Contents
No Topic Page No.
1 Introduction to Information Technology 1
2 Information Technology Supplements Business
Environment 2
3 Banking Sector 5
4 Insurance Sector 8
5 Stock Exchange 9
6 Corporate Sector 13
7 Use of Internet & Social Media in Financial Sector 15 8 Adapting to the New Regulatory Environment 16 9 The Positive Effects of Information Technology 18 10 The Negative Effects of Information Technology 19 11 Technology with a Purpose: The Next Generation Today 20
12 Conclusion 21
1
Introduction to Information Technology
Our society is being reshaped by rapid advances in Information Technology, computers, telecommunications networks and other digital systems. It has vastly increased our capacity to know, achieve and collaborate. These technologies allow people to transmit information quickly and widely, linking distant places and to create communities that just a decade ago were unimaginable.
It is difficult to appreciate how quickly Information Technology is evolving. Five decades ago ENIAC, one of the earliest computers, stood 10 feet tall and stretched 80 feet wide; while today, one can buy a musical greeting card with a silicon chip that is 100 times faster than ENIAC. This extraordinary pace of Information Technology evolution is bringing people and cultures together and creating new social dynamics in the process.
There is a long-standing trend in the computer industry in which the number of transistors that can be placed on an integrated circuit doubles every two years. This trend, which has continued for more than half a century, tells us that future advances in processing power and capacity will not be linear, but exponential. For the financial services industry, this translates into nearly limitless opportunities to put this emerging wealth of computing power to work.
The advancement of technology has had an enormous impact on the world. Communication technology in particular has drastically changed the way society operates. With new advances in communication being developed constantly, people are becoming more and more reliant on the benefits they provide. Communication technology has become significantly important in the realms of education, business, politics, interpersonal interactions and crisis responses.
2
Information Technology Supplements Business Environment
Technological advances in the past few decades have greatly increased the competitive nature of the economic business world. Companies have used software, computers and the Internet to transform their businesses from local places of business to national and global market competitors. Many companies have responded to these changes by automating their business processes and capturing industry-related information and using it to their advantage.
Technology has also forced businesses to remain flexible, adapting their operations to newer and better technological advances.
Better Reporting Functions
Companies that have multiple locations, whether nationally or globally, have used technology to implement better communication services and software modules that communicate to a home base via the Internet. This allows companies to penetrate new economic markets without sacrificing the needs of communication or financial and operational reporting. Additionally, companies can improve their management information system (MIS) to capture information for specific locations when making business decisions.
Financial reporting has also benefited greatly from technology; rather than sending external auditors to multiple locations, it is possible to create a centralized accounting office to record and report financial transactions. This improves financial reporting and lessens the expense related to external audits.
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Increased Employee Productivity
Computers and business software packages have exponentially increased employees' productivity by allowing them to provide data entry functions or review automated reports. Companies have automated several traditional manufacturing processes; instead of using manpower to manually create and assemble goods, machines and/or robots now complete these functions. While these improvements may increase capital expenditures, they lessen the impact of consistent labour expenses related to productions. Fewer employees are needed to monitor the machines and ensure they are working properly.
Other areas, such as customer service, accounting and administrative support, have also seen an increase in employee productivity. Employees now review and report electronically collected data to ensure they are accurate and timely, rather than manually gathering information.
Improved Business Mobility
Technology has also improved companies' sales and service departments by allowing employees to use personal electronic devices to create sales displays and transmit orders and customer information to the home office. These electronic devices shorten the lead time companies spend on receiving and delivering goods or services, creating an instant competitive advantage in the industry. Companies can also send sales representatives to multiple markets at the same time, allowing them to penetrate multiple markets with few overhead costs. Companies may allow their internal employees to work from home using a company Internet connection, reducing the fixed overhead expenses from a large corporate office.
Reduction in Storage Space
Prior to the advent of Information Technology, corporate had to invest in large storage spaces and lot of paper work was involved. Searching of old records was a nightmare. The present digital age allows us to store huge amounts of data / information on tiny storage devices with large capacities. The financial books for years can be stored in a small digital device.
4
Reduction in Communication Costs
The cost of communications which used to be very expensive has drastically reduced with today’s electronic devices and emails. Sharing of large amounts of information across the globe has been a boon with the internet and the world-wide-web.
Financial Data Analysis
Financial data analysis and generation of matrices have helped users and organisations perform their decision making activities more efficient and accurate.
Information has become more accessible, reachable, portable, and editable across mediums and devices and across users as well.
5
Banking Sector
Information and communication technology is playing a vital role across many industries and sectors, resulting in a positive impact on economic development cutting across the geographical barriers. It is important to note that the financial sector and more particularly banking industry was one of the very first to utilize information technology way back in the 1960s, and has thus the record of influencing the development process through the technology. The banking sector is an example in which information technology infrastructures have had implications on the economic development of many nations across jurisdictions. Studies show that information technology coupled with knowledge management hold much potential for propelling the development process.
Since the 1990s, the banking sector in India has seen greater emphasis being placed on technology and innovation. Banks began to use technology initially with a view to take care of their internal requirements pertaining to book keeping, balancing and for transactions processing; the all-pervasive face of Information Technology soon enabled banks to provide better quality of services at greater speed. Internet banking and mobile banking have made it possible for customers to access banking services literally and virtually from anywhere and anytime. The biggest barriers, time and distance, to access banking services were crossed by leveraging technology. The sector has also moved rapidly towards universal banking and electronic transactions, which changed the way banking is done, during the last decade or so.
Take the case of payment systems where technology has brought in a sea-change. Till 1990s, one could make payments in this country through two predominant means - cash and cheque.
Today, a tech-savvy customer is empowered to choose a desired service from slew of products- card payments, NEFT transfer, RTGS transfer, ECS/NECS payments, mobile payments etc. Further, after using any of these payment methods, the first instrument he turns to is his mobile phone for confirmatory messages, a feature unique to India. The most frictionless solution is not a smart phone but a collection of sensor networks that automatically identify the buyer, scan the items to be purchased, and process payments without human intervention. No lines, no taps, no swipes, no associates, no cash registers.
Just wireless sensors and networks that automatically process transactions, manage inventory, etc. Biometric factoring is not that far away, fingerprinting and retina scans.
Information technology has changed the way companies conduct business domestically and internationally. The banking and finance industry has made great strides in implementing current technology in their business operations. The banking industry has used business technology to create several new options for consumers, including online banking, instant access to retirement accounts, electronic application processes and electronic wire transfer capabilities.
IT can reduce banks’ operational costs For example, internet helps banks to conduct standardized, low value-added transactions (e.g. bill payments, balance inquiries, account transfer) through the online channel, while focusing their resources into specialized, high- value added transactions (e.g. small business lending, personal trust services, investment banking) through branches.
IT can facilitate transactions among customers within the same network (e.g. automated teller machines (ATMs) by banks)
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The Facts
Consumers typically prefer to do business with banks that offer a wide variety of services.
The ability to access their information quickly and securely through the Internet allows banks to increase their customer base, increasing overall profitability.
Considerations
Security is always a concern when individuals use the Internet to access personal information.
Banks must be able to use technology to protect consumers while allowing them virtual access to their information.
Benefits
Banks can improve the transaction time it takes to transfer money and move financial information between accounts or other banks using technology. This improvement allows banks to collect funds from consumers and businesses quicker, earning the bank higher interest rates on their funds.
Geography
Banks can operate multiple locations in several states or countries using business technology.
Information can be quickly transmitted to other branch locations regarding funds and financing paperwork, allowing managers to make better business decisions.
MICR Encoding
In 1952 the banking industry was drowning in paper and rapidly losing functionality. Forty- seven million accounts generated 8 billion checks that year. Each one was manually processed and physically touched 2.3 banks on average. The Technical Committee on Mechanization of Check Handling was formed by the American Bankers Association and charged with creating an automated system for processing checks. Their solution was to encode checks with magnetic ink in a language that could be read by machines, known as magnetic ink character recognition (MICR). Machine makers, the print industry and the Federal Reserve adopted the committee's solution, and it is has been in use for well over half a century.
The Asynchronous Transfer Mode (ATM)
The patent for asynchronous transfer mode (ATM) went to Docutel, for its Docuteller machine, first installed in Chemical Bank. The bank ran an ad saying, "On September 3, 1969, our branch will open its doors at 9:00 a.m. and we'll never close again!" Twenty-four hour banking was born on that September morning.
Automated Clearing House (ACH)
In 1970 the Federal Reserve acquired the necessary computer processors and established the Clearing House Interbank Payments System to process automated international banking transactions. The federal government and large businesses quickly saw the merit of the new technology. They negotiated agreements to use the equipment, facilities and staff of the
7 Federal Reserve to process high-volume recurring payments like Social Security checks and government payrolls. By 1978 a nationwide Automated Clearing House (ACH) network was in place and direct deposit payroll checks were rapidly becoming commonplace.
Online Banking
ACH capabilities, the emergence of strong security systems and the prevalence of home computers, combined with a busy society hungry for conveniences, created ideal circumstances for online banking to flourish. Banks began offering online banking in the 1990s, allowing customers to view their accounts in real time, pay bills without writing checks and schedule recurring transactions.
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Insurance Sector
The impact of Information Technology in Insurance business is being felt at an accelerating pace. In the initial years IT was used more to execute back office functions like maintenance of accounts, reconciling broker accounts, client processing etc. With the advent of "database concepts", these functions are better integrated in an administrative efficiency.
The real evolution is however emerged out of Internet boom. The Internet has provided brand new distribution channels to the Insurers. The technology has enabled the Insurer to innovate new products, provide better customer service and deeper and wider insurance coverage to them.
At present, Insurance companies are giving customers a distinct claim id – to track claims on- line, entertaining on-line enrolment, eligibility review, financial reporting, and billing and electronic fund transfer to its benefit clan customers. Also calculating the EMI’s amount &
related calculations are done online.
9
Stock Exchange
The National Stock Exchange (NSE) changed the way the Indian markets functioned, in the early nineties, by replacing floor based trading with nationwide screen based electronic trading, which took trading to the doorstep of the investor.
Information technology enhances investor growth. The Internet has created global availability of information. Although there are the ‘Have’s and the Have Not’s’ regarding technology and technical know-how, the Internet and the World Wide Web, the global open market and pop culture, and the Information Age economy is quickly spreading throughout the world. Also the financial statements for most corporations have been published for public use on the World Wide Web. The access of this public information makes it easier for more investors to have the information they need to make smart, well-educated decisions for investing. Since investors are able to be better educated about investing, more investors have entered the market. Participating in the market is not only easier, but also cheaper. Since the information is out there for everyone to see, more and more people are becoming their own investors, cutting out the middleman, which is the broker. Cutting out the middleman allows the investor to keep the percentage of money he used to pay the broker.
Key developments can be received through new communication networks. Through the Internet an investor can find large amounts of information on the Stock Market and many corporations. New technology also allows investors to be able to buy and sell stock and bonds on-line. The investor can maintain on-line brokerage accounts. An investor can do this either by keeping up with their accounts daily of by putting a low or high cap one each stock. An investor can also get information on particular stocks and the history of these stocks. In some cases an investor can receive on-line advice from a broker if they need help.
However, easy as it is for individual investors to get on-line and invest for themselves, there are negative aspects of the information technology age for investors. Distorted facts are possible with such a plethora of information. Investors looking for information may find the wrong information or information that has been cooked, changed, or distorted in the corporations’ favour. Also, the more information there is out there, the harder it is to find the information you need because you have to trudge through all the excessive information.
When a broker makes a decision to invest, the decision is based on many different things such as the buying and selling price for the past couple years, the stock’s beta, etc… With ease and inexpensive access brings unsophisticated investors. The unsophisticated investor thinks to themselves, “how hard could it be?” They do not know what they are doing and lose their money.
Investment professionals historically relied on the use of shouting and hand signals known as open outcry as a method for communicating buy and sell orders on stock and futures exchanges. The system is used at financial exchanges such as the Chicago Mercantile Exchange and the American Stock Exchange (AMEX). Using the system, traders typically make quick gestures across the trading floor to indicate a buy or sell order. A trader who holds his hands up with his palms facing in is gesturing that he would like to buy. When the trader’s palms are facing out, it indicates a desire to sell. The numbers one through five can be gestured on one hand with the fingers pointing directly upwards. For six through ten, the hand is held sideways, parallel to the ground. Counting starts from six when the hand is held in this way. To achieve blocks of ten, numbers are gestured from the forehead, while
10 repeatedly touching the forehead with a closed fist indicates blocks of hundreds and thousands. Signals can also be used to indicate months, specific trade option combinations and additional market information. Although rules vary significantly among exchanges, the purpose of the gestures remains the same.
Ever since the advent of Modern Portfolio Theory, asset managers have used computation and mathematics to model portfolio risk and return. Being able to effectively quantify portfolios and markets has allowed managers to address the daily challenges of money management with objective information and analysis, both of which have steadily increased in volume, quality and granularity with the advance of computing power. While the application of technology to portfolio management and asset allocation has helped drive the greatest accumulation of investment assets in history, it has also had unintended consequences, effectively creating a kind of self-perpetuating technological arms race that has been blamed for exacerbating the financial crisis.
In quantitative finance, back-testing refers to the use of historical data to simulate outcomes of a hypothetical investment strategy. For example, a researcher who wants to test the efficacy of a particular rebalancing rule could evaluate how it would have performed over any given time period and set of assets for which he or she has data. While the adage “past performance is no guarantee of future results” is especially applicable to back tests, they do provide insight into the relative merits of alternative strategies and are a key component of the quantitative research toolkit. The modelling of entire markets in this way would not be possible without high-performance computers that can accommodate massive volumes of transaction and pricing data. As every new threshold of quantitative analysis is reached, investors raise the bar and develop expectations of market insight that is both broader, accommodating more investment scenarios, and deeper, with more precise factual information about investor behaviour and its impact on securities prices. These expectations also extend to associated derivatives markets, in which data volumes are substantially larger and perhaps more indicative of investor sentiment and trends.
As the global pool of investments under management continues to expand, and as the proportion of these assets that move across borders increases, asset owners and managers must cast an ever wider net, incorporating into their strategies more markets, assets classes and securities types. It is a truism of risk management that investors cannot manage what they can’t measure. And measurement of globally distributed portfolios demands ever-larger models composed of ever-more numerous and varied securities.
While this challenge may be daunting, it cannot be ignored because all market participants, dealers, buyers and electronic markets are similarly committing to the new technologies that define markets. Asset owners and managers have little choice but to continue investing in Information Technology systems and raw computational power for building intelligent, networked models that seek to map risk and dynamically evolve both in service to alpha acquisition and to enhance risk management.
But technology alone cannot resolve critical investment challenges. A state-of-the-art operating room and arrays of diagnostic technology, by themselves, do not necessarily foretell a successful medical procedure any more than super-computer databases and networked workstations alone can manage a globally allocated investment portfolio. The human factor experienced financial practitioners expert in both the theory and application of financial practice is an important determinant of successful financial outcomes. In the
11 complex partnership between expertise and technology, the arms race of ever-more powerful systems engaging ever larger and more complex markets shows few signs of abating.
Technology has dramatically advanced the trading of financial instruments over the past two decades. In that time, the practice of “open outcry” trading has been replaced by electronic trading platforms for equity, bond and currency markets, among other areas. This shift has fundamentally changed the way these markets behave and has led to higher trading volumes.
Technology is the best tool for adapting to new regulatory conventions. To ensure compliance with new rules, derivatives market players will need to take a hard look at current technology platforms and retrofit them to the new market realities. The bar is much higher than it was before and demonstrating regulatory compliance will be challenging.
Regulatory reform is an expanding and changing variable around the world. Perhaps the biggest challenge is the uncertainty about the shape of future regulations. Yet, while no one knows exactly how far regulators will go, new rules stand to make the markets a better, safer place for everyone.
Technology is the only solution to effectively meet the challenges inherent in new trading regulations. It has already turbo-charged the process of switching from a relationship model to the tried-and-true Chicago market model — a model that has ensured the safety of customer risk positions and margin money over the past 100 years which will democratize the markets and level the playing field for all. Further, success in eliminating credit risk hinges on the ability to harness technology to assess and analyze valuations and risks in real time. To do this, market transparency through electronic execution platforms is required.
12 Technology is the great equalizer. When equally distributed, it trends toward transparency and open competition. Advancing and improving upon technology protects the best interests of the world’s economies and ultimately will help all market participants grow their businesses.
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Corporate Sector
Technology affects almost every aspect of our lives. Just look around you and you'll see how wired we are. Thanks to the Internet, virtually anything you desire can be delivered to your door in a matter of days. Technology and the advances in communication and information technology, has changed the face and the pace of business
The Internet enables airlines to provide online flight booking, banks to offer online account management and bill pay and allows any company to sell any product online. In general, the Internet has proven to be an inexpensive way to reach more customers. Nowadays, if you can't find a business online, or if it has an outdated, ugly Web site, it looks downright unprofessional.
The finance department in a corporation is in charge of taking accounting data and creating reports that the managers within the company, all the way up to the CEO, need for decision making purposes. Information Technology refers to the software tools and computer systems the company uses to automate these functions and organize the data flow to improve the management team's decision making capabilities.
Enterprise Resource Planning
Even very small companies use accounting software packages like Tally, that generate financial reports such as income statements and cash flow statements. This simple form of Information Technology allows a small business owner to save accounting time and have management reports available on timely basis. Today balance sheets and other financial records can easily be created and maintained and distributed online to stakeholders.
Mid size and larger companies use more sophisticated Information Technology systems called enterprise resource planning or ERP, which are groups of software modules that serve the needs of all functional areas of the company. As its name suggests, ERP helps the company plan the use of its resources, a process that the finance department oversees.
Faster Flow of Information
Information Technology systems allow a company to link up every department within the organization. Information generated by the manufacturing, marketing and finance divisions can be shared for example. This information is available real-time, meaning as soon as it is created on the system. Accessing it does not require a great deal of research or manual effort.
The time finance staff used to devote to "digging" for the numbers they needed can now be devoted to analyzing and interpreting the information -- finance's primary role in the organization.
Customized Reporting
The Information Technology systems used by the finance department have a report generating functionality that speeds up the process of producing management reports. The system provides a certain degree of customization -- the reports can be configured based on the specific needs of the management team. Automation of these reporting systems means that routinely generated reports, such as those produced at the end of each month, can be
14 created quickly. With many of the decisions management has to make, time is of the essence.
Information Technology systems address this need for rapid, customized reporting capability.
Collaboration
Many organizations take advantage of collaborative effort across departments, the concept of each department benefiting from other departments' expertise. The finance team acts as in- house consultants to other departments within the organization. When all departments use a centralized Information Technology system, it drops the barriers that formerly blocked the flow of information. The company now has a centralized database that all team members can access -- subject to certain security rules. In the case of a company with multiple offices or international divisions, this ability to access the same information from around the globe saves time and improves efficiency. If finance requires manufacturing cost data to create a report for an upcoming board meeting, operations personnel can quickly transmit the data in the format the finance department requires and understands.
Better Forecasting
Better forecasting means producing a forecast that is a more accurate prediction of what the company's financial results are likely to be. Finance staff members need access to in-depth information to create forecasting models that depict how the organization actually works.
Having access to information from all segments of the company makes accurate forecasting much easier. Finance has real information and does not have to rely on guesswork when creating assumptions for the forecast.
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Use of Internet & Social Media in Financial Sector
The open, public nature of the Internet threatens the closed information networks developed by the financial industry in the late 20th century. As a result of this conflict, banks are at the forefront of both information sharing and information security technology. Online commercial transactions began in 1995, and by 1998 the Internet was processing more than
$50 billion worth of transactions. In the 21st century, the annual worth of Internet transactions is higher and requires more networks, more computers and more security programs. Financial institutions cannot compete without a broad but secure information network, so information technology is essential to their success.
The information technology that runs social media on the Internet provides financial institutions with valuable information on their customers. By encouraging online communities associated with their products, finance companies not only acquire information but also encourage brand loyalty. For example, websites such as TradeKing allow online stock traders to discuss their picks and advise newcomers. Socially driven information technology allows finance companies to contact the younger demographics that will be their future customers.
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Adapting to the New Regulatory Environment
In the last few years, there have been new laws targeting financial services entities, making financial services the most highly regulated sector. More specifically, much of this legislation is concerned with the protection of non-public information (NPI) and personally identifiable information (PII). With major customer data breaches reported by the media on a daily basis, and with identity theft as the fastest growing financial crime, it is not surprising that regulators are focusing their attention on this growing issue. Even more legislation is on the horizon.
Non-Public Information (NPI) and Personally Identifiable Information (PII) Non-public information (NPI) is an encompassing term that refers to all information appearing on applications for obtaining financial services (credit card or loan applications), or on account histories (bank or credit card). It also includes the customer’s status with the organization: either a current or previous customer. NPI can include: names, addresses, telephone numbers, Social Security numbers, PINs, passwords, account numbers, salaries, medical information, and account balances. In general, NPI is broader than its counterpart, personally identifiable information (PII).
PII is typically regarded in the information security and privacy fields as any piece of information which can potentially be used to uniquely identify, contact, or locate a single person. PII can include: national identification numbers, street addresses, driver’s licenses, telephone numbers, IP addresses, email addresses, vehicle registrations, and ages.
While identity theft is the number one financial crime, the theft of intellectual corporate data is also on the rise. Laws are enacted specifically with a mandate to the financial services entities to protect customer personal information and to combat identity theft. In addition there are a number of data protection laws, which also apply to financial services organizations. The remaining laws relate to protecting intellectual corporate data and information assets, but the same security safeguards apply to all.
The Reserve Bank of India runs a Department of Information Technology (DIT), the primary function of which is Computerisation in RBI (Regional Offices and Central Office Departments), Design and development of projects for use of banks and financial institutions and Monitoring progress of technology in banks.
The Information Technology Act 2000 created legal procedures for electronic transactions and e-commerce. It addressed the following issues:
Legal Recognition of Electronic Documents
Legal Recognition of Digital Signatures
Offenses and Contraventions
Justice Dispensation Systems for Cybercrimes
The Amendments to the Act has provided additional focus on Information Security. It has added several new sections on offences including Cyber Terrorism and Data Protection. A set of Rules relating to Sensitive Personal Information and Reasonable Security Practices (mentioned in section 43A of the ITAA, 2008)
17 Some of the cyber law observers have criticized the amendments on the ground of lack of legal and procedural safeguards to prevent violation of civil liberties of Indians. There has also been appreciation about the amendments from many observers because it addresses the issue of Cyber Security.
It empowers the Government to intercept, monitor or decrypt any information generated, transmitted, received or stored in any computer resource, in the interest of the sovereignty or integrity of India or for investigation of any offence. They can also secure assistance from computer personnel in decrypting data under penalty of imprisonment.
This is widely criticized and has also led to numerous abuses reported by the press and even challenged in Lucknow and Chennai High Courts for its constitutional validity. The Bombay High Court has held that creating a website and storing false information on it can entail cyber crime.
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The Positive Effects of Information Technology
Technology has changed much of the world, but the effects are rarely more pronounced than in the area of business.
Businesses today use technology in almost every facet of operation. They communicate with advanced network systems; they analyze data and plot forecasts using complicated programs;
they utilize all types of digital media for marketing campaigns; and they streamline operations with new inventory and check-out systems.
Technology is not without its downsides, but business cannot deny the impact it has had on every level.
Speed
Technology allows businesses to do everything faster. Many processes that once required ledgers, check-books and journal notations have now moved onto computer systems. Logging in and out, updating inventory information and communicating can now happen much more swiftly. This allows businesses to react immediately to any changes.
As communication and information travels faster and faster, the world seems smaller and smaller, and this has large implications for the way we conduct business. Storing important in files on a computer rather than in drawers, for instance, has made information easily accessible. Using e-mail allows businesses to communicate and send these files quickly to remote locations outside of an office.
Accuracy
A properly designed computer program does not make any mistakes, and its computations (not its inputs) are free from human error. This means that a calculation done by a computer program (like Excel) will always be accurate and trustworthy. Finance Packages like Tally give you up-to-date tallied Balance Sheet at any point in time.
Unless the coding or the inputs are wrong, there is no chance a program can produce inaccurate data.
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The Negative Effects of Information Technology
Competition
Technology moves very quickly, constantly evolving and creating new devices and faster systems. Businesses note these changes and attempt to move with technology, adapting it to their present and future needs while also keeping a wary eye on the technology competitors are using.
The end result is an increase in the evolution of technology and its application to business, a process by which everyone benefits.
Expensive to buy Software Licenses & Out of life hardware no AMC within a short period of time. Training employees cost on new modules prove expensive.
Confusion
While technology is useful, its fast pace and complex systems can be confusing. If companies want to update their systems or change the type of technology they use, they have to retrain not only employees, but often customers. New employees must also be trained in using business systems, which can create confusion.
Distorted facts are possible with such a plethora of information. Investors looking for information may find the wrong information or information that has been cooked, changed, or distorted in the corporations’ favor. Also, the more information there is out there, the harder it is to find the information you need because you have to trudge through all the excessive information.
Customised financial software packages that generate various reports and financial ratios with in-depth analysis and jargon, can sometimes be quite confusing.
Availability
Technology is very available, meaning that it is easy for competitors of all sizes to use and learn. This makes it difficult for businesses to keep up with technological changes and vastly increases the number of competitors in their market as smaller business can use technology to offer value to a wider range of consumers.
Crime
Technology also increases the possibility of crime. A tech- savvy employee can embezzle funds and make it difficult for the company to trace. Hackers can access personal and financial data of customers who trust the company to keep their information safe. Businesses must spend time and money developing safeguards against these events.
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Technology with a Purpose: The Next Generation Today
Technology has long been an essential behind-the-scenes partner in the financial services industry, providing the innovative incremental advances necessary for the industry to upgrade and expand its services. Improvements in storage capacity and processing speed, for example, have had a profound impact on data management and transactional capabilities, with accompanying reductions in cost. Yet despite these and other advances, the industry has struggled to fully leverage the power and promise of technology, with market participants eager for solutions that are not only faster and cheaper, but that also offer greater security and efficiency.
With the critical technology and related business challenges facing the financial services industry, a solution is at hand for those able to meet it. The idea of a seamlessly integrated approach to processing, managing, delivering and correlating data has the potential to change not only the technology landscape but, more importantly, the business landscape as well.
Tools available today, coupled with emerging new business approaches geared to address current organizational challenges, can shift this idea from a future possibility to an actual solution for today. Third-party providers, with their experience, expertise and deep resources, can help realize the vision now. At the same time, although the stakes are high for providers, the opportunities are enormous. Firms that excel at execution in achieving optimal computing power and that have the capability to leverage it will be best-positioned to reap the benefits.
As technology innovation is increasingly viewed as a strategic imperative, rather than a support function, a game-changing chapter will begin to unfold across the financial services industry.
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Conclusion
The stage is set for an exciting era of innovation as increasingly powerful and sophisticated technology becomes intertwined in the DNA of the financial services industry. It is this continuing convergence of advanced business processes and technology that is steadily moving us closer to achieving the true, seamless integration of information, tools and front- office capabilities. This phenomenon has the potential for significant impact in the financial services industry. Not only will it help facilitate the full spectrum of risk and return management, but it promises to fundamentally change the way investment decisions are considered and made.
Indeed, we are nearing the day when this increasingly powerful technology, properly and efficiently deployed, will be able to provide institutional investors with an unprecedented level of awareness of their business environments, helping to better inform their decision- making processes and empower them to manage risks and optimize returns in ways simply not possible in the past.
The role of technology and innovation in the financial services industry is evolving more quickly and with greater potential impact than ever before. For service providers and the clients they serve, the potential benefits are numerous, and include the promises of more informed, holistic decision-making, more powerful predictive capabilities and enhanced risk and compliance frameworks in which to operate.
As our industry continues to embrace and incorporate these amazing technological advances, we are able to extract more intelligence and potential value from raw data today than ever before. This trend is certain to continue going forward. And, in addition to helping market participants to grow their respective businesses and portfolios, this evolution of technology in the financial services industry will help lead to increased transparency and openness, protecting the best interests of the respective market players, their clients and the economies from which they operate.
While there are clearly some compelling business advantages associated with this enhanced role of technology and innovation in the financial services industry, there are also a number of obligations. Going forward, industry participants will need to respond to the numerous challenges presented by the rapidly changing regulatory environment we’ve witnessed since the global financial crisis. The regulatory landscape continues to evolve and the number of parties interacting with one another continues to increase. All the while, providers are expected to react more quickly, continue to create new functions and features, and seamlessly integrate those new features with the rest of their service offerings.
To ensure ongoing compliance with this new and constantly evolving set of rules, providers will need to be able to quickly and efficiently retrofit their technology platforms to suit these newly introduced regulatory conventions. Coping with the challenges associated with a regulatory landscape in a state of constant flux will be a key challenge facing the financial services industry going forward, but it, too, is a challenge that can be overcome through the strategic application of technology.
As for the institutional investors themselves, they continue to clamour for newer, more complex and more flexible ways to manipulate, enrich, adapt and view their business data.
22 Portfolio managers who were once content to revisit risk models quarterly or monthly are now demanding access to information on a much more granular and timely basis. And now, the bar is being raised even higher, as institutions search for ways to use this data not only as a detailed reflection of the recent past, but also as a telltale window into the future. Realizing the benefits of private cloud computing will be critical going forward.
As we’ve seen, for the most part, the technology required to achieve these goals already exists. One of the primary challenges in implementing it, of course, is that many financial organizations are still reluctant to make the sizable and ongoing technology investments required to meet their increasingly complex business needs in this fast-changing business/technology paradigm.
Going forward, those organizations with the foresight to make wise, strategic investments in technology will lead the industry. Those organizations bold enough to embrace innovation and embed leading-edge technologies into every aspect of their operations will be well- positioned to thrive, while those that fail to capitalize on the opportunities presented by this new business/technology paradigm risk being left behind altogether.
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