Impact of ICT Development in the Banking Sector in Britain - Research Paper Example

RESEARCH PROPOSAL ON THE CONTRIBUTIONS OF ICT ON PRODUCTIVITY OF THE BANKING SECTOR: BRITAIN AS A CASE STUDY Customer Inserts Name Customer Inserts Tutor’s Name 10th May, 2012 Contents Contents 2 SECTION 1 3 Research Objectives 3 Specific objectives 3 SECTION TWO 4 2.1 Topic of Study 4 2.2 Research Scope 4 2.3 Background Information 4 2.4 Research Questions and Objectives 7 2.4.1 General Objective 8 2.4.2 Specific objectives 8 2.4.3 Research questions 8 2.4 Research Methodology 8 2.6 Literature Review 9 2.7 The Paper’s Working Plan 11 2.8 Conclusion 11 References 12 SECTION 1 Marketing Accounting and Finance Economics Human Resource Management Tourism Project Management Strategy Information Systems Management Science Research Objectives The researcher will be guided by the following objectives: General objective To determine the impact of ICT development in the banking sector in the Britain. Specific objectives i. To determine the extent in which ICT investment has improved productivity of the banking sector in Britain in the last decade ii. To analyse the trend of ICT investment on Britain’s banking sector over the last decade. iii. To analyse the level of investment with which the bank of England has made on ICT iv. To examine the increased productivity of Britain’s banking sector over the last decade, in particular the bank of England. SECTION TWO 2.1 Topic of Study The research shall investigate on the contribution of ICT on the productivity of the banking sector,over the last decade. We shall integrate both empirical and theoretical literature to establish whether the myth that increased adoption of information and Communication technology facilitates increase in output/revenue with imminence of reduced costs. 2.2 Research Scope Whereas the topic under consideration is the contribution of Information and Communication Technology on the financial service sector’s productivity, this paper will lay its emphasis on the banking sector of Britain and how technological upgrade has enabled it to enhance productivity. We shall take analyse data from some of the firms in this sector and consider the diversity of their products geared towards providing wholesome customer satisfaction and the efficiency with which they do this. An efficiency, which can only be measured by analysing marginal costs, revenue as well as the marginal increase in the proportion of its customers. 2.3 Background Information Present day’s business environment experiences unpredicted overhauls and dynamism as a result of technological changes and customizations of products due to increased clientele requirements and increased competition from the globalised system. The 21st Century operates in a web like atmosphere characterized by invention and discovery of new technology (Frenzel 1996, p. 20). Scott & Cecchini (2003, p. 74 ) define technology as the mode of doing things in a slightly different and improved way. This implies that new technology should yield an increase in output which is of higher quality and subsequently adds to the overall revenue gain. Due to this insight, technologically oriented firms, in this modern day, continously strive to better their systems management techniques and designs to ensure that they posses leadership in any of their products. Of great interest, was the vast investment in information and communication technology (ICT) which has been critical in formulation and implementation of firms’ business strategies, organisational structures and customer support services. Information and CommunicationTechnology is synonimous to the computerizing of key controls and processess and use of such systems in collaboration with other devices, such as those of communication, to effectively produce relevant information and run transactions ( Ovia 2005, p .8). ICT has by far extended its initial function of electronic data handling or that of support service. Its areas of use have spurred into the different lines of work and become infinite. Management should therefore not take lightly the spill over effects of a good ICT sytem. They are not only key in determining the eventual value of a busines but are also critical in the decision making process of the managers particularly on the nature and diversity of their products portfolio. Relevant ICT wedded with intelligent managers holds the key to push for economic growth and development of many economies. Moreover, large growth is witnessed when that marriage takes place in key economy changing sectors such as the financial sector. Musara and Fatoki (2010, p. 1815,) wrote that, over the last decade, the financial service sector has experienced major changes and revolution in terms of its information technology with the intention of upgrading service delivery to its customers. Technological innovations, such as the Automated Teller Machines, improved computer softwares and designs and the mobile phones are the ones that have been found to have a greatest impact. They form part of a greater range of innovations that have enhanced the banking sectors’ local and international competitiveness. Over the years, many banks have adamantly opted to adopting and improving their technological standards. They are heavily focussing on this strategy particularly with the view of electronic trading and banking (Akpan 2000, p. 266). Some of the other innovational changes with regard to ICT in the financial service sector include the use of Mobile Banking, initiation of the Electronic Funds Transfer and Electronic Data Network. Internet banking is also one of those visible innovation of the information technology which has the provided low cost banking and extensive financial networking that emphasised on globalisation of financial services. One is able to check on his account details or transact using his money such as buy things online very easily.Through incorporation of the internet banking, banks have also been to market their diversified products online through companys websites.( Woldie 2008, p. 39). The net banking have now transformed into a grand ICT behaviour as statistics have shown that daily banking activities are conducted online. There was however a reluctance of most of Europe, Britain in particular to adopt to net banking with regard to private and corporate clients fears basically due to the lack of complete confidence which necessitated strategies for behavioural change (Yang & Heshmati 2006, p. 46). In simple terms, this meant that with improved information technology there was ease in the mode of payments rather than the conventional mode of payment of using physical money such as cheques and cash and customers had to be made aware of this. Such steps have led to the adoption of a 24 hour banking service. Banks operations can now be described as technologically oriented with slight dependance on the human capital. This is despite, the rare occassions where network breaks down which make banks’ clients unable to access the service they are looking for (Osabuohien 2008, p. 69). These are however only slight hiccupps in comparison to the inconveniences that were being offered by the traditional banking sytem (Ovia 2005, p. 13). This is in support of a survey on ICT and Millenium deveopment goals which concluded that activity costs per client dropped as a result of implementation of ICT. This would have the effect of allowing lenders of funds to reach the vast population found in the informal sectors of the economy (World Bank 2003). ICT is thus revolutionising the financial providance sector and allowing for economic growth and development. It allows for the less fortunate in society to get access to financial services. Information with regard to the banks products is now effectively dispersed to the masses whom at one point, banks could not reach. Major fads in this sector have always been inclined to the renewal of processing capabilities and renewal of corporate affarirs management. Their major fear is by exclusively resorting to the e-banking system they will experience greater incidences of money laundering and corruption. There has therefore been notable focus in ensuring that careful security of data and resources kept by the modern ICT facilities (Tshinu & Botha 2008, p. 43). 2.4 Research Questions and Objectives The researcher will be guided by the following objectives: 2.4.1 General Objective i. To determine the impact of ICT development in the banking sector in the Britain. 2.4.2 Specific objectives i. To determine the extent in which ICT investment has improved productivity of the banking sector in Britain in the last decade ii. To analyse the trend of ICT investment on Britain’s banking sector over the last decade. iii. To analyse the level of investment with which the bank of England has made on ICT iv. To examine the increased productivity of Britain’s banking sector over the last decade, in particular the bank of England. 2.4.3 Research questions In supporting the researcher’s gathering of relevant data and information, the following questions were formulated. i. What contributions have the development of ICT had on Britain’s banking sector? ii. What has been the trend of ICT development in Britain over the last decade? iii. What is the degree of correlation between ICT development and increased productivity on Britain’s banking sector? 2.4 Research Methodology The topic under study posses two variables. The trends in ICT investment and the productivity of the banking sector in Britain. Productivity and ICT investment levels will basically contain empirical data which will, in major, be collected from secondary sources. This will include information from published statements, magazines, jounals and so on. In addition, primary sources will also be used and questionnaires are the best for this task. A comprehensive questionnaire will be designed which will entail structured and unstructured questions due to both the nature of data our data and also the design of our research. We will also require to conduct face to face interviews with participants in the banking sector in our area of study. This will aide in not only validating of our primary data but also in support of the quantitative data collected from secondary sources. There will therefore be need to schedule appointments and ask for permission from management of institutions concerned. Data review, interpretation and analysis will warrant the examining the collected data as to whether it conforms to the area and scope of study. We shall then try to analyse the data with mathematical and statistical formulaes such as those of correlation to infer the nature of relationship between the variables of study. In addition, other methods of analysis such as graphs, pictorials, percentages will be used to further analyse the data collected from the questionnaires. 2.6 Literature Review The banking fraternity was among the first financial service providers to take the bold steps of inaugurating information and communication technology in its processes. Such steps began, way back in the 1950s with the setting up of the first automated record keeping machine. Automation then became the new norm, with banks making emphasis on capital intensity rather than labour intensity. This, was from the evident practicality that these systems could handle the same book keeping functions that was initially handled by humans better. With subsequent creation and innovation in the infomation and communication technology, first, came the automated teller machines which is rumoured to have been first used in the United States of America in 1968. In functionality, it could only allow for cash withdrawals and not the extensive services that the modern day automated teller machines provide. However it played its objective of lowering the aggrgate cost, upgrade service provision and improved customer utillity. This is in contrast to the manual operation that required voluminous client transaction logbooks to be maintained, withdrawal of cash could only be done on the counter with bureacratic processes and long queues hindering banks’ efficiency and raising susceptability to errors (Ark et al 2002). The motivation for the present day investments is by the striking envy of the success in the growth of United States of America productivity that occurred in the late 1990s. This heightened growth was highly attributed to the increased use ICT equipment particularly in the financial industry (Rajput 2011, p. 24). There now seems general tendercy that a large proportion of the increase in gross revenue can be accounted for by huge increase in ICT equipment inventory (Pilat et al 2002). .However, at what cost does this increase inventory come? And if the policy were to be adopted, would it bring a similar increase in the productivity to other countries and in particular Britain? The total investment in ICT in the UK at the end of the last decade was similar to that of the United States being around 3 percent of the Gross Domestic product. The two countries investment merged in almost all aspects except with reference to telecommunications where there still remains a significant gap. This was thought to be the reason for the difference in productivity (Oulton 2001, p 17). In contrast, another survey by Eurostat indicated that 46 percent of banks in Britain offer payment services using the internet and 56 percent of them use them to provide financial services. However, what many financials have put in to the spot light is the issue of cost. Investment in the informational and communication technology has been deemed as a costly affair. (Forth, Mahony & O’Mahony 2002) 2.7 The Paper’s Working Plan TASKS TO BE DONE June-July 2012 Aug-Nov 2012 Dec 2012- March 2013 April-May 2013 June-July, 2013 Planning of the Research Collection of information Review, Interpretation and Analysis Conclusion & Presentation Presentation 2.8 Conclusion With contradicting data being scattered all over the globe, there can only be further investigation into the matter to clearly ascertain that whether a further investment in ICT would lead to an increase in productivity in the banking sector in the UK. Over the years many models have been introduced by various disciplines, in measuring the proportion of ICT responsible for the change in the dependent variable and have been used in various countries. The econometric studies for example, came up with a formulae that is more centered for short period analysis being based on the differentiation with respect to the independent variables. This however, is of more use to problems that deal with numericals that do not posses the attribute of a time factor (Venturini 2007, p27). He himself, opted for the use two designs of panel cointegration estimation, DSUR and PDOLS where the former is a time series equation the latter is dynamic design of the OLS analyser. References Akpan, P 2000, ‘Basic-needs to globalization: Are ICTs the missing link?’Journal of Information, Technology for Development, Vol. 10, no. 1, pp. 261–274. Ark B, Inklaar R & McGuckin, 2002, ‘Changing Gear: Productivity, ICT and Service Industries: Europe and the United States’. Groningen. University of Groningen. Forth, J, Mason G & O’Mahony M 2002, ‘Industrial Performance, ICT Investments and Workforce Skills: Literature and Statistical Review’. London: National Institute of Economic and Social Reseearch. Frenzel, C 1996, ‘Information Technology Management’. Cambridge: Thomson Publishing Company. Heshmati, A & Yang, W 2006, ‘Contribution of ICT to the Chineese Economic Growth’. Seoul: Seoul National University, pp. 38-72. Masara, A & Fatoki, O (2010), ‘ICT and Productivity of Industries’, African Journal of Business Management, Vol. 4, No. 9, pp. 1813-1821. Osabuhien, E 2008, ‘ICT and Nigerian Banks Reforms: Analysis Anticipated In Selected Banks’, Global Journal Of Business Research, Vol. 2, No.1, pp. 67-76. Oulton, N 2001, ‘ICT and Productivity Growth in the UK’, London: Bank of England, pp 5- 38. Ovia, J 2005, ‘Enhancing the Efficiency of the Payment System in Nigeria’, CBN Bullion, Vol. 29, No.1, pp.8-18. Pilat, D, Lee F & Ark B, 2002, ‘Production and use of ICT: A Sectoral Perspective on Productivity Growth in the OECD Area’. Groningen: University of Groningen. Rajput, N 2011, ‘Impact of IT on Indian Commercial Banking Industry: DEA Analysis’. Global Journal of Enterprise Information System, Vol. 3, No 2, pp17-31, Scott, C & Cecchini, S 2003, ‘Can Information and Communications Technology Applications Contribute to Poverty Reduction?: Lessons from Rural India’, London School of Economics and Political Science, Vol. 10, No. 4, pp 73-84. Tshinu, MS & Botha G, 2008, ‘An intergrated ICT Management Framework for Commercial Banking Organisations’, Interdisplinary Journal of Information, Knowledge and Management, Vol. 3,No.1, pp 39-53. Venturini, F 2007, ‘The Long Run Impact of ICT,’ Marche:Polytecnic University of Marche. Pp1-31. Woldie, A, Hinson R, Iddrissu H & Boateng R 2008, ‘Internet Banking’, An Initial look at Ghanian Bank Consumer Perceptions. Banks and Bank System, vol 3, No.3, pp 35-46, World Bank 2003, ‘ICT and MDGs: A World Bank Group perspective’. Washington D: World Bank. Read More