Information technology (IT) refers to the study of using computer technology and telecommunications for data entry, manipulation and sending of information. The field’s work includes software development, network management, planning, software installation and administration. It requires that both hardware and software resources be maintained, monitored and replaced regularly. Data input, processing and storage have undergone several phases of development over the years namely: pre-mechanical, mechanical, electro-mechanical and electronic respectively (Chaouali et al, 2017).
A bank is an intermediary between money savers and borrowers as it is a financial institution that accept deposits from the general public, extends loans to them and offers other financial services such as issue of currency. Finance is the study of monetary resources and incorporates the process of identifying, controlling and managing those assets and the risks associated with them. Every economy needs a healthy financial system which has several parts such as financial instruments, institutions and markets, money, regulatory agencies, for example, Capital Market Authority (CMA) and the central bank. The study of banking and finance is crucial as it affects the personal wealth of business firms and individuals and enables them to understand how money and the monetary policy affect resource allocation and distribution.
This is a report about a private bank in form of a partnership called Wealthfront Bank, and the effects of IT in its operations. The bank provides all the regular financial services of a public bank but mostly deals with high income individuals.
IT is quite essential in this bank especially
in today’s world where relationship banking has replaced the traditional banking system. In the traditional banking system, the customer had to literally go to the bank’s branch for any services he or she required. The head office of the bank was responsible for activities such as major decision making and staff training. Wealthfront’s major goal is to increase profits while strengthening the relationship it has with its customers. To do this it requires IT which aids in increasing the quality of their services.
Comparative advantage:
To be able to grow in the changing business environment, Wealthfront is adopting the latest technologies in its operations. Customers are demanding new and more convenient systems of service and delivery making the bank to incorporate the internet and offer interactive links for updates. The business environment is highly competitive and therefore for Wealthfront to earn more customers and offer better services compared to the other banks it has to engage IT in its activities.
The bank uses IT to come up with more flexible structures that respond more quickly to the changing dynamics of the market. In addition to enabling the financial agents to reach more complex and diversified markets, IT also positively affects the delivery channels of the bank (Kumaraswamy, 2017). By just pressing a few keys, customers are able to assess their accounts, review their bank statements and even pay their bills via their phones or computers. This saves the bank a lot of time and efforts in having to deal with these customers one by one.
IT enhances the exchange of data between the bank’s employees and the customers. This is now faster, easier and more efficient by the day through the use of cell phones, electronic mails and networking websites. There are also interactive networking links where customers can check for updates from the bank and post their complaints and concerns, if any. IT has also provided for a convenient store of information which later acts as evidence for business transactions carried out.
The bank’s personnel provide guidance and advise to their customers irrespective of their location by use of communication tools enabled by the internet. Effective communication enables the bank to attract new customers as well as retain the existing ones, leading to business survival.
Installation:
The act of setting up a computer program and arranging the software for practical working is determined by several factors such as usability, performance, reliability and network security. The installing personnel must ensure that the program or programs has positive productivity effects, thus its benefits should override its cost.
This includes the cost of purchasing computer hardware and software equipment as well as that of obtaining and maintaining IT services. It also includes miscellaneous costs such as software licensing, depreciation, asset management and data center facility charges. This are involved in the bank’s calculation of profits to derive Return on Investments (ROI). This is an important factor for Wealthfront in regard to its objective of maximizing profits.
The users of the newly installed programs are trained on how best to operate them to decrease the chances of failure while minimizing the cost they incur. This training is an extra expense to the bank thus it is required to review its IT budget and resources before offering this. It is also important to find out what type of training will be most beneficial to the employees and the bank in totality, whether internal or external training. External training may be more expensive but has more advantages, for example, increased productivity by the trained employees (Malik et al, 2016). This cost category also includes other employee benefits such as insurance covers.
Electronic banking:
Wealthfront Bank has employed the use of mobile banking, telephone banking, internet banking, E-Cheques, Automated Teller Machines (ATM), Electronic Data Interchange (EDI), Electronic Funds Transfer (EFT) as well as debit and credit cards in its operations. This is all for the benefit of the customer through ease and flexibility in banking as opposed to a while ago when customers underwent huge amounts of paper work. This has also lowered the cost of banking for the customers as it is possible to withdraw cash from any ATM of the bank’s branches and also conduct online business transactions (Mattila, 2015). Customer can now do their banking when they want it and from wherever they are leading to customer satisfaction which is the utmost measure of success in banking and finance.
The bank uses IT for efficiency in data storage and retrieval. It is only displayed when required and only shown to the right people. Use of pass codes keep unauthorized people off this information thus they cannot easily harm the bank by its use. The data is also cross referenced before storage to avoid any privacy issues in the future. This is done for the comfort of customers who feel threatened about inadequacy of privacy in their account information, which they consider confidential.
IT brings about operational flexibility in Wealthfront enabling it to come up with more customized services thus increase in productivity. Customers get served easily and faster than before since most of the inquiries and commercial transactions are carried out online nowadays. In addition to encouraging innovation, taking advantage of the new technologies, involving and engaging the customer, training and including employees in decision making help develop flexibility in all activities as the core competency for the bank.
As mentioned earlier, Wealthfront Bank is a profit making financial institution. It focuses on making profits to pay interests, partners’ salaries, give out loans (most profitable asset of the bank) and also to fund its day to day activities. With IT, more efficiency is achieved in the bank’s operations, leading to generation of more revenue and profits.
The bank is introducing new ways of marketing by selling insurance and investment quotes to get a higher ROI. This is done by the use of mobile phones and interactive videos to personally reach every customer while still lowering delivering cost (Laeven et al, 2015). Watching the customers’ changing needs, tastes and preferences is very crucial to ensure that they are sufficiently provided for. Wealthfront Bank also carries out intensive advertisement about its activities to give a clear picture of what an asset it is to the public.
Risk of false identity:
Increase in the use of ATMs and e-banking has rendered some of the bank’s branches almost dormant. Customers check their accounts, bank statements and other information required online and therefore do not literally go to the bank branch for services (Singh et al, 2015). With this mass collaboration, all transactions take place instantly so it is impossible to determine whether the said customers or partners are real until a strong bond has been created or losses incurred.
Incorporation of IT in the bank subjects it to cybercrimes, cyber warfare and cyber espionage, such as hacking. This could lead to important information being altered or destroyed permanently leading to huge money losses. As the world advances technologically, the business become more susceptible to this risk and thus try to be always prepared and take full responsibility of the resulting damages. There could also be occurrence of the leakage of the customers’ confidential information (account information) which could portray the wrong image about the respective bank to the public. Damage of physical resources is also not an unheard of case regarding information technology (Gbangou et al, 2016).
To mitigate cyber risks, everyone involved in the business is encouraged to report to the securities when they spot anything suspicious happening within the bank’s premises. The authority involved then follow up on this without any hesitation to prevent a possible threat. Important data is also coded to keep it off breaching. In as much as this is not a sure method of ensuring security of the data, it is an important step to ensure that the information is not easily accessible to unauthorized parties.
Conclusion
IT is very essential for the growth and development of a business in the banking and finance sector. It greatly increases the rate at which transactions take place and enable customers to serve themselves via the internet other than having to go to the bank for various services.
Based on the aforementioned benefits of information technology in the banking industry, all banks should be ready to adopt the latest technologies and conduct massive research on better ways of offering services to their customers.
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