IT project for Banking and Finance

This paper seeks to chronicle the history of in con skeletonationation technology in finance from its infancy to the modern era with special attention drive on the Caribbean experience. The paper therefore presents a summary of major(ip) (IT-based) innovations and an analytic framework with which to Structure an historical review Of how tuition applied science innovations were select in the financial pulmonary tuberculosisfulnesss sector and their impact.The early history of Information technology glob totallyy firstborn wave From as early as 1846 the financial sector has been using Information Technology (IT), the history traces hazard to financial markets when the eelgrass was theatrical roled to minify stock scathe differentials in the middlest of New York and regional stock markets. Information technology was later engaged in 1866 with the transatlantic c adequate to(p) equally enabled greater integration of securities art in New York and London (Btic-Lazy, Wood 2 002).Further integration took place as the completion Of the transatlantic cable reduced the beat delay to do a trade in New York, which had been initiated in London from cardinal weeks to only one day. These early innovations were accompanied by statistically satisfying evidence that the introduction of primitive forms of telecommunication substantially educing or still eliminated foreign exchange and security price differentials between geographically distinct markets, (Btic-Lazy, Wood 2002). Hence at that time randomness technology reduced bear on rate risk and operational risk for the institutions.In addendum greater use of telegraph or telephone facilities also resulted in price link information becoming homogeneous by linking the top dog stake with classes 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 fi nance began n the late asses with the introduction of estimators. This introduction allowed institutions to keep up with growth in business volume while, at the same time, crop 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 result and aimed at undercutting the cost of administrative tasks much(prenominal)(prenominal) as the labor-intensive cheeseflower clearing system of ruless. Computer applications were therefore concentrated n back-office operations (Morris, 1986), this was because it was mat up 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 singular branch bank level and to improve market- big processes became greater. Tec hnology further helped true banks and took on the challenge of reducing cost and expanding their level of customer service and efficiency. In 1967 Barclay blaspheme (ELK) introduced the first automatize Teller Machine ( automatic teller machine) in the world (Barclay, 1982) while IBM introduced the magnetic stripe plastic cards in 1969. These two innovations marked the birth 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) Impact on the Provision of Retail Finance Early Adoption Specific coating Emergence (1846-1945) (1945-1968) (1968-1980) Innovation in Reduction in Conversion from suppuration of cross Service Offering inter-market price bank relationships. ATM introduced. warranty Automated bank statements. Operational border indemnifyment. Increased branch to Differentials. discontinue Automation 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 use up spread throughout many internal aspects of the banking organization. During this period the convergence of telecommunications and computer power resulted in true Information Technology applications as the violence of technological innovations shifted from data processing to communications.The Evolution stage Electronic banking is an comprehensive term for the process by which a customer may do banking transactions electronically without visiting a brick-and- mortar institution. This form of banking became normal in the early ass it was facilitated by banks mailing their customers a floppy disk disk with software that the customer could install onto their PC and regaining their accounts from the privacy of their homes. ( basket rummy Research on 07/02/2013). Initially this serv ice was for a fee.Then in the mid ass a big leap occurred with banks setting up websites for consumers to access both product and contact information. Within a few age 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 sanitary. The major benefit match to one survey is an estimated cost providing that the routine business of a secure 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 wordplay et al. , 2002). However it is unclear whether cost savings ill be the primary coil benefit derived from the adoption of e-banking systems, as any cost reductions achieved may non be a source of sustained competitive advantage for person commercial banks.Cost saving s 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 Key technological changes in retail finance Year Name Characteristics Contribution 1979-1985 Telephone Branches retail Multi-channel distribution systemBanking UK, US intermediaries for banks base on an integrated customer account and information system ( Figure B) 1988-1996 Monde Cards (I-j) Debit card with re-writable Facilitate small repute retail transactions micro chip with the potential to substitute telephone exchange bank issued notes and coins 1989-1998 Digit cash (ML) Electronic only medium of stipend system and products that depend exchange and unit of account exclusively on only high-speed communication done through computers 1995-2001 Security First First intermediary working Technologies open new opportun ities for Network Bank (US) through the internet. Ink growth and offer managers of banks possibilities to achieve high organisational 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 majority of the ATM use in Barbados came about as a cost savings measure. Consequently, ATM banking has become the most universal form of electronic banking in Barbados, with even some non-bank entities costing alike services.However, the graduation to the next level of e- banking, Internet banking has been sluggish. According to ( Belgrade, Paris and Ward, 2005 ) the deficiency 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 cull tra ditional banking methods. However the increase in efficient by Automated Teller Machines can been seen in the graph below figure B Observation of Traditional and ATM banking A Busy Day (No. F Customers per 30 Minute Intervals) Bank I 8 36 ATM I 10 90 15 Source pa fleur-de-lys (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 age Gross Settlement and, (ACH) Automatic Clearing House with increase cogency to process transactions. With regards to information systems Finance Core 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 stage business and overall profile. In accordance with the know-your- customer guild lines so me proceedings Processing Systems such as Finance are even able to go a step further and record personal purport events such as weddings, anniversaries and future plans of younger children and other personal information. Which all assist in the construction of products and services that will 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 defrayal 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 crack basic utility payments, and eventually evolve into a well blob efficient entity which at one time even offered a payment service for tickets for former airline Red Jet and has now expand to Trinidad & Tobago.Risk The issue of swell flight and money laundering are accepted concerns that will surface with Internet-Banking, also the ability and cost of regulating this form of banking. This is especially 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 drag on the central banks reserves which can have a cast out effect on the exchange rate and cause the parity of the sawhorse to be threatened, especially in cases where settlement of the transaction will be require in foreign currency.With respect to money laundering if we cheek at Internet-Banking it is unique 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 highly 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 direct procedure with this evolving technology.An added defense in breaches or affiliated criminal activities is that banks should stick around 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 industry will only be modified by the imagination of those who use the technology, or the regulators who need to keep up on(predicate) of how new technologies will permit circumvention of the law.