The Role of Technology on Performance of Financial Institutions

Introduction

In the globalized world, technology is one of the critical economic success determinants for businesses across the different industries, numerous innovations have occurred in the recent years, and the most triggering and widely appreciated is information technology. Firms are today threatened by the widespread changes in the markets which are demonstrated by increased merging rate and authoritative competition. Under such settings, the conventional management strategies that center on the control of financial gains along the analytical planning strategies are ranged as inadequate for adequately enhancing the firms in the complex environment. Today, consumer satisfaction is mainly grounded on convenience, affordability, and quality of services. The rate of adaptation of smart gadgets ranging from mobile phones to computers and the full internet access has resulted in an upward development which represents E-commerce. Businesses similar to the respective industries have shifted their activities from the conventional strategy to the use of the innovational technology which is attributed to the increased income and the widening of market share. The trend is well reflected within the banking sector where banking services have been transformed in the recent through the utilization of information technology which includes accounts opening, transactions, and deposits.

Technology has offered support to self-service from the standpoint of the customers since most services can be carried out online with ease. The banking system and activities is appreciated as the wiring of banks in the financial industry as it encourages and supports the high performance of banks across the world. Based on the top and desirable results, there is a mandatory need to adapt information technology. It is on this ground that this research tries to investigate the effects of information technology with regard to the performance of financial institutions in country and beyond. Information technology plays a critical role in economic development, but the success of social development has the responsibility of technology increasingly to every day’s life. In addition, the general performance of processes within commercial banks has improved which has resulted in smooth, friendly and convenient bank with satisfying and superior services to the consumers (Melville, Kraemer and Gurbaxani, 2004 p.286). In this context, the innovation has facilitated the development of banking efficiency and effectiveness since less resources are used with maximum gains. Banking operations are becoming grounded on information technology due to the connection that is developed. It appears that the financial and banking sector is gaining adequately from technological advancement as it is observed in its application in all its operations. IT is not only needed in running banking operations, but it is also required in managing operations in general. The technology cannot be neglected by banks managers since it plays a crucial role in the modernized organizations. The utilization of IT concepts, approaches, practices and strategies implementation in commercial banking is thus a subject of essential significance given that it is linked to the operation of all banks across the local and international competitiveness

Problem Statement

IT is perceived to be the center of financial system in the globalized economy and this determines the economic success given that the development solely depends on the capability of financial institutions. The performance of the banking sector is not just remarkable for the investors but also for all those that are involved. Running the economy required adequate response from the financial institutions. The extensive advancement of technology has been applied in banks across the world and most of the institutions are currently taking advantage of the growth to offer enhanced customer and more effective services that will improve productivity. Competition has intensified globally, and for the forms to mitigate the threat of reducing their shares and revenue gain, IT has offered solutions that not only provide flexible and convenient services (Ravi, 2008 p.10). It is argued that, for financial institutions to be successful it has to be used as the leading system to reinforce the company’s strategies. Banking holds one of the largest market across the banks, however the industry is overcrowded by financing industries. Much competition is generated by the well-established companies that besides having the highest number of customers, the firms have enormous resources and finances to support their operations. The intensifying competition has alerted commercial banks to adopt innovation in the quest of retaining consumers and attracting new ones.

Banks are in need of efficiency and effectiveness to increase their performance and increased revenues. Innovation has played a crucial role in the development of the mobile application, websites, online banking and so on. The introduction of such aspects has enhanced the financial viability of businesses through marketing and operations management. In that, for instance, online websites make it easier for the customers to access information about a company as well as interact directly. Contrary to the traditional physical banking, customers are currently not required to visit the banks for simple services. They can open accounts directly and access transfer and deposit services in the comfort of their homes. In other words, it has enabled banking institutions to offer consumer-centered services by accounting for the needs of the customers first (Dincer & Hacioglu, n.d p.6). The use of IT within the banking sector is additionally linked to the fact that language-based challenges required curbing to facilitate more accessible and affordable communication. In the process to enhance the customer based relationship, improve consumer satisfaction, enhance operational efficiency, lower the operating expense, lower transaction period, provide a competitive positioning and sector’s investors profit needs. It is worth noting that since the financial institutions such as banks are the primary determinant of the development of the economy, technology has been crucial in enhancing growth. Substantial growth has been experienced in the recent past due to efficiency in the banking sector which facilitates the movement of money within the economy. In this context, technology is not only crucial to the growth of the economy but also enabling a stable society where the customers are satisfied. In other words, IT has brought about more competitive and development based strategies. In this context, the study will investigate the role of technology particularly information technology on the performance of modern banking.  

Research Question

To what level does technology affect the performance of commercial banks?

Research Objectives

The purpose of the study is to investigate the IT role in the performance of commercial banks. Based on the fact that banks play a crucial role in the development of the economy, the study seeks to establish the level in which technology has enhanced operations and the development of banking.

This study will, therefore, seek to fulfill the following objectives:

1. To establish the extent to which IT has contributed to increased banks productivity and revenue gain.
2. To determine the effects of technology on commercial banks competitiveness
3. To establish whether there is a rise in the rate of effectiveness and efficiency of banking activities since the initiation of IT and electronic innovation in commercial banks.

Significance and Scope of the Study

This study is focused on technology role in the performance of commercial banks. IT is a necessary driving factor in the development of businesses which has had positive effects on the economy. Technology is not only appreciated based on the efficiency that has come about in the banking sector but also based on its contribution to customer satisfaction and operations efficiency (Baptista and Oliveira, 2015 p.420). Within the banking sector, most of the companies are involved in the utilization of computers in daily operations for the provision of superior services to their clients through the utilization of modernized technology. Also, technology has also enhanced customer awareness about the use of technology in making transactions at their comfort. It is the same technology that has led to the effectiveness and growth of the economy through infrastructural, revenue and human resource development. The research will offer awareness and familiarity to the banking firms on how they can best involve technology in gaining a competitive position and increasing efficiency. Since the success of the banks is dependent on the ability to impress the customers through differentiated and quality services the study can act as a point of reference for those that need to compete effectively.

Literature Review and Theoretical Frameworks

In the globalized market, information moves very fast and thereby, it is deliberately essential to the management of technology that can change and enhance operations, procedures, products, and services for competitive positioning. According to Melville, Kraemer and Gurbaxani (2004) technology are essential for the success of businesses particularly financial systems for two primary reasons. To start with, it is necessary for banks to acquire success in all commercial based operations since the firms cannot be able to handle the intensifying competition without the use of technology. Also, in the current market, it is the technological innovation that leads to the stability of the business in the long run. The primary objective of using technology is not just to overcome competition but also sustainability is essential. About business operations, firms can benefit highly from the utilization of technology by fully differentiating, lowering their cooperating spending and grabbing economic opportunities (Martins, Oliveira, and Popovič, 2014 p.6). Banks typically provide services that are similar and thus what makes an organization better it’s the ability to offer differentiated services regarding convenience, friendliness, and unique experience. Also, to increase revenue gain, the operating expense must be deep meaning that with technology most of the services become self-based thus lowering the need for more employees.

Romdhane (2013) notes that Technology is a form of business innovation and investing in it will lead to the growth of the market, financial earnings and competitiveness. Based on the significance of technology on financial institutions performance, the managements are not only required to adapt but to also focus on the effective management of technology. In general the modern firms mainly the large banking institutions are focused on gaining efficiency and competitive positioning through technology (Sadeghimanesh & Samadi, 2013 p.2912). Within the financial sector, technology is an essential element in meeting the anticipations and needs of the clients. Overall, besides having to achieve the set organizational objectives, all the companies are needed to focus on the demands of the market. Most of the most successful companies within the financial sector usually adopt the use of IT in enhancing operations. This usually involves activities such as marketing and promotion activities were some of the conventional strategies have proved to be ineffective. For instance, the rising influence of the internet has forced most companies to set social media and online based websites to cater for the need of the segment. In turn efficiency and convenience as some of the drivers in the market has facilitated in the attraction of more customers.

Despite the importance of technology of improved banking performance, the implementation is a complex operation that needs useful management instruments and procedures in the incorporation of transformation. The initiation of IT within the system should be integrated with a strategic approach. One of the determining factors is leadership. In that, the management must be determined to ensure that the approach works (Romdhane, 2013 p.96). Also, the organization’s culture must be one that encourages the move and motivates individuals to strive. The firms must, therefore, invest in human resources for the management of operations. Technology is a progressing process that changes rather rapidly, and thus companies are required to move with the pace. This means that the systems must be updated continuously to meet the changing needs. Innovation represents one of the most appropriate strategies for achieving success in the digital age. Based on Celik (2014 p.177) the effects of technology and commercial banks performance can be established by assessing the market, competition, external and internal factors. IT has played an enormous role in enhancing the stability of companies in general from the critical theory view. In that, the strategy is focused on improving the performance by ensuring that efficiency in running operations has been achieved. Currently, financial institutions have benefited from enhanced services, processes, modernized marketing as well as networking. The relationships with the customers have been developed in general.

Methodology

Introduction

This section offers a plan that will be used in collecting research data to answer the proposed research question. The researcher will provide the particular highlight of the research strategy, approach, data collection, ethical issues and limitation of the study. This section is essential since it will determine the success and reliability of the study.

Research Design/Philosophy

This study will seek to examine the role that is played by technology on the general performance of financial institutions a case study of commercial banks. The study that will be carried out concerning the thesis will be applied research that will seek to develop new findings. The study will begin by reviewing the existing literature regarding technology and its impacts on the financial sector. This will be followed by detailed primary research so that the findings can be boasted. A descriptive research design will be used for the study.

Research Method

For the fulfillment of the aims of the thesis, this study will utilize qualitative research. The primary features of this approach are that it is mainly suitable for a small populace, but the results are not quantifiable. However, the advantage is that it provides comprehensive research. The research was selected based on its ability to generate maximum information within the shortest period (Taylor, Bogdan, and DeVault, 2015 p.17). The method is also flexible and easy to use given that fewer skills are required. This will allow the researcher to conduct a comprehensive study without restricting the study’s scope and responses from the participants.

The study will adopt a case study approach to generate theories and conclusions drawn from the qualitative research. The reason for using a case study approach of commercial banks is because it is suitable for a small sample. The plan is therefore essential in providing reliable and accurate information.

Data Collection

Surveys and interviews will be used. This involved the use of individualized and unstructured surveys whose objective is to determine the real ideas of the subject. The benefit of using the instruments in the collection of data is the ability to generate real and verified information directly from the respondents. The structures will allow the researcher to interact with the respondents due to the flexibility involved. The aspect of convenience and flexibility will create the opportunity for generating in-depth details without deviating from the primary objective. Semi-structured questions will be used. The surveys and interviews will be conducted online based on the convenience of the respondents. The sample will be selected based on the expertise and knowledge about the relationship amid technology and financial institutions performance.

Data Analysis

Content analysis will be used in summarizing the data acquired from surveys. The method involves the categorization of data in themes so that comparison can be made. The main benefit of content analysis it that it assists in the reduction and simplification of the collected data (Taylor, Bogdan, and DeVault, 2015 p.12). The information can also be quantified using quantitative approaches. The aim is to ensure that the research question is answered fully.

Ethical Issues

The current research will be subjected to significant ethical problems. In this consent, all the respondents will be required to sign a consent form. The form will allow them to understand that the participation is deliberate and they can always quit at any point. Also, they will get to know that the study is an academic one and the responses will be used in that context and confidentiality will be guarded.

Scope and Limitations

Similar to every research the study will face several limitations. First, the sample size will be small thus meaning that the reliability cannot be established. Also, the qualitative approach fails to allow the measurement of the issue. Also, resources and time is also a limitation. This is because with the limited resources the researcher will struggle in meeting the needs of investigating.

Expected Significance

The expected significance is to improve the application of IT in banking institutions to improve performance.

Timeline, Resources and Contingency Plan

The study will require an estimation of 200 dollars to cater for the expenses ranging from travel, printing, food, and beverages. Some of the things that are likely to go wrong include delayed interviews. This is because the study will mainly be involving a sample populace of busy individuals and thus getting free time to answer the questions is challenging. Finances might also be a problem. The best way to mitigate the issues is through scheduling and focusing on the low-cost operation. The surveys will be conducted earlier to avoid any delays, and to lower the expenses, the surveys will be conducted directly.

Activity/ Timeline	Week 1	Week 2	Week 3	Week 4	Week 5
Drafting proposal and Reviewing of literature
Sample selection and survey questions structuring
Data collection and analysis
Thesis development
Review and submission of thesis

 

 

 

References

Baptista, G. and Oliveira, T., 2015. Understanding mobile banking: The unified theory of             acceptance and use of technology combined with cultural moderators. Computers in    Human Behavior, 50, pp.418-430.Top of Form

Celik H. 2014.The Impacts of Information Technologies on Financial Institutions. In: Dincer H., Hacioglu Ü. (eds) Globalization of Financial Institutions. Springer, Cham, Pp. 175-183.

Dincer, H., & Hacioglu, Ü. (n.d.). Globalization of Financial Institutions [recurso electrónico] A Competitive Approach to Finance and Banking. Springer Science & Business Media.Top of Form

Martins, C., Oliveira, T. and Popovič, A., 2014. Understanding the Internet banking adoption: A unified theory of acceptance and use of technology and perceived risk application. International Journal of Information Management, 34(1), pp.1-13.

Melville, N., Kraemer, K. and Gurbaxani, V., 2004. Information technology and organizational performance: An integrative model of IT business value. MIS quarterly, 28(2), pp.283-322.

Ravi, V. (2008). Advances in banking technology and management: impacts of ICT and CRM. Hershey, Pa, IGI Global. http://www.myilibrary.com?id=103789.

Romdhane, S.B. 2013. Impact of Information Technology on the Performance of Tunisian Banks: A Stochastic Frontier Analysis with Panel Data. Asian Academy of Management Journal of Accounting and Finance. Pp. 95-125.

Sadeghimanesh, M. & Samadi, A. 2013. The Effect of IT (Information Technology) on Financial Performance of the Banks Listed in Tehran Stock Exchange. European Online Journal of Natural and Social Sciences, Pp. 2911-2919.

Taylor, S.J., Bogdan, R. and DeVault, M., 2015. Introduction to qualitative research methods: A guidebook and resource. John Wiley & Sons.