The Effects of IT Expenditures
on Banks’ Business Performance: Using a Balanced Scorecard Approach
Information
Technology is a very important strategic
tool for banks in these days. And also banks are highly investing for
information technology. In the banking industry, many expenses are focused by
the services required by individual customers rather than by corporate
customers.
Therefore
most of the transactions processed for individual customers are routine, which
can be easily provided by on-line banking system.
IT
provides more timely and accurate information to improve management decisions.
IT
operations in the banking industry are various. IT operation such as ATM,
internet banking, and computerized bank functions allows banks to provide
financial services anytime and anywhere. This gives an easy access to their
customers.
The
use of IT also gives an opportunity for banks to innovate processes in
developing and distributing financial product as well as procedures in lending
and depositing. This strategic role of IT will contribute to the banks’
increased operational quality.
IT
operation helps banks to better serve their customers by supplying a
variability of financial services quickly as possible at the nearest location.
In this case,
§ The
effect of IT expenditures on increasing labor productivity is greater for high
IT level banks than low IT level banks
§ The
effect of IT expenditures on reducing administrative expenses is greater for high IT level banks than low
IT level banks
§ IT
utilization for high IT level banks has a greater positive impact on increasing
market share than one for low IT level banks.
§ Banks
that spend more on IT will have a greater positive impact on financial
performance than other banks.
Applying in to local
situation:
In
Sri Lanka most of government banks and commercial banks are highly investing
for Information Technology. Because of these days customer requirements based
on virtual aspects.
They
need more efficiency at on line banking. Time and the cost are most vital
indicators of their day to day life style.
Opportunities:
§ Increasing
productivity by investing for Information Technology in banks.
For an example: Electronic Funds
Transfer at Point of Sale is an on-line system that
allows customers to transfer
funds immediately from their bank accounts to
merchant accounts when making
purchases.
Increased banking productivity
results from customers shopping payment
requirements instead of clerical
duties in handling cheques and cash withdrawals for
shopping.
§ Improving
new customers for virtual banking systems by winning their trust for accuracy
of online banking systems.
The idea of Internet
banking is; "to give customers access to their bank accounts via a web
site and to enable them to ratify certain transactions on their account, given
compliance with stringent security checks"
Internet banking by its nature offers more
convenience and flexibility to customers
coupled with a virtually absolute control
over their banking. Service delivery is
informational and transactional
It is most cost-efficient technological
means of yielding higher productivity.
It eliminates the barriers of distance,
time and provides continual productivity for the
bank
to beyond belief distant customers.
§ Introducing
high technologies to the banking Industry.
Computers have been used in the banking
industry since 1980s. However, their impact was
limited because there were not enough
of them. As technology has already advanced,
it has become a major influence in the
banking industry.
This development has affected nearly
all aspects of the banking industry. The improvement in Information and
Communication Technology (ICT) has enhanced the creation of new business models
and has revolutionized the distribution channels of financial system resulting
in not only a reduction in the transaction costs but also has improved the
convenience and accessibility for the customer.
Challengers:
§ Security
level of transactions.
§ Speed
of transactions.
§ Privacy
of customer Information.
Conclusion:
The
effect of IT expenditures on increasing productivity is depending on IT level of
banks.
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