Question

Identify a business which will benefit from IT Globally
Literature review of the business chosen
How this business was previously performed without the introduction of Information Technology?
Introduction
Globalization and the impact of Business IT have affected the world and why it is necessary.
Body
Identify or recommend opportunity and strategy in which IT implementation can be used to improve the chosen business
What are the advantages and disadvantages of introducing this implementation?
In comparison with the current market, explain why IT is necessary to keep up with the current competitors.
Case study or studies of proven concept which has utilized IT to improve its business values
Conclusion
Information Technology is now a necessary part of any business because of the global impact it can create….

Please include all references used in PDF files, without the pdf of references used, the assignment cannot be submitted

Method of referencing is in Harvard standard

Answer

Student’s Name:

Instructor’s Name:

Course Code and Name:

University:

Date Assignment is due:

Contents

Literature review of banking. 2

The necessity for IT-based banking in the era of globalization. 5

Banking before the introduction of Information Technology. 6

An opportunity and strategy for improving the banking sector through IT implementation. 10

Advantages and disadvantages of introducing this IT implementation. 11

Importance of IT in keeping up with the current competitors in the banking business: important case studies. 12

Conclusion. 15

References. 16

Literature review of banking

Information technology has led to the opening up of new products, new markets, new services and delivery channels that are more efficient for the operators in the banking business to operate. Today, many business services offered in the banking sector such as internet banking, electronic banking, and mobile banking are wholly provided on IT platforms. The information has taken a very stable position as the cornerstone of all reforms that are taking place in the financial sector. These reforms have been made so as to increase the speed and reliability of all financial operations with the aim of strengthening the sector.

ORDER SIMILAR PAPER NOW

The IT revolution in recent years has led to increased financial activity globally. Technological developments and the introduction of worldwide networks have reduced the costs of transactions.

Information technology continues to impact both the account and back-office elements in banking. This has translated into new delivery channels and large-scale usage of services that are targeted at the banks’ customers. Evidence of information technology being used in the banking sector is everywhere for everyone to see: Automatic Teller Machines, Mobile banking services, Net banking, among many others(Casolaro& Giorgio,2007).

The success of banking institutions and banks today is largely dependent on the use of various tools of technology. Unfortunately, many indigenous banks find it difficult to carry out an overhaul of their systems because of various reasons. One of these reasons is the inability to abandon legacy systems on which the banks’ visions are founded.

The deployment of IT has made it impossible for banks to manage any of their numerous IT implementations on a standalone basis. With the ongoing IT revolution, banks are becoming increasingly interconnected. This is because the computer systems possess interconnectivity not only across branches in a city or a country but also to any other geographical location through a high-speed network infrastructure. Additionally, local area networks are today is connected to the internet for purposes of operational efficiency and ease of management.

 Some of the most commonly available IT-based banking services today include bill payment, shopping, railway ticket booking, express delivery, card-to-card funds transfer, anywhere banking, normal delivery, e-Monies electronic funds transfer, phone banking, internet banking, funds transfer (eCheques), smart money order, credit card online, payment of taxes online and prepaid mobile recharge.

Singhal&Padhmanabhan (2008, p 105) set out to find out the factors that determine the perceptions of customers towards internet banking. They found out that the major factors responsible for shaping customer’s perceptions include ‘utility transaction’, ‘ticket booking’ ‘fund transfer’ ‘utility request’ and ‘security’. More than half of all the respondents surveyed agreed that internet banking remains a convenient and flexible banking option that has many transaction-related benefits (Singhal&Padhmanabhan 2008, p 105). Thus, the provision of internet banking is increasingly being viewed as a “need-to-have” as rather than a “nice to have” service (Davenport, 2008).

Broadie et al (2007, p. 5) predict that e-banking is bringing about a paradigm shift in various marketing practices in the business, leading to high performance in the entire banking industry. Delivery of services in banking can be efficiently provided only in cases where background operations are functioning efficiently. An electronic system provides an efficient background where operations are conducted in an integrated manner.

Through an electronic system, it is possible for the information to be shared among different banks. This is why it becomes possible for inter-bank money transfer services to be possible. Conversely, when financial market indicators affect one bank, it is possible for many other bank operators to react to this impact, thereby offsetting the existing balance in the market.

The various components of electronic banking that constitute elements of IT include computer hardware, software, data, network, and people (Geoffrion& Krishnan, 2001). Banking customers can only get satisfied if the system provides them with maximum comfort and convenience whey they are carrying out transactions with the bank. Internet-enabled electronic systems facilitate the task of achieving these results (Davern& Kauffman, 2000).

The necessity for IT-based banking in the era of globalization

An in-depth analysis of IT systems in the banking business is necessary in order for all stakeholders to understand the difference between banking in the traditional setting and in the modern era of globalization (McKenney& Copeland, 1995). In the age of globalization, the level of interaction between the service provider and the customer is instant, anytime and anywhere. Additionally, worth noting is the fact that today’s banking operations do not involve the transfer of physical currencies; instead, the information on the value of these currencies is the most important element.

In service businesses such as banks, the flow of information is more frequent than that of physical cash. In the commercial world, typically in today’s advanced societies, money is transferred more easily through information storage media such as credit cards, cheques as opposed to the cash form. Therefore, sound technological systems in banks become indispensable. Without proper data exchange systems, it is impossible to be able to offer revolutionary banking services that customers always want.

Christopher et al (2006, p. 364) note that e-banking has become a very important channel through which products and services are sold and are perceived to be an absolute necessity in order for profitability in the business to be maintained. Perceptions to the techno-based banking experience among both employees and customers are based on how the experience is interpreted. When the user’s experience is interpreted positively, then various stakeholders feel motivated to pursue more far-reaching IT changes in order for greater levels of efficiency to be achieved (Markus &Soh, 2006).

Banking before the introduction of Information Technology            During the 1950s, the entire banking sector was facing a paper-handling crisis. Nearly all banks were unable to stay on top of the increasing number of checks that were needed by customers. They were unable to retain enough staff to handle bookkeeping tasks. The Bank of America, which was then the largest bank in the world, requested Stanford Research Institute to embark on the task of developing an automated proofing and bookkeeping system. The need to do away with paperwork in the banking sector motivated many innovators to come with automated means of bookkeeping. Although efforts at automation made by banks (such as the Bank of America) led to the introduction of systems such as the Electronic Recording Machine (ERMA) and Magnetic Character Recognition (MICR), they were by no means a match to today’s IT-based banking systems (Fisher &Mckenney 1993, p. 45).

ORDER SIMILAR PAPER NOW

            Significant growth in the banking sector in the United States was recorded between 1943 and 1952, when the checks are written every year doubled from 4 billion to 8 billion. Bankers had projected that by 1955, there would be an increase in the number of checks drafted by 1 billion every year and that 14 billion checks would be written annually by 1960 (Fisher &Mckenney 1993, p. 47).

            The increase in checks being written resulted in two main problems in the banking industry: first, the banks were unable to retain bookkeeping staff, and two, the banks were unable to keep up with the increasing number of papers that had to be dealt with, thus they it was difficult to expand operations.

            The increase in the paperwork was due to the lengthy check-clearing process. About 28 million checks were written every business day throughout the 1950s, each of which had to go through at least two banks as part of the clearing process. Fisher &Mckenney(1993, p. 47) indicates that it took these checks at least two days to be processed.

            Before the onset of the IT era, bookkeeping was one of the tasks that made banking a very challenging career because almost everything was done manually (Liao & Shao, 1999). Some of the tasks that were done manually include sorting checks before posting the new balances into the account’s ledger.

            The timing was one of the most important tricks that customers and bankers alike had to master in order to succeed in the sector in terms of outcomes, performance, and efficiency. Every morning, banks had to receive the checks that had been processed by the Federal Reserve, which required to be debited from the account of the check writer. In the afternoon, banks exchanged all piles of checks with other banks, except the “on us” check piles, with other banks within the same city. In fact, most banks had to shut all their doors to the business every day at 3 pm in order to handle various bookkeeping proofing and bookkeeping needs.

            The developments that were being made in the banking sector prior to the introduction of information technology encountered similar problems to the ones being faced by internet-based banking initiatives (Sohal& Ng, 1998). For instance, during the 1950s, when the Bank of America embarked on the ERMA project in conjunction with the Stanford Research Institute, it was thought unwise to change the nature of the check owing to the emotional attachment that customers exhibited towards it.

            The elimination of tedious manual work through automation through the ERMA project would facilitate the attainment of appropriate time schedules, economic requirements, and growth potentials, which it eventually did. However, for long-term efficiency to be achieved, the automated equipment had to be such that both the initial cost of installation and operational cost were low. Additionally, it was important to take care of the cost of depreciation such that it was more cost-efficient than the methods that were currently in use.

            The issue of cost-efficiency remains an important consideration even in today’s era of technological innovations. Banks are not blindly embracing automation initiatives without carrying out efficiency checks. If they did that, this may jeopardize their level of profitability and overall performance.  Not all technologies that are available in today’s market are appropriate for operational efficiency and satisfaction among customers in the banking sector. Choosing the most efficient technologies from among a wide array of products demanded by customers is a daunting task today, just as it was fifty years ago.

            On the basis of discussions relating to operational efficiency, the Bank of America and the Stanford Research Institute embarked on the task of creating an automated system that would carry out five basic bookkeeping tasks: (a) maintaining a record of every transaction, (b) crediting and debiting all accounts, (c) retaining a constant record of all customers’ current balance for printing as needed, (d) responding to hold orders and stop-payment on checks, and (e) notifying the operator if any given check resulted in the account in question being overdrawn. The original design did not contain the feature for automatically sorting and proofing checks.

            In England, by 1950, little had changed in the banking sector since the development of Britain’s joint stick banks that had emerged in the mid-1800s. For bankers, the task of sifting through checks was a daily ritual. A banker had to practically thumb through each one of his customer’s checks that had been cleared and sent overnight by the postal service. Local bankers were so much used to the regular payments their customers made that they would note immediately in case there was an irregularity in payments of posting of checks.

            Although brand name banks with a national outlook have replaced hundreds of local ones throughout the 1950s and 1960s, nothing disturbed the utter single-minded localness of England’s banking system. The changes in the banking sector in England took the shape of upheavals that marked the disappearance of the localness of the banking sector as well as the local manager who had once stood on a social par with the solicitor, the doctor and even the vicar. As it were, there was little, if any, competition in the banking sector in the 1950s.

            Meanwhile, the majority of UK’s major High Street Banks began to embark on marketing initiatives during the late 1950s. These initiatives were in the form of personal loan adverts, followed by credit cards. The era of modern banking had set in. the Government White Paper on Competition on Credit Control ushered in competition on interest loans. At just about the same time, banks started investing heavily in computerization of their operations in an attempt to do away with the daily ritual of transferring parcels containing cleared checks by the head office. With computerization and internalization of the banking sector, a new era of banking that is supported by information technology systems had been heralded.

An opportunity and strategy for improving the banking sector through IT implementation

In a world where technological changes are taking place all the time, leaders in the banking business have an opportunity of choosing the best technologies while leaving out those technologies that do not add value to the existing level of financial performance. The best strategy for such an ambitious IT implementation is through carrying out an ambitious study of various IT systems in terms of applicability in the banking systems for proposes of solely adding value. Studies on the cost-effectiveness need to be conceived and embarked on within a short space of time or else, bankers may find themselves doing more technology research work than handling day-to-day banking activities.

Burucs (2009, p. 45) underscores the role of risk management in IT implementation in the banking sector. Knowledge on the security of various network-based banking systems is important. Whereas some emerging technologies are helpful to the customer, they may be vulnerable to hacking. Internet banking security remains an area of concern for many banking customers as well as service providers.

Burucs (2009, p. 47) reports that many midsize banks’ reporting and monitoring systems are not sufficiently developed because these basks do not have IT systems that have risk management support. The main reason for not adopting these systems, according to Bruce, is the inability to afford the most advanced and best-known international IT systems. Most banks in Russia tend to plan about instituting changes in risk management processes. These plans mainly take the form of credit scoring/rating systems, elaborate risk reporting, and exposure measurements and stress test models

Advantages and disadvantages of introducing this IT implementation

The most important benefit of introducing more cost-effective IT systems is the increase in efficiency and customer satisfaction. When customers are satisfied, banks get more revenue to roll out more services that customers need. Generally, banks stand to reap more benefits in the internationalized banking business through the implementation of more efficient IT systems (Bharadwaj, 2000). The banking sector is being integrated across the globe, such that it is possible to transfer money from one bank to the other, almost instantly, with minimal restrictions.

In a globalized world where information is exchanged more frequently than paper and coin money, any modern bank that fails to embrace modern information-based systems risks being pushed out of business. On the other hand, bankers who fail to study the current trends in implementation processes keenly enough to choose the best available technology risk being exposed to obsolescence and threats of internet insecurity.

The main disadvantage of an IT implementation of this nature is that customer acceptance may be a problem, especially in developing technologies where the level of IT penetration is still. In such societies, the percentage of the unbanked population still remains relatively high. This unbanked customer base may feel uncomfortable with new, seemingly complicated banking practices to which they have no emotional attachments. The same problems that were being experienced by the designers of an automated system at the Bank of America in the 1950s are being encountered today. The only difference is that in today’s scenario, IT systems have replaced the traditionally ineffective systems.

Competition is another key disadvantage of IT implementations. In large banking institutions, technological overhauls take time to implement, as opposed to small financial institutions. Additionally, the range of IT solutions available to investors continue to increase, smaller financial institutions are able to cut out a niche in the banking market, a situation that exponentially stiffens competition for customers.

Importance of IT in keeping up with the current competitors in the banking business: important case studies

In today’s banking sector IT plays a very important role of streamlining the channels through which information is exchanged. In order to remain competitive, banks have to seek information on various financial instruments that are necessary for keeping up with the current competition. Some of the most commonly exchanged information is about indicators of financial soundness; monetary statistics; general economic statistics; measures of financial sector strength and vulnerability; and statistical information for deposit and withdrawal trends by banks.

No bank can survive in today’s competitive environment without accessing minute-by-minute information on macroeconomic indicators. This is because the operation of any financial system depends on the general state of economic activities and financial institutions are always affected, in a significant way, by certain macroeconomic developments. Banks operators have an opportunity to access and use IT in order to tap and process financial information from a variety of sources. This information can be used to predict when there is a looming crisis.

Some of the useful macroeconomic indicators of a looming crisis include a balance of payment deterioration, falling growth rate, volatile exchange rates, high inflation, weak performance in various export sectors, without access to information to these indicators, it is impossible for a bank to fair well in terms of competitiveness, performance, and growth.

Today, banking service providers are competing in the provision of banking services through the use of the latest technologies. Financial institutions and banks have started recognizing that information technology is a critical tool of maintaining a better market infrastructure, sophisticated product development, and the development of the most reliable techniques for controlling risks. As competition in the sector continues to grow, customer aspirations are increasing; leading to awareness among banks on the role that information technology can play.

In India, for instance, foreign and private banks have entered the market, bringing with them state-of-the-art information technology (Lang & Colgate, 2006). This has forced the Indian banking fraternity to follow suit through the adoption of the latest information technology in order to counter the competitive threat and to meet customer expectations. The automation and implementation of information technology in the Indian banking industry have been supported by both market and regulatory forces.

Yes, Bank is one of the newest, state-of-the-art, IT-driven, Indian private banks. As the youngest bank in India, Yes Bank benefits through a lack of legacy systems. At the same time, the bank has been capitalizing on the experience of peers in the banking industry with regard to the adoption of international technology.

Yes, Bank has adopted a ‘knowledge-driven’ approach towards the provision of solutions that go beyond the historical realm of banking. The development research arms of the bank in coordination with the government advisory section have formed the Strategic Initiatives and Advisory Government (SIG) Group. Some of the areas of focus in Yes Bank include e-governance, financial inclusion, IT-enabled tourism, and efforts to reach out to the rural Indian community.

Most of the e-governance-linked initiatives require a banking interface that is very active in order to be cost-efficient and successful. It is only when these systems are completely IT-enabled that financial transactions can be undertaken effectively. Therefore, increased consumer access is necessary in order for all players in the sector to keep up with the increasing competition. Other electronic initiatives introduced at Yes Bank include online Forex Solutions, Auto Upload Facility (an automated bulk payment system), and Email Advice Master (an email-based billing system).

Yes, Bank also continues to ensure that these transactions are secure. A Unique Tracking Number is generated for every transaction made in order to ensure that it is possible to trace every transaction through the payment history. All transactions are facilitated through a closed user group. This eliminates risks of third party intervention. A straight-through process has been put in place in order to ensure that no manual intervention can be facilitated by the bank servers.

Conclusion

Information Technology is now a necessary part of any business because of the global impact it can create many opportunities for the development of new, more efficient tools of technology that accelerate the effectiveness of various business undertaking. The information shared through efficient IT systems, if used effectively, is a good source of business power. In the banking sector, this power manifests itself through a thorough understanding of market dynamics, thus enabling industry players to stay on top of the competition.

Today, new platforms for competition in the banking sector are being unveiled through information technology. These include e-­Business, e-­Procurement, e-­Agriculture, e-­Post, e-Tourism and many other e-systems that accelerate the pace of business undertakings both locally and internationally.

Today’s IT-based competition is characterized by various systematic changes, key among them being a switch from the exchange of physical cash and paperwork to that of information. However, indigenous banks are being held back by legacy systems, making it difficult for an overhaul of their systems to be carried out. At the same time, globalization has brought about many changes in the business environment, whereby banks have to embrace an international approach in the forecasting of financial markets in order to stay in business.

Therefore, all banking business players have no alternative but to embrace IT systems and the globalization forced of which they are an integral part. Fortunately, the existing IT systems can be used to derive new value systems that are adaptive to the prevailing competition. The case study of Yes Bank has demonstrated this very accurately.

References

Brodie, H. (2007). Is e-marketing Coming of Age? An Examination of the Penetration of e-marketing and Firm Performance. J. Innterac. Market, 21(2), 2-21

Bharadwaj, A.  (2000), A Resource-Based Perspective on Information Technology Capability and Firm Performance: An Empirical Investigation, MIS Quarterly, 24(1), 169-196.

Burucs, J. (2009) Improving Risk Management in the Russian Banking Sector, Eastern Europe and Central Asia: World Finance Review, 5(4), 44-60.

Casolaro, L. & Giorgio, G. (2007) Information Technology and Productivity Changes in the Banking Industry, Rome: Working Paper Series.

Christopher, G. Mike, C. Visit, L. & Amy, W. (2006). A Logit Analysis of Electronic Banking in New Zealand. International Journal of Bank Market, 24(3), 360-383.

Davenport, T. (2008) Process innovation: reengineering work through information technology, London: Ernst and Young.

Davern, M. & Kauffman, R. (2000) Discovering potential and realizing value from information technology investments, Journal of Management Information Systems, 16(4), 121 – 143  

Fisher, A. &Mckenney, J. (1993) The Development of the ERMA Banking System: Lessons from History, IEEE Annals of the history of Computing. 15(1), 41-57.

Geoffrion, A. & Krishnan, R. (2001), Prospects for Operations Research in the E-Business Era, Interfaces, 31(2), 6-36

Lang, B. & Colgate, M. (2006) Relationship quality, on-line banking and the information technology gap, International Journal of Bank Marketing, 21(1), 29 – 37

Liao, S. &Shao, Y. (1999) The adoption of virtual banking: an empirical study, International Journal of Information Management 19 (3) 63-74.

Markus, M. &Soh, C. (2006) Banking on information technology: converting IT spending into firm performance, Hershey, PA: IGI Publishing 

McKenney, J. Copeland, D. (1995) Waves of change: business evolution through information technology, Oxford: Oxford University Press.

Singhal, D. &Padhmanabhan, V. (2008) A Study on Customer Perception Towards Internet Banking: Identifying Major Contributing Factors, The Journal of Nepalese Business Studies, 5(1), 101-111.

Sohal, A. &Ng, S. (1998) The role and impact of information technology in Australian business, Journal of Information Technology, 13(3), 201 – 217.