IT project for Banking and Finance

Topics: Bank, Automated teller machine, Online banking Pages: 14 (2003 words) Published: February 3, 2015


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University of the West Indies
Cave Hill Barbados

Information Technology for Banking and Finance
FINA (2003)

Name Id Number
Kedar Gittens
Andre Headley
Nakita Hunte

The Impact of Information Technology
On The Finical Services Industry

Table of Contents

Introduction ……………………………………………………………………1

The early history of Information technology globally………………..2-6

The Barbados Experience……………………………………………..…7-9

Future expectations…………………………………………….………....10

References…………………………………………………………….…….11

Introduction

The effect of information technology on the financial services sector has been more than significant and some may even argue it has been responsible for the financials sectors coming of age. This paper seeks to chronicle the history of information technology in finance from its infancy to the modern era with special attention place on the Caribbean experience. The paper therefore presents a summary of major (IT-based) innovations and an analytical framework with which to structure an historical review of how Information Technology innovations were adopted in the financial services sector and their impact.

The early history of Information technology globally
First wave

From as early as 1846 the financial sector has been using Information Technology (IT), the history traces back to financial markets when the telegraph was used to reduced stock price differentials between New York and regional stock markets. Information technology was later employed in 1866 with the transatlantic cable equally enabled greater integration of securities trading in New York and London (Bátiz-Lazo, Wood 2002). Further integration took place as the completion of the transatlantic cable reduced the time delay to execute a trade in New York, which had been initiated in London from six weeks to only one day.

These early innovations were accompanied by statistically significant evidence that the introduction of primitive forms of telecommunication substantially reducing or even eliminated foreign exchange and security price differentials between geographically distinct markets, (Bátiz-Lazo, Wood 2002). Hence at that time information technology reduced interest rate risk and operational risk for the institutions. In addition greater use of telegraph or telephone facilities also resulted in price related information becoming homogeneous by linking the head office with branches in different domestic and international locations or by providing dealers and banks with the same price information in a timely manner. Second wave

A second wave of Information Technology innovation in retail finance began in the late 1950s with the introduction of computers. This introduction allowed institutions to keep up with growth in business volume while, at the same time, solve very specific problems and automate existing practices of specific departments. This resulted in the branch network quickly turning into the main point of contact with retail customers. A process-directed automation thrust dominated the specific application period and aimed at undercutting the cost of administrative tasks such as the labour-intensive cheque clearing systems. Computer applications were therefore concentrated on back-office operations (Morris, 1986), this was because it was felt that controlling a growing mountain of paperwork provided the potential for economies of scale at that time.

As the benefits previously mention became apparent the incentive to automate at the individual branch bank level and to improve market-wide processes became greater. Technology further helped developed banks and took on the challenge of reducing cost and expanding their level of customer service and efficiency. In 1967 Barclays Bank (UK) introduced the first Automated Teller Machine (ATM) in the world (Barclays, 1982) while IBM introduced...

References: 1 Bátiz-Lazo, Wood, (2001) Information technology innovations and commercial banking: a review and appraisal from an historical perspective.
2 Barclays (1982) Barclays: A Story of Money and Banking, London: Barclays Bank
3 Clarke, Danns T( 1970-1976) The evolution of the financial services in the Caribbean community
4 Clarke, Danns (1970-1996) The Financial Evolution Of The Caribbean Community
5 Morris, Timothy (1986) Innovations in Banking, London: Croom Helm.
6 Nathan, L. (1999). Www.your-community-bank.com: community banks are going online, Community and Banking, Federal Reserve Bank of Boston.
7 (Richard , Hussam and Fleming ) July 8th 2003 http://www.bankersonline.com/
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