Introduction to Modern Banking Technology and Management

Introduction to Modern Banking Technology and Management

Vadlamani Ravi (Institute for Development and Research in Banking Technology, India)
DOI: 10.4018/978-1-61520-635-3.ch008
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This chapter introduces Banking Technology as a confluence of several disparate disciplines such as Finance (including risk management), Information technology, Computer Science, Communication technology and marketing science. It presents the evolution of banking, the tremendous influence of information and communication technologies on banking and its products, the quintessential role played by computer science in fulfilling banks’ marketing objective of servicing customers better at a less cost and thereby reap more profits. It also highlights the use of advanced statistics and computer science to measure, mitigate and manage various risks associated with banks’ business with its customers and other banks. The growing influence of customer relationship management and data mining in tackling various marketing related problems and fraud detection problems in banking industry is well documented. Of particular significance is the set of latest trends this chapter presents in terms of biometric ATMs, RFID enabled bank notes, Antiphishing techniques that make Internet banking secure and the applications of Web 2.0 in banking. The chapter concludes by predicting that the Banking Technology discipline is all set for rapid growth in future.
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The term “Banking Technology” refers to the use of sophisticated information and communication technologies together with computer science to enable banks to offer better services to its customers in a secure, reliable and affordable manner and sustain competitive advantage over other banks. Banking Technology also subsumes the activity of using advanced computer algorithms in unraveling the patterns of customer behavior by sifting through customer details such as demographic, psychographic and transactional data. This activity also known data mining, helps banks achieve their business objectives by solving various marketing problems such as customer segmentation, customer scoring, target marketing, market-basket analysis, cross-sell, up-sell, customer retention by modeling churn etc. Successful use of data mining helps banks achieve significant increase in profits and thereby retain sustainable advantage over their competitors. From theoretical perspective, Banking Technology is not a single, stand-alone discipline, but a confluence of several disparate fields such as finance (subsuming risk management), information technology, communication technology, computer science and marketing science. Figure 1 depicts the constituents of Banking Technology. From the functional perspective, Banking Technology has three important dimensions. They are as follows: (i) The use of appropriate hardware for conducting business and servicing the customers through various delivery channels and payments systems and the associated software constitutes one dimension of Banking Technology. The use of computer networks, security algorithms in its transactions, use of ATM and credit cards, Internet banking, telebanking and mobile banking are all covered by this dimension. The advances made in information and communication technologies take care of this dimension. (ii) On the other hand, the use of advanced computer science algorithms to solve several interesting marketing related problems such as customer segmentation, customer scoring, target marketing, market-basket analysis, cross-sell, up-sell and customer retention etc. faced by the banks to reap profits and outperform their competitors constitutes the second dimension of Banking Technology. This dimension covers the implementation of a data warehouse for banks and conducting data mining studies on customer data. (iii) Moreover, banks cannot ignore the risks that arise in conducting business with other banks and servicing their customers, for otherwise, their very existence would be at stake. Thus, the quantification, measurement, mitigation and management of all the kinds of risks that banks face constitutes the third important dimension of Banking Technology. This dimension covers the process of measuring and managing credit risk, market risk and operational risk. Thus, in a nutshell, in the word ‘Banking Technology’, ‘banking’ refers to the economic, financial, commercial and management aspects of banking while ‘technology’ refers to the information and communication technologies, computer science and risk quantification and measurement aspects.

Figure 1.

Different constituents of banking technology

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Editorial Advisory Board
Table of Contents
Mohammad Ali Sarlak, Asghar Abolhasani Hastiani
Chapter 1
Sujana Adapa
The traditional mode of delivering products and services by banks to the consumers’ is through a single distribution channel and that is physical... Sample PDF
Global E-Banking Trends: Evolution, Challenges and Opportunities
Chapter 2
Sattar J. Aboud
There are many proposals which offer anonymous and non-repudiation e-payment protocols. But they have the drawbacks that the anonymity can be... Sample PDF
Efficient Anonymous and Non-Repudiation E-Payment Protocol
Chapter 3
Asma Mobarek
The objective of the chapter is to present a brief review of E-banking services especially in the developing economies, highlighting the major... Sample PDF
Electronic Banking as a Strategy for Customer Service Improvement in the Developing Economy
Chapter 4
Jafleh Hassan Al-Ammary
In today’s business environment, knowledge is increasingly recognized as the most important and valuable asset in organizations and a key... Sample PDF
Factors Influencing KM Strategic Alignment in the Banking Sector: The Case of Persian Gulf Countries
Chapter 5
Abel E. Ezeoha
Internet banking strategy can be generally very challenging, but more challenging in an economic environment infested with high degree of... Sample PDF
Internet Banking Strategy in a Highly Volatile Business Environment: The Nigerian Case
Chapter 6
Internet is not simply one more distribution channel among the multi-channel strategies used by the financial industry; it is fostering new... Sample PDF
Business Model of Internet Banks
Chapter 7
Mirza Hassan Hosseini, Ali Ghorbani
Nowadays, e-banking plays an important role in e-society and human life. Imagine an e-society without e-banking is not possible. The e-banking is... Sample PDF
Toward a Conceptual Framework for Verification and Analysis of Effective Factors in Successful Implementation of Electronic Banking
Chapter 8
Vadlamani Ravi
This chapter introduces Banking Technology as a confluence of several disparate disciplines such as Finance (including risk management), Information... Sample PDF
Introduction to Modern Banking Technology and Management
Chapter 9
Lotfollah Forozandeh Dehkordi, Ali Ghorbani, Ali Reza Aliahmadi
Nowadays, the banks are using new technologies to provide better services to customers. One of these new technologies is RFID. In this chapter first... Sample PDF
Application of RFID Technology in Banking Sector
Chapter 10
Bala Shanmugam, Mahadevan Supramaniam
The emergence of e-banking has created a significant transformation towards the services provided by the banks. E-banking provides alternatives for... Sample PDF
Improving E-Society through E-Banking
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