The Impact of IT on Financial Services
Since the introduction of information technology to the financial services industry, the affects on the internal operations, the industry structure and the type of services on offer has been vast.
Technology has been a great catalyst and facilitator of change in the financial services industry over recent years and continues to be so. A significant change in the industries structure has been witnessed as companies not traditionally seen as financial service providers, take advantage of the new opportunities that have been created by the evolving technology on offer. This has allowed for new technology based services to emerge and has enabled new companies to enter the prestigious financial services market.
The changes observed have largely been as a result of the relationship of information technology with certain factors such as the overall economic picture, modern day living pressures and the legal and regulatory conditions in which the financial services industry operates.
Without the support of advanced information processing and telecommunication technologies we have today, the industry would not be able to provide the level of service it currently does. A staggering 37 billion credit checks and 3.5 billion credit card drafts are made annually every year using IT.
Despite all of the new sophisticated technology, the financial services industry has not yet exhausted all of the possibilities that these innovations have to offer. The internet for example, is viewed by some financial institutions as an alternative product delivery channel. For others it is seen as the primary delivery channel. The practice of transactions through the internet has seen financial institutions attracted to this method of business due to two main factors.
The first being the lower costs associated with transactions conducted electronically, as opposed to their branch networks. The second factor is the demographic of customers who will be interested in using the internet to access various financial services.
However, the internet has provided criminals an ideal opportunity to commit fraud and robbery of consumers account details. The Financial Services Authority (FSA) has responded to this to guarantee that customers are aware of the risks of internet transactions and that firms have in place sufficient systems and IT controls, to ensure their security precautions are user friendly in an environment of multiple passwords and PIN numbers.
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