Impact of Information and Communication Technology in Banking Business

Table of Content

1. General Introduction Robust financial institutions provide an indispensable support to an economy. If the financial industry collapses, the whole economy is likely to collapse. This is evident from the current recession in the United Kingdom. In a bid to improve the activities of financial institutions, Information and Communication Technology (ICT) has been found instrumental and is adopted worldwide. ICT involves the use of electronic gadgets, especially computers and their peripherals, for storing, analyzing and distributing data.

In recent times, ICT is having a dramatic influence on almost all aspects of individual lives and that of the world. Technology has helped many business owners worldwide in running successful businesses. In the past decade, large volumes of paper were being used in offices. Data were collected and stored in loose hard copies filed away in cabinets or piled on office desks. This was quite cumbersome. With the advancement of business activities, a solution was developed to help many companies organize their work through ICT. Now, electronic storage and accessing of information is possible.

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Data retrieval is easier than it used to be before the advent of ICT. Electronically stored information is easily referred to when need arises. This has been advantageous to most businesses because of ease of comparison between current data and historical data in the processes of monitoring and evaluating individual business activities. Banks have adopted the new technology. Vast improvements seem to have been registered in bank service delivery. The inconvenience of queuing for bank services has been drastically reduced by the introduction of the auto-teller machines.

Simple bank account data, like account balances can be retrieved easily from an auto-teller. The painstaking exercise of filling withdrawal forms, upon which any mistake will warrant refilling the forms and queuing again, has been costing the client the precious and irreplaceable resource, the time. The client used to leave the bank frustrated despite the completed transaction . ICT has brought a difference in the life of both the banker and the client. Its application is felt in every area of human existence.

Therefore, its contribution to the world of commerce cannot be overemphasized (James Hall, 2012). Upon observing the apparent improvements in business activities in several organizations, the researcher was interested in investigating the actual impact of ICT in the banking business. 1. 1 Background of the study It seems ICT has influenced all aspects of banking activities. Information collection, storage, processing, transmission and distribution are all computer-based. There are widespread claims that ICT is the main driving force of the improvements in the banking industry.

With the introduction of mobile phones and internet, clients enjoy many time-, energy- and money-saving products like accessing bank account statements, effecting cash transfers, paying utility bills, salary processing and mobile banking, just to mention a few, while clients are distances away using their time, energy and money in other productive engagements. However, ICT may not be the only technology that has brought successes in the banking business. Other technical and logistical dimensions might have had a significant influence in the very survival and successful operations of the banks, (Shuangtia, 2008).

National Bank (NB) appears to be the leading bank in Malawi. It was established in 1971 as a result of a merger of Barclays Bank DCO (Dominion Colonial Overseas) and Standard Chartered Bank. The latter originated from the Republic of South Africa, and was widely established in Africa. Therefore, National Bank is a product of the experiences and expertise of Barclays Bank and Standard Chartered Bank. National Bank is reputed for its nationwide social services and rigorous and uncompromising recruitment exercise. Only well qualified and experienced candidates are considered for various positions in the bank.

New Building Society (NBS) Bank was formed following the amalgamation of Central Africa Building Society, Commonwealth Century Building Society and First Permanent Building Society. NBS Bank is known for its client consciousness, flexibility, product diversity and meticulous recruitment procedures that identify well trained, experienced and innovative characters like Mike Chibaka who developed the client-friendly Easy Mobile Facility. 1. 2 Problem statement In today’s business environment, most of the technologies used are developed by the generation x, who are said to be young, innovative and adaptive to changes.

Almost all the people in the age range of 18–40 years are already using the ICT and its related services and products that have been introduced in the banking systems. For example, while the generation x have quickly adopted the use of auto-teller Machines (ATM), Mo626 and Easy mobile, some individuals, mostly of the preceding generations, are so conservative that they are reluctant to use them. With this back ground, the researcher wishes to investigate and bring to light the significance, if any at all, of ICT in today’s complex business environment at National Bank and New Building Society in Lilongwe. 1. 3 Assumption of the study

This study assumes that ICT has a significant influence in banking business. All branches of National Bank of Malawi and New Building Society are using ICT. All clients are responding positively to the use of ICT. 1. 4 Significance of the study Due to the increasing need for robust financial institutions to support the world economies, banks have to continuously search for most appropriate means of service delivery. The results of this research work will be the means to that end. The results will also be an eye opener to clients on the significance of ICT and indeed any other advancement in bank service delivery.

These results might also trigger the need for a more vigorous civic education on new developments in bank service delivery to take care of all clients regardless of the possible generation gaps for the mutual benefit of both the banks and their clientele. 1. 5 The study structure This study will be presented in five chapters. Chapter (I) will provide the general introduction, the background to the study, statement of the problem, research questions, purpose of the study, significance of the study, hypotheses, assumption of the study.

Furthermore, this chapter will discuss limitations, delimitations, budget, feasibility and scope of the study. Finally, it will provide the definitions of key terms that will be used and also the ethical consideration of the study. Chapter (II) will discuss the literature related to the study. This chapter will act as the basis of the study because it will present results of other studies on the impact of ICT on banking business, thus giving the direction of the study. Chapter (III) will present research design and methods, analytical instruments, validity and reliability of the collected data.

Chapter (IV) will present qualitative and quantitative data, data analyses and interpretations. Finally, chapter (V) will deal with conclusions drawn from interpretations of analyzed data. Relevant recommendations will be put forward. The chapter will also present the need for further research should the investigation show any knowledge gap. 1. 6 Research question • What significant role has ICT played in the banks? • Of what significance has ICT been to the clientele? • What challenges have banks and the clientele faced with the introduction of ICT? • What are the ways of overcoming the challenges? . 7 Objectives of the study 1. 7. 1 Major objective The major objective of this study is to assess the impact of ICT in banking business. The investigator will look at the negative and positive impacts of ICT in today’s banking business environment at National bank and New Building Society Bank in Lilongwe. 1. 7. 2 Specific objectives • To assess the significance and effectiveness of the banking services provided.

• Analyzing the differences in and within the services provided and suggest, where necessary, alternative ways of conducting business to improve customer satisfaction and loyalty. Evaluating customer satisfaction levels consequent to the introduction of several ICT banking facilities like ATM. 1. 8 Hypothesis The following hypothetical statements will be tested • Null hypothesis: The advancement of ICT in banking activities has significant influence in the success of the banking business. • Alternative hypothesis: The advancement of ICT in banking activities does not have any significant influence in the success of the banking business 1. 9 Limitations of the study In conducting the study, the researcher predicts to encounter the following limiting challenges; . 9. 1: Time factor This study will be carried out over a period of six months. The researcher will also be occupied with course work during the same period. Therefore, the time may not be sufficient to collect as much of the required data as possible. 1. 9. 2: Lack of knowledge on the part of some respondents ICT in Malawi is quite young. The researcher predicts that some respondents will not be able to provide accurate information due to lack of adequate knowledge. 1. 9. 3: Reluctance on the part of some respondents

Some respondents will probably be reluctant to provide the researcher with the required information due to internal bank policy issues. 1. 10 Delimitations of the study All banks are thriving to civic educate the masses on the use and merits of ICT in banking activities. This study focuses on influence of ICT on banking activities. Therefore, there will be no conflict of interests. The researcher does not anticipate hideous behavior on the part of the respondents. 1. 11 Feasibility of the study The researcher is a resident of Lilongwe city.

Therefore, the data collection sites are within manageable distances. Furthermore, the researcher has better understanding of the topic under study from business management courses. The researcher has also extensively reviewed related literature on the topic before embarking on this research work. These factors coupled with the delimitations mentioned earlier, create enabling conditions for collection of reliable data that will yield meaningful information. 1. 12 Scope of the study 1. 12. 1: The study area This study will be conducted in Lilongwe, the capital city of Malawi.

Two banking institutions are purposefully chosen for the study. The banks are applying ICT in their operations. 1. 12. 2: Subject of the study. The study will assess the impact of ICT to the banking business. 1. 12. 3: The targeted group of respondents Since this research work will concentrate on ICT facilities like auto-teller machines, e-banking, easy-mobile and Mo626, target respondents will comprise program development managers, account relations managers, bank tellers and other relevant employees and the clientele. 1. 12. 4: key words

The bank Technology Products and services E-banking Auto-teller machine Mo626 Easy mobile 1. 11 Ethics The data collected from this study and the information that will be derived from those data will be used for academic purposes only. The researcher will ensure honesty, objectivity, confidentiality, openness, respect for intellectual property, integrity, and human subject protection throughout the research process and period. This will be done to promote moral and social values, human integrity and also maintain the aim of the research. . 12 Conclusion This chapter provides a general overview of the study. It has discussed the problem, significance, objectives, assumptions, limitations and delimitations of this Study. Furthermore, it has focused on defining the key words and terms that will be used in this study. Finally, it has discussed the ethical considerations of this study which will promote moral and social values of the financial institutions concerned while maintaining the desired quality of the research work. CHAPTER TWO 2. 0: Introduction

The business dictionary defines technology as the branch of knowledge that deals with the creation and use of technical means and their interrelation with life, society, and the environment. Technology is a broad concept that has come to refer to breakthroughs in science that allow for a better or automated solution. While the most obvious benefit to technology in small business is increased productivity, which translates into a lower cost structure , there are some other benefits that can help the bottom line as well.

Improved speed, the ease of sharing and storing information and a decrease in human error through automation add up to a reduction in costs and an increase in revenue. 2. 1 Theoretical framework Several people have done a research on the impact of technology in the banking business. Shirley J. Ho and Shushanta K . Malick ,(2007) ,did an investigation on the impact of technology in the bank with a belief in two ways thus reducing operational costs and facilitating transactions among customers on the same network .

It was concluded that the results are conditional, it depends on the IT expenditures and banks financial performance or market share upon the extent of network effect. Neeko cortwell ( 2009) suggested that Technology plays a vital role in business. Over the years businesses have become dependent on technology so much so that if we were to take away that technology virtually all business operations around the globe would come to a grinding halt. Almost all businesses and industries around the world are using computers ranging from the most basic to the most complex of operations .

In E-Banking,Mo626 and Eazy mobile, one is able to carry transactions with the aid of the network and internet on their mobile phones whilst they are home ,there is no need to travel to the bank and perform a cash transfer transaction. Crystal ,(2012), reports that Electronics and information technologies are rapidly changing the banking and financial services industry. Online banking and electronic payment systems are new and this allows customers to check their balance and update personal information, and the development and diffusion of these technologies by financial institutions is expected to result in a more efficient banking system.

This technology offers institutions an alternative and better delivery channels through which banking products and services can be provided to consumers. The decline in cost and increase in capacity of computers, as well as developments in communications technology, have altered not only the way information is transferred but also the cost of processing and storing information, Elizabeth Hardcastle,(2011). To bring services closer to a customer and to guarantee the opportunity to use them anytime a customer wants to, have been the most important targets in banking during the last twenty years.

The continuing development of more and more complicated back-office systems would not have been possible without information technology Technology solutions have paved a way to a new world of internet, business networking and e-banking, budding as a solution to reduce costs, change the sophisticated economic affairs to more easier, speedy, efficient, and time saving method of transactions. Internet has emerged as a blessing for the present pace of life but at the same time also resulted in various threats to the consumers and other institutions for hich it is proved to be most beneficial. Various criminals like hackers, crackers have been able to pave their way to interfere with the internet accounts through various techniques like hacking the Domain Name Server (DNS), Internet Provider’s (IP) address, spoofing, phishing, internet phishing. These have been successful in gaining “unauthorized access” to the user’s computer system and stolen useful data to gain huge profits from customer’s accounts.

The case in question is the introduction of e-commerce in the banking sector; a technology known as “E-Banking”. Elizabeth Hardcastle,(2011), defines a hacker as a computer expert who uses his knowledge to gain unauthorized access to the computer network. Crackers on other hand use the information cause disruption to the network for personal and political motives. The common types of attack by hackers are phishing or identity theft, spam scams ,spoofing and internet pharming.

Benson V. ,and Tribe K. (2008) recorded that phishing occurs when “fraudsters” gain access to personal details of unsuspecting victims through various electronic and non-electronic means. This information is then used to open accounts (usually credit card), or initialize loans and mobile phone accounts or anything else involving a line of credit. Spam scams involve fraudsters sending spam e-mails informing customers of some seemingly legitimate reason to login to their accounts.

A link is provided in the e-mail to take the user to a login screen at their bank site; however the link that is provided actually takes the user to a ghost site, where the fraudster can record the login details. This information is then used to pay bills and or transfer balances for the fraudster’s financial reward. Spoofing is carried on by use of deceiving Websites or e-mails. These sources mimic the original websites so well by use of logos, names, graphics and even the code of real bank’s site.

Internet Pharming is where a hacker aims at redirecting the website used by the customer to another bogus website by hijacking the victim’s DNS server (they are computers responsible for resolving internet names into real addresses – “signposts of internet), and changing his I. P address to fake website by manipulating DNS server. This redirects user’s original website to a false misleading website to gain unauthorized information. In support of these, Shuangtia (2008),reported that whilst being positive about technology in the banking business ,there has been several other negative effects in the banking industry.

The first is that technology is influencing competition and the degree of contestability in banking. Due to the development of technology, bank’s superiority in information is deteriorated. Entry barrier have been declining, new competitor have emerged, Saedi Khaje Dangolan, (2011). Some financial products and services have become more transparent and commodities, customer show willing to unbundled the demand for financial products and services, all these lead to a more competitive market environment.

Due to lowered entry and exist and deconstruction, for some sub-financial markets, contestability in banking is also raised. Shuangtia (2008) also reported that technology influences Economy of scale in bank procession instead of being a big bank. Bank seeks to secure the optimal business structure, and secure the competitive imperative of economy of scale. There are other options to get economy of scale, including joint venture and confederation of financial firms. Small firms also can get economy of scale by outsourcing, i. . buy in economy of scale. The writer also added that Technology influence the economics of delivery. Technology has a major impact on the way banking and financial services are delivered. A wide range of alternative delivery mechanism becomes available, Internet and ATM ,these Reduces the dependence on the branch network as a core delivery mechanism. With the development of technology, the financial systems are substantially over-supplied with delivery system through a duplication of network.

In the writers opinion ,it is agreeable as to Shuangtia’s work but considering the fact that technology is the main driving force in business and evidence has been shown by several researchers that technology is bringing in positive effects in several businesses for example the auto-teller machines saves time when one is on the emergent need of money ,it is also quick and convenient available 24hours,it is available anywhere and there is no paperwork where one has to fill in a withdrawal slip and produce an identity card ,all one needs is an ATM card and a PIN number to access your account.

There is also an advantage of privacy of your account for example allowing a teller to view your account balance. The same applies in E-Banking where one could save time from commuting to paying bills to the centre for example electricity and water bills, with just a mobile phone one can perform these transactions. It is also noted that today’s generation supports innovation through technology and according to research,75% of youths have auto-teller cards . Tiwari R,(2012) ,contributes on the consideration of the banks to improve their banking services since research clearly reveals a major, growing interest in mobile banking.

There is need to develop several value added services considering different target groups. CHAPTER THREE 3. 0: Introduction This chapter will present the research design and methods for this study. It will also state the sampling procedures and also discuss the tools that will be used to collect the required, valid and reliable data for this study. The chapter will further outline how, where and why the pilot study will be conducted, how the collected data will be presented, analysed and interpreted by the researcher. Lastly, the chapter focuses on the plan for data collection and also the projected budget for the study. . 1: Research methods The researcher, throughout the research process will subscribe to both philosophies, and both research approaches shall be used thus qualitative and quantitative designs. The researcher shall use mixed methods in the process of collecting data. This method is called descriptive qualitative and quantitative. 3. 2: Population and sampling. The researcher shall target junior members of staff and the sampling framework will comprise of 30 individuals from both institutions including the program developer ,the manager ,staff and also the clients.

The individuals will be interviewed separately inorder to analyse the significance and challenges that are being faced with the growth of technology especially in the banking sector. 3. 3: Research instruments A variety of data collecting tools will be used in the study. This will be done so that the researcher can collect as much data for the study as possible. The major data collecting instruments will include: ? Hand-delivered questionnaires ? Structured interviews ? Unstructured interviews 3. 4: Validity and reliability of data.

The data to be collected will be valid and reliable because the researcher will use a wide range of data collecting tools. The literature will be critically and logically analysed before the researcher embarks on this tasks. The researcher will conduct a pilot study to pre-test the reliability of the data collecting tools and the hypotheses that will govern this study. The researcher will collect data from, managers, program developers, employees and clients of the banking institutions. 3. 5: Data presentation, analysis and interpretation.

The presentation, analysis and interpretation of the collected data will be done using Micro soft excel, tables and graphs. The tables and graphs will be followed by clear and logical explanation of the presentation. 3. 6: Data collection plan The data will be collected from respondents for a period of three months. The respondents will include; Program managers and developers, employees, stakeholders with good knowledge and understanding of information technology. The table below provides more details on the way data will be collected; Table 1 : The table shows the data collection plan DATE |TIME |PLACE |ACTIVITY | |25/ 01/ 2013 |13:00- 15:00 |National bank , Lilongwe |Distributing questionnaires | |10/ 02/ 2013 |13:00- 15:00 |New building society ,Lilongwe |Distributing questionnaires | |13/ 02/ 2013 |10:00- 12:00 |National bank, |Meeting the program manager | | | |Lilongwe | | |16/ 02/ 2013 |10:00-12:00 |New building society ,Lilongwe |Meeting the program manager | |01/ 03/ 2013 |09:00- 12:00 |National bank; |Collecting questionnaires | | | |New building society | | 3. 8: Budget It is estimated that the projected expenditure for this study is k110, 000 and will be funded by Mr. Mulekano.

These costs include the supervision fees paid to Exploits University, transport cost, stationary and other possible costs arising during the study process. The individual financing this research project will take care of any expense, which may rise outside this budget due to changes in the economic situation. 3. 9: Conclusion This chapter has discussed an overview of how data will be collected by the researcher. It has further presented how the collected data will be presented and analysed , the projected budget for the study and the data collection plan for the study. The chapter has also presented how the research project will be financed.

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