Importance of Information Technology in Banking

Topics: Bank, Internet, Online banking Pages: 7 (2046 words) Published: April 4, 2013
Today’s business environment is very dynamic and undergoes rapid changes as a result of technological innovation, increased awareness and demands from customers. Business organisations, especially the banking industry of the 21st century operates in a complex and competitive environment characterized by these changing conditions and highly unpredictable economic climate. Information and Communication Technology (ICT) is at the centre of this global change curve. Laudon and Laudon, (1991) contend that managers cannot ignore Information Systems because they play a critical role in contemporary organisation. They point out that the entire cash flow of most fortune 500 companies is linked to Information System.

The application of information and communication technology concepts, techniques, policies and implementation strategies to banking services has become a subject of fundamental importance and concerns to all banks and indeed a prerequisite for local and global competitiveness. ICT directly affects how managers decide, how they plan and what products and services are offered in the banking industry. It has continued to change the way banks and their corporate relationships are organized worldwide and the variety of innovative devices available to enhance the speed and quality of service delivery. Harold and Jeff (1995) contend that financial service providers should modify their traditional operating practices to remain viable in the 1990s and the decades that follow. They claim that the most significant shortcoming in the banking industry today is a wide spread failure on the part of senior management in banks to grasp the importance of technology and incorporate it into their strategic plans accordingly. Woherem (2000) claimed that only banks that overhaul the whole of their payment and delivery systems and apply ICT to their operations are likely to survive and prosper in the new millennium. He advises banks to re-examine their service and delivery systems in order to properly position them within the framework of the dictates of the dynamism of information and communication technology. Indian Banking sector has seen tremendous increase in advancements in Information and Communication Technology in the past decade. The quest for survival, global relevance, maintenance of existing market share and sustainable development has made exploitation of the many advantages of ICT through the use of automated devices imperative in the industry.

Information Technology (I.T.) has been defined as the usage of computers , digital technology in various fields of production and service.Here in the banking sector it is used in concepts like Internet Banking , Automated Teller Machine (A.T.M) and Debit & Credit card, etc. It is a general term used for utilising of electronic technology for business information processes at all levels. List of some of the processes of banking revolutionised by I.T. and Telecommunication technology are account opening, customer account mandate, and transaction processing and recording. Information and Communication Technology has provided self-service facilities (automated customer service machines) from where prospective customers can complete their account opening documents direct online. It assists customers to validate their account numbers and receive instruction on when and how to receive their chequebooks, credit and debit cards.

Communication Technology deals with the Physical devices and software that link various computer hardware components and transfer data from one physical location to another.
ICT products in use in the banking industry include Automated Teller Machine, Smart Cards, Telephone Banking, MICR, Electronic Funds Transfer, Electronic Data Interchange, Electronic Home and Office Banking. Several authors have conducted investigation on the impact of ICT on the banking sector of the Indian economy.

Some of the advancements made by ICT in the Banking sector are as...
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