IT project for Banking and Finance

This paper seeks to chronicle the history of schooling 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 revaluation 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 handling Information Technology (IT), the history traces back to financial markets when the eelgrass was used to decrease stock wrong differentials in the midst of New York and regional stock markets. Information technology was later employed in 1866 with the transatlantic cable equally enabled great integrating of securities trading in New York and London (Btic-Lazy, timberland 2002).Further integration took place as the completion Of the tran satlantic cable reduced the time delay to execute a trade in New York, which had been initiated in London from six weeks to only unity day. These early innovations were come with by statistically significant evidence that the unveiling of primitive forms of telecommunication substantially educing or stock-st bronchitic eliminated foreign transfer and security price differentials between geographically distinct markets, (Btic-Lazy, 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 teleph wizard facilities also resulted in price related information comme il faut homogeneous by linking the head office with extinctgrowthes in different domestic and international locations or by providing dealers and brinks with the same price information in a timely manner. Second wave A number wave of Information Technology innovation in retail finance began n the late asses with th e introduction of computers. This introduction allowed institutions to hap up with growth in business volume while, at the same time, go very item problems and automate existing practices of specific departments.This resulted in the branch network quickly number into the main point of contact with retail customers. A process-directed automation thrust dominated the specific drill period and aimed at undercutting the terms of administrative tasks much(prenominal) as the labor-intensive cheese clearing dodgings. information processing system applications were therefore concentrated n back-office operations (Morris, 1986), this was because it was felt that controlling a growing mountain of paperwork provided the potency for economies of scale at that time.As the benefits previously mention became app atomic number 18nt 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 Barclay curse (ELK) introduced the first Automated Teller Machine (ATM) in the world (Barclay, 1982) while IBM introduced the magnetic stripe plastic cards in 1969. These two innovations marked the surrender of electronic banking.The chart of Figure IA on the following page shows this information. Use of Technology in the Organization, 1845-1995 (Figure IA) daze on the Provision of Retail Finance Early Adoption Specific Application Emergence (1846-1945) (1945-1968) (1968-1980) alteration in Reduction in Conversion from Growth of cross Service Offering inter-market price bank relationships. ATM introduced. Guaranty Automated bank statements. Operational border payment. Increased branch to Differentials. Cheese mechanization of branch Functional cards.Reduce cost of coordination labor intensive head clearing system). Branches accounting. Innovation office and between n activities (I. E. Real time control begins. (Sources Morris (1986) and Squints (1991)) In a nutshell, technological changes nonplus spread throughout many internal aspects of the banking organization. During this period the convergence of telecommunications and computer power resulted in confessedly Information Technology applications as the emphasis of technological innovations shifted from data processing to communications.The Evolution stage electronic banking is an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brick-and- mortar institution. This form of banking became popular in the early ass it was facilitated by banks notice their customers a floppy disk with softw ar that the customer could install onto their PC and accessing their accounts from the privacy of their homes. ( Canasta research on 07/02/2013). Initially this service was for a fee.Then in the mid ass a big dance occurred with banks setti ng up websites for consumers to access both product and contact information. deep down a few historic period after internet banking functionality was launched, this made the process of doing your banking online easy and accessible to everyone. This form Of banking has emerged as an option to customers and was offered by Caribbean banks as intimately. The major benefit according to one survey is an estimated cost providing that the routine business of a full service branch in the USA is $1. 7 per transaction, as compared to 54 cents for telephone banking, 27 cents for ATM (Automatic Teller Machine) banking and 1. 5 cents for Internet banking (Nathan 1999 Pun et al. , 2002). However it is unclear whether cost savings ill be the primary benefit derived from the adoption of e-banking systems, as any cost reductions achieved may not be a source of sustained competitive advantage for individual commercial banks.Cost savings using e-banking techniques are generally easily replicated by competitors. Secondly, cost savings are also accompanied by reduced entry barriers or increased market transparency leading to a further intensification of competition, ( Belgrade, Paris and ward, 2005 bring up technological changes in retail finance Year Name Characteristics Contribution 1979-1985 Telephone Branches retail Multi-channel dispersal systemBanking UK, US intermediaries for banks base on an integrated customer account and information system ( Figure B) 1988-1996 Monde card (I-j) Debit card with re-writable Facilitate small value retail transactions micro chip with the capableness to substitute central bank issued notes and coins 1989-1998 Digit cash (ML) Electronic only medium of Payment system and products that depend exchange and unit of account exclusively on only high-speed communication through with(p) through computers 1995-2001 Security First First intermediary working Technologies open new opportunities for Network Bank (US) through the internet. Ink growth and offer managers of banks possibilities to achieve high organizational flexibility Source (Btic-Lazy, Wood 2002) The Barbados Experience Improvements In Barbados all banking institutions and major credit unions offer the most basic forms of e-banking. There is a well connected network of automatic teller machines (Atoms), telephone banking, debit cards, and electronic funds transfers (OFT). The mass of the ATM use in Barbados came about as a cost savings measure. Consequently, ATM banking has induce the most popular form of electronic banking in Barbados, with even few non-bank entities costing similar services.However, the offset to the next level of e- banking, Internet banking has been sluggish. According to ( Belgrade, Paris and Ward, 2005 ) the lack of advancement is for a number of reasons, one most obvious is a divide between customers who wish to use the technology and those who simply pick traditional banking methods. However the increase in efficient by Automated T eller Machines can been seen in the graph below figure B Observation of Traditional and ATM banking A Busy twenty-four hour period (No. F Customers per 30 Minute Intervals) Bank I 8 36 ATM I 10 90 15 Source pa iris (2001 ) Traditional (Teller) A 5 c Within the back office operations of the institutions they have been major improvements across the banking sector, with the use (ARTS) Real Time everlasting(a) Settlement and, (ACH) Automatic Clearing House with increase capacity to process transactions. With regards to information systems Finance center banking system is one of the information systems use as a customer management information system.The use of this system has allowed institutions to capture customer information which can then be used for the modeling of products to specific target markets base on the habits of the institutions clientele and overall profile. In accordance with the know-your- customer guild lines some Transactions Processing Systems such as Finance are even able to go a step further and record personal life events such as weddings, anniversaries and future plans of younger children and early(a) personal information. Which all assist in the construction of products and services that pass on meet customers needs at every stage of their life.Hence the (T AS) is used as a strategic management information system in some institutions. In addition to cost savings and increase capacity (IT) has brought about payment innovations such as Sure-pay in Barbados. Sure-pay is a payment undying service that allows customers to pay an array of their bills in one location. The company Sure-Pay began its service just offering basic utility payments, and eventually evolve into a well recognize efficient entity which at one time even offered a payment service for tickets for spring airline Red Jet and has now expanded to Trinidad & Tobago.Risk The issue of capital flight and money launder are real concerns that will surface with Internet-Banking, also the ability and cost of regulating this form of banking. This is curiously so in an small open economy with a fixed exchange rate such as Barbados. For example if capital is allowed to leave at an rapid unregulated rate this could place pull on the central banks reserves which can have a negative effect on the exchange rate and cause the parity of the dollar to be threatened, especially in cases where settlement of the transaction will be require in foreign currency.With respect to money laundering if we look at Internet-Banking it is uncomparable because it offers the user anonymity, rapid transactions speed and wide geographic availability. For those reasons the issue of depositing and withdrawing money in and out of the system is extremely important because t is easy for layering to occur. Encryption technology, fire walls and the use of digital signatures are extremely vital verification tools and should be standard operating procedure with this evolving technology.An ad ded defense in breaches or affiliated criminal activities is that banks should adhere to the commonly cited know-your-customer guidelines. If properly implemented, within an effective operational and regulatory framework, such guidelines should prove pivotal in preventing these kinds of crimes. Future expectations The future of Information Technology and the financial service assiduity will only be limited by the imagination of those who use the technology, or the regulators who need to keep abreast of how new technologies will permit circumvention of the law.