Impact of Technology on Banking Industry
The developments in information collection, storage, processing and transmission and distribution technology have influenced all aspects of banking activity. And was regard as the main driving forces for the changes in banking industry. In my opinion, the technology influences the banking industry, mainly in the following six aspects:
1. Technology is influencing competition and the degree of contestability in banking.
Due to the development of technology, bank’s superiority in information is deteriorated. Entry barrier have been declining, new competitor have emerged. Some financial products and services have become more transparent and commodities, customer show willing to unbundled the demand for financial products and services, all these lead to a more competitive market environment. Due to lowered entry and exist and deconstruction, for some sub-financial markets, contestability in banking is also raised.
2. Technology influence Economy of scale:
Competitive pressure force banks to lower their cost. Bank seeks to get economy of scale in bank procession instead of being a big bank. Bank seeks to secure the optimal business structure, and secure the competitive imperative of economy of scale. There are other options to get economy of scale, including joint venture and confederation of financial firms. Small firms also can get economy of scale by outsourcing, i.e. buy in economy of scale.
3. Technology influence the economics of delivery
Technology has a major impact on the way banking and financial services are delivered. A wide range of alternative delivery mechanism becomes available, Internet, ATM… these Reduces the dependence on the branch network as a core delivery mechanism. With the development of technology, The financial systems are substantially over-supplied with delivery system through a duplication of net work, bank has to change their delivery strategy, rationalize their branch network strategy, and widen the range of delivery option.
4.
1. Technology is influencing competition and the degree of contestability in banking.
Due to the development of technology, bank’s superiority in information is deteriorated. Entry barrier have been declining, new competitor have emerged. Some financial products and services have become more transparent and commodities, customer show willing to unbundled the demand for financial products and services, all these lead to a more competitive market environment. Due to lowered entry and exist and deconstruction, for some sub-financial markets, contestability in banking is also raised.
2. Technology influence Economy of scale:
Competitive pressure force banks to lower their cost. Bank seeks to get economy of scale in bank procession instead of being a big bank. Bank seeks to secure the optimal business structure, and secure the competitive imperative of economy of scale. There are other options to get economy of scale, including joint venture and confederation of financial firms. Small firms also can get economy of scale by outsourcing, i.e. buy in economy of scale.
3. Technology influence the economics of delivery
Technology has a major impact on the way banking and financial services are delivered. A wide range of alternative delivery mechanism becomes available, Internet, ATM… these Reduces the dependence on the branch network as a core delivery mechanism. With the development of technology, The financial systems are substantially over-supplied with delivery system through a duplication of net work, bank has to change their delivery strategy, rationalize their branch network strategy, and widen the range of delivery option.
4.