the similar research. Taking into account that the authors touched the problems of cost efficiency of banks after implementation of IT, the article can fit into the research about the reasons of cost efficiency reduction in the banking sphere. Lastly, the theme of IT implementation in business is wide, so the article can be used as a credible source for investigations of factors, contributing to business success. It will be useful for scholars and students, engaged in the topic research.

Shu, W. and Strassmann,P. A. (2005), “Does information technology provide banks with profit?”, Information and Management, 42 (5), 781-787.

The authors of the article assert that despite numerous statements about positive contribution of IT technologies to the business value, people are still not convinced. The reason is that IT in the service sector has not been seen to be more productive, while the data, demonstrated in the previous researches were focused on different sectors and little emphasis has been made on banking sector. In order to prove effectiveness of IT in banking sector, the authors have chosen 12 banks covering 9 years for analysis in order to demonstrate statistical data on how IT has improved the work of banks. An analysis for panel data—a random effect model was applied to eliminate all estimation errors (Shu and Strassmann, 2005). In this respect, the authors started with statistical data, showing that the Bureau of Labor Statistics and National Income and Product Account asserted that IT investment has increased to 25 time, compared to the period 30 years ago (Shu and Strassmann, 2005). In order to provide full and clear picture of IT use in banking sector, the authors used statistics, taken from different sectors to analyze how IT, in its narrow sense, impacted banks. The data were taken from commercial companies, since governmental data are not always reliable. With the help of calculations and use of variables, the authors concluded that statistical and financial data prove positive influence of IT on the work of banking sector.

Taking into account that the article is more than descriptive research findings, but contains statistical data and calculations of financial results, it is very significant. In addition to research, it contains statistical results, based on the facts about the use of IT in different sectors of economy, with an emphasis made on banking area. Therefore, the article will be useful for financial analysts and researchers, engaged in the studying of the role of IT in banking industry. The source is reliable as it is taken from the reliable and credible online magazine Information and management, used by students and scholars worldwide.

Since the article is more a statistical report about the range of companies within several different sectors of economy, with banking one being at a core, this is a great resource for statistical findings. It contains comparative data about the positive role of IT in different sectors and among a range of companies. Therefore, it can be fit into the research work on the role of IT in economy or comparative study about the IT impacts on service providing sectors, including banks, as banking industry is a leader in the sphere of customer service delivery.

June 26, 2023
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