Interplay of Technology and Customer Value Dynamics in Banking Industry: Analytical Construct for Measuring Growth and Performance

Introduction

The new information technology is becoming an important factor in the future development of financial services industry, and especially banking industry. The developments information and communication technology have significantly contributed to the exponential growth and profits of the financial institutions worldwide. This evolution had transformed the way banks deliver their services, using technologies such as automated teller machines, phones, the Internet, credit cards, and electronic cash. However, banks face a number of important questions on strategies for deriving full advantage of new technology opportunities and tracking electronic development changes affecting interactions with the customers.

In general terms, increasing convenience is a way of raising consumers’ surplus provided new technology is adopted by the banks in order to offer convenience to the customers may be through an electronic transaction as a substitute for a trip to the branch. The technology based services imply different combinations of accessibility attributes (time, distance, and search costs), ease of use and price. Another factor in determining the magnitude of the surplus that the bank can seize is the relative importance of cross-selling. The bundle of services provided electronically is usually not the same as the one available at a branch. For this reason new technology based banking services with high customer value may offer better service conditions to harmonize the flow of information and services across the spatial and temporal dimensions.

The following sections of the paper will critically examine the available recent literature on this subject and present an analytical framework to measure the intrinsic contribution of various attributes related to technology and customer value in banking services. The construct of the measure is described through liner equations for technology, customer value and their symbiotic relationship followed by the general discussion on the sub-models. The locus of the model has been placed on the subsets of technology adoption and customer value as a profit driver in the banking industry.