One of the biggest impacts of Information Technology on the banking system has been digitization which has made banking accessible right from the mobile phone of the user. There are other aspects too – telebanking, ATMs, e-payments, net banking, credit and debit cards, data warehousing, etc., are all the results of innovative technology. Beyond that, now the Metaverse is fast becoming a reality and it is good news for banks and financial institutions.
We’ll trace the history of the impact of IT on the Banking system and touch upon the latest in the fields.
The Early Years
India’s banking industry had its first brush with IT back in the 1980s. It was the Software Packages for Banking Application. This was when banks started computerizing their branches in small ways. Fast forward to the 1990s, Total Branch Automation Packages came into being. In this gamut, IT was responsible for creating an ecosystem where technology was used for day-to-day banking functions like money transfer, safeguarding customers’ money, draft issues, loans, investment opportunities, etc.
This was the era when banks used IT majorly for their back-office functions. But that was soon to change.
Internet and the new era
Information Technology has evolved phenomenally from those initial years to now. With the internet, smartphones, and now the metaverse, the entire landscape has been transformed.
It was natural for the banking industry too to embrace the novel innovations for enhanced value proposition. Thus, today’s banking systems no longer restrict the use of IT simply for running their back offices. Instead, sophisticated technology today is boosting the industry to integrate IT in every sphere of functioning to raise the value of the banking unit.
With the adoption of Information Technology, banks today can offer their customers sophisticated product choices, enhance their infrastructure and get control over risk management. They are also better able to access varied geographical regions and diversified marketplaces further making IT such an omnipresent aspect of the industry.
Some key IT-specific functionalities & products that are helping banks enhance their services include:
Impact of IT on the banking industry
1. For the Customer
Most importantly, the digitization of the banking sector has made things convenient for the customers adding to the feel-good factor.
2. For Banks
Overall, IT has helped banks remain consistently competitive, innovate, and take customer services to several notches higher. No doubt, banks are embracing relationship banking with more power and vigor now.
IT, however, has some negative aspects too. For example, banks need to heavily invest in IT infrastructure these days to ensure customer-centric services. Plus, globally, millions have lost their jobs or earning opportunities due to large-scale automation. The risk of data theft can also not be ignored.
Having said that, the potential of IT in this industry is huge. IT has played a major role in the evolution of the industry and it all started quite some time back. Like the banking industry is the backbone of a nation’s economy, information technology is the backbone of the industry. Invariably, the success of the banking system depends largely on adopting progressive technology.
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