Review of The Technologies Influence on Transformations in The Banking Industry

Introduction

The 21st will bring about an all-embracing convergence of computing, communication, information and knowledge. This will radically change the way we live, work and think. The growth of high speed network, coupled with the falling cost of computing power, is making possible application undreamed of in the past. Voice, data, images and video may now be transferred around the world in micro second.

The explosion of technology is changing the banking industry from paper and branch banks to digitized and networked banking service. It has already changed the internal accounting and management system of banks. It is now fundamentally changing the delivery system banks use to interact with their customers. All over the world, banks are still struggling to find a technological solution to meet the challenges of a rapidly-changing environment. It is clear that this new technology is changing the banking industry forever. Banks with the ability to invest and integrate information technology will become dominate in the highly competitive global market. Bankers are convinced that investing in IT is critical. Its potential and consequence on the banking industry future is enormous.E-banking: The execution of financial service via internet, reducing cost and increase in convenience for customer to access the transaction.

E-banking is an umbrella term for the process by which a customer may perform banking transaction electronically without visiting a brick and mortar institution.Mobile payments is the path to the next generation of retail payments, and even if they do threaten to minimize—or atomize—the idea of what a bank’s brand is worth, that’s no reason to avoid the reality that there’s plenty of money to be made in the future of payments, and that clinging to old forms is unlikely to prove a useful response to new facts. ATM is an example of computer application in banking industry. ATM technology adoption has increased community efficiency, which led to a reduction in cost, improvement of quality and increase in the added value to customer.

Literature Review

Computer is getting more sophisticated. They have given banks a potential they could only dream about and have given bank customers high expectations. The changes that new technologies have brought to banking are enormous in their impact on officers, employees, and customers of banks Advances in technology are allowing for delivery of banking product and services more conveniently and effectively than ever before-thus creating new bases of competiti0on. Rapid access to critical information and the ability to act quickly and effectively will distinguish the successful banks of future. The bank gains a vital competitive advantage by having a direct marketing and accountable customer service environment and new streamlined business process. Consistent mangament and decision support systems provide the bank that competitive edge to forge ahead in the banking market place.

Major Application

The advantages accuring form computerization are three directional to the customer, to the bank and to the employee. For the customer. Banks are aware of custommers need for new services and plan to make them available.it has ncreased the level of competition and forced them to integrate the new technologies in oder to statisfy their customers. They have already developed and implanted a certain number of solution among them .For the customer: Banks are aware of customers need for a new services and plan to make them available. IT has increased the level of Competition and forced them to integrate the new technologies in order to satisfy their customers.

They have already developed and implemented a certain number of solutions among them:

• Self-inquiry facility: Facility for logging into specified self-inquiry terminals at the branch to inquire and view the transactions in the account.
• Remote banking: Remote terminals at the customer site connected to the respective branch through a modem, enabling the customer to make inquiries regarding his accounts, on-line, without having to move from his office.
• Anytime banking- Anywhere banking: Installation of ATMs which offer non-stop cash withdrawal, remittances and inquiry facilities. Networking of computerized branches inter-city and intra-city, will permit customers of these branches, when interconnected, to transact from any of these branches.
• Telebanking: A 24-hour service through which inquiries regarding balances and transactions in the account can be made over the phone.
• Electronic Banking: This enables the bank to provide corporate or high value customers with a Graphical User Interface (GUI) software on a PC, to inquire about their financial transactions and accounts, cash transfers, cheque book issue and inquiry on rates without visiting the bank. Moreover, LC text and details on bills can be sent by the customer, and the bank can download the same. The technology used to provide this service is called electronic data interchange (EDI). It is used to transmit business transactions in computer-readble form between organizations and individuals in a standard format.
• As information is centralized and updates are available simultaneously at all places, single-window service becomes possible, leading to effective reduction in waiting time.For the bank: During the last decade, banks applied IT to a wide range of back and front office tasks in addition to a great number of new products.

The major advantages for the bank to implement IT are:

• Availability of a wide range of inquiry facilities, assisting the bank in business development and follow-up.
• Immediate replies to customer queries without reference to ledger-keeper as terminals are provided to Managers and Chief Managers.
• Automatic and prompt carrying out of standing instructions on due date and generation of reports.
• Generation of various MIS reports and periodical returns on due dates.
• Fast and up-to-date information transfer enabling speedier decisions, by interconnecting computerized branches and controlling offices.

For the employees: IT has increased their productivity through the followings:

• Accurate computing of cumbersome and time-consuming jobs such as balancing and interest calculations on due dates.
• Automatic printing of covering schedules, deposit receipts, pass book / pass sheet, freeing the staff from performing these time-consuming jobs, and enabling them to give more attention to the needs of the customer.
• Signature retrieval facility, assisting in verification of transactions, sitting at their own terminal.
• Avoidance of duplication of entries due to existence of single-point data entry.
• Banks need the ability to also sell insurance and investment products to get a better return on this investment. Telephone banking can bring financial services to the home or office, especially if they are affordable screen phones.

By noticing how much interest the customer expresses, the bank can market stock quotes and insurance quotes. Interactive videos are new technology that banks can make available to the customer to maintain personal contact while still lowering the expense of delivery service. With an interactive video an expert employee is not needed in each branch. Complex life insurance products, open brokerage accounts, customized product illustrations can be widely available where needed. The interactive videos will be cost effective expertise. The internet is a medium to allow banks to offer products to customers outside the normal customer base of a branch. Banks are aware of the customer's need for these services and plan to make them available before other sources do.

Drawbacks

Early experiences with electronic commerce in the banking industry, which has been a pioneer in the use of electronic systems, can be used to learn of some potential dangers and issues to be taken into account. The use of Automated Teller Machines and electronic home banking systems has increasingly allowed customers to bank outside of traditional bank facilities, for most of their usual transactions. This was consistent with the strategy of most banks, which discovered that electronic transactions were about seven times less costly compared to the manual handling of these transactions by a bank teller. Nevertheless, the fact that customers' only contact with their banks was through (rather unsophisticated) electronic interfaces, and the major difficulties in integrating the legacy systems of a typical bank, prevented banks in many cases from selling additional products to customers (cross-selling).

In some European markets, the insurance companies took opportunity of that to grab business from banks, selling savings products to customers through their extensive distribution network. Similarly, the decrease in human interaction with customers could also lead to a less sophisticated understanding of their needs, as they're not always able to express comments, criticisms or requests for new products while interacting with machines. This should lead to a design of electronic commerce systems which incorporate capabilities for customer understanding and for proactive selling of new products. Electronic business transactions can only be successful if financial exchanges between buyers and sellers can occur in a simple, universally accepted, safe and cheap way. Various systems have been proposed, some of them based on traditional mechanisms (e.g. credit cards accounts) while others rely on new designs, such as electronic money.

The key here will be to find a few widely accepted mechanisms, which can be used by most actors. The recent agreement between Master card and Visa on one security standard for credit card transactions over the Internet, and its backing by most major software vendors is one step in the right direction. This doesn't diminish the need for more specialized systems, for instance to allow micro transactions, the exchange of very small amounts of money (a few cents) in exchange for information or services. These new payment mechanisms will in turn enable new business models such as pay-per-article newspapers.Technical Aspects: Computers in the bankng sector have enchanced customer service and productivity regarding account management, while streamling back-office activities. The biggest impact in the area of competition. Small banking institution can access the same technology as large banking institution can access the same technology as large banking institution and,therefore,can complete with them more effectively for business.

In banking, activitives start with banks automating customer accounts, which allows personnel to create,update and maintain customer records.Banking hardware and software have enchanced the accuracy ofaccount that tellers and other banking personal process. Banking software performs customer transaction through a centralized data record system. Account management is the genesis and backbone of all banking information systems.2.

Banking systems must perform electronic transactions.Direct deposit is an example of an electronic transaction.computer processing electronic transaction must have hardware and software encryption capabilities to keep data from being compromised during a transmission. After the computers performs electronic transmissions,it transfer the information to the main computer system for processing and updating. Banks have extended electronic capabilities through landline and cell phones, the Internet AND ATMs.3.

Web-based banking systems use a dedicated server through a bank network system.An area of the banking system is partitioned for internet application. Web-based banking systems by law must include securs servers and authenticated certificates regarding transactions from the Federal deposit insurance company and the federal Reserve Board. Customers wo choose to bank online can access their account through a web interface, which integrates with the main computer .A customers credentials-user ID and password—pass through several checkpoints before entering the main system to perform a web-based transaction.

Future Work

Banking is one of the world’s oldest businesses. It's been with us in one form or another since the merchants of Ancient Babylon started offering grain loans to farmers who needed to transport goods between towns. It wasn’t until 14th century Italy that banking as we recognise it today developed: In fact the oldest bank still trading today (the Monte dei Paschi di Siena) was founded in 1472.The speed that modern technology has developed has meant that the traditionally slow-moving financial institutions have had to invest billions to remain relevant to customers and competitive in the marketplace.

So, which aspects of technology have caused the biggest disruptions - and which have changed the way banking works in the 21st century?

No More queuing:If you are over 30, you've probably spent hours in interminable bank queues over lunchtimes or on a Saturday mornings, to withdraw money or pay in a cheque. Banks have leaped on the opportunities offered by online - and now mobile - banking. It's possible to do everything online, from simple transactions to complicated issues such as applying for a mortgage.A new study by YouGov reveals that one in three retail banking customers feel their bank’s mobile app isn’t as good as their online banking provision however. This, coupled with the fact that more people are relying on their phones to access their banking, is sure to be a focus for high street banks in the coming years. Some banks are now only available virtually - banks like Smile in the UK and Simple in the US don’t have any physical branches at all (although they're partnered with existing institutions which ensures the funds are completely safe).

One quick tap and you’re done:Although Mobil first issued contactless cards for customers to use at their petrol stations in the US as early as 1997, the very first contactless cards associated with banks were given out by Barclaycard in 2008. Now there are well over 32 million in circulation in the UK. By 2011, mobile technology had merged with contactless, and the first wave of apps that allowed their owners to pay by tapping the phone against the terminal were born.Google Wallet is now one of the most popular in the world, allowing users to store debit, credit, loyalty gift and store cards on their phones. A few years ago London buses opened their doors to contactless technology - you can now pay your fare with a quick tap of your card as you step onto the bus.

Cyber security and data protection:In the first half of 2015, 400 data breaches took place in the US, according to the US-based Identity Theft Resource Center, with 117,576,693 personal records put at risk. 10% of these breaches were in the banking sector - and that is an 85% jump from the same period in the previous year. Keeping financial information safe is one of the biggest areas of investment for banks, and it is also a responsibility for customers.Easy passwords, public computers and “phishing” scams are some of the most common ways we are separated from our money. Take a look at Which?’s guide to banking online safely - and their rundown of the safest UK banks.

A different sort of customer service:2015’s World Retail Banking Report spelled out some bad news for high street banks: Positive customer experiences had fallen for the second year in a row. Younger, Generation-Y, bank customers are less likely than their parents to show loyalty to one particular bank. Customers are generally less willing to take their bank’s word for which secondary products such as mortgages and investments they should take, preferring to do research themselves. Online banking and mobile banking mean that generic customer services are no longer needed. Customers expect a more tailored and personalised experience when they - on rare occasions - need to contact their bank by phone or by chat, or even in person at a branch.The IT research company Gartner suggests that gamification will become increasingly important for customer service in the coming years. Customers will need to be more engaged digitally through the use of the sort of mechanics usually only seen in video games, combined with virtual reality technology such as gesture recognition and head-mounted displays.

More competition and bigger challengers:One of the biggest changes to happen to the banking sector is the opening up of competition to some of the processes that were only ever available in-bank before. Take Transferwise, which can save you on the fee your bank would charge you for an international money transfer, as an example. It will be interesting to see how banking evolves in the future, and which institutions will be flexible and nimble enough to keep up with the demands of today’s society. What those demands will be and what banking will look like in five or ten years time is an exciting proposition.