DIGITAL TRANSFORMATION OF FINANCIAL SERVICE
Technology Enhancement Phases in banking sector:
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1980 to 1989:ATM (Automated Teller Machine) was introduced in the 1960s and by 1980 , the customers became habituated to use it. From the 1980s, the banks started to focus on electronic trading and provided the customers with home-based banking products. Apart from the ATMs, the banks also introduced new delivery channels through PC and telephones. In 1980s, the 2g internet was introduced and it was being used for banking. However, in 1980s, the banking customers were reluctant to change themselves (Safeena et al.2018). So, the advanced technological products failed to attract them.
1990 to 1999: During the period 1990 to 1999, the banking sector introduced internet banking to the customers (Boateng, 2015; Prasetyo et al.2015). The period from 1990 to 1999 is also important as the online banking also improved a lot in these years. Since 1990, the banks started adopting a number of online strategies including the use of web, informing customers about funds and balance after transaction. The banks also started posing themselves as one-stop financial solutions such as portfolio calculation, corporate research and stock trading. In 1990s, the banking transactions were easily handled though mail, phone and other electronic ways. However, the early online banking infrastructure was unable to accept deposits. ATMs were required to do the task. For instance, the Amazon.com and ebay launched online market place in 1995 (Ifeonu and Ward, 2015).The WWW was developed in the early 1990s whereas the browsers like Netscape Navigator was introduced in the mid-90s (Fathima and Muthumani, 2015). Availability of these disruptive technologies promoted the electronic trading faster. In addition, PayPal, one of the most prominent online payment systems, also launched in 1998 (Boateng, 2015). It is evident that such developments changed the traditional banking and financial activities to a great extent.
Fintech Era (2010 to 2015): The phase 2010 to 2015 can be considered as the age of Fintech. The financial technology is an emerging sector that facilitates the development of latest banking services in the 21st century. Initially, the term financial technology referred to the back-end processes used by financial institutions. Later the term, Fintech indicated all the technological innovations applied to the retail banking financial literacy and the investment banking.
Emergence of digital currency, virtual currency and cryptocurrency is one of the major developments in the banking sector during the period; from 2010 to 2015 is development and increasing use of digital currency. In 2012, the virtual money was considered to be used by the members of some specific virtual community (Sathye and Sathye, 2017; Martins et al.2014). However, in 2015, the European Central Bank announced that the virtual money or digital currency has a value and in some situations, the money can be used as an alternative for the traditional money (Safeena et al.2018). It is evident; the increasing usage of digital money transformed the banking sector significantly. In contrast to the virtual money, digital currency is considered as an asset which is represented in the digital form and also possesses a number of monetary characteristics. The digital currency helped the banks significantly to create a ‘cashless’ society.
Fintech (Digital Currency):
The digital currency also made the money transfer process more secured and faster (Benrit. and Marimuthu, 2014). In traditional way of transferring money, the banks had to carry out a number of processes and it took several hours. On the contrary, use of advanced financial technology such as the digital currency, the money transfer takes less time and it, in turn, helps the customers to obtain more benefits.
As stated by Venkatesh et al. (2015), unlike the traditional money transfer, the digital currency help financial to set the real time money transfer process. The digital currency uses distributed ledger technology and it facilitates the financial institutions to make the money transfer faster. Therefore, the digital currency is increasingly becoming an alternative to the traditional money as it benefits the end-users in several ways.
Technology transformation in a bank Crypto Currency: Crypto currency is another technological innovation that is transforming the banking sector in the recent days. The crypto currencies are originally a form of digital currency but they are developed using the latest encryption technology . The crypto currencies can be transacted in an open source environment. Such currencies are controlled by code and uses peer-to-peer network for the transaction.
Similar to the digital currency, the crypto currency also employs the ledger technology. In addition, the crypto currency also uses the cryptographic techniques and the digital wallet (Sathye and Sathye, 2017). The crypto currency uses the ledger technology to store the transaction records accurately. The encryption technology is also used to keep the information regarding the owner in coded form. The transactions involving crypto currency are carried out after performing complex computational problems.
The discussion on crypto currency indicates that use of complex computation techniques keep the transactions of crypto currency more secured than the traditional money transfer. Use of encryption techniques also adds to the security and enhances confidentiality of the information regarding the owner. Lastly, use of the ledger technology also ensures higher accuracy of the stored information regarding transaction. It can be stated that the increased use of crypto currency and the other technologies associated with it is transforming the traditional banking services.
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Boateng, K., 2015. Leveraging the power of mobile technology as a banking strategy–a case for Ghanaian banking institutions.
Fathima, Y.A. and Muthumani, S., 2015. USER ACCEPTANCE OF BANKING TECHNOLOGY WITH SPECIAL REFERENCE TO INTERNET BANKING. Journal of Theoretical & Applied Information Technology, 73(1).
Ifeonu, R.O. and Ward, R., 2015. The Impact Of Technology Trust On The Acceptance Of Mobile Banking Technology Within Nigeria. IEEE African Journal of Computing & ICTs, 8(4).
Kimando, L.N. and Kimeu, M., 2016. Factors influencing the adoption of mobile banking technology by bank customers in Machakos town.
Martins, C., Oliveira, T. and Popovi?, 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.
Prasetyo, R., Wulandari, D. and Mukhlis, I., 2015. The Effect of the Perception of Deposit Bank Rate, Quality of Service, and the Using of Banking Technology towards Rural Fellow’s Interest to Save Money in Bank Rakyat Indonesia Inc. Unit Wates–Blitar. International Journal of Financial Research, 7(1), p.130.
Sathye, S. and Sathye, M., 2017. Do ATMs Increase Technical Efficiency of Banks in a Developing Country? Evidence from Indian Banks. Australian Accounting Review, 27(1), pp.101-111.
Safeena, R., Kammani, A. and Date, H., 2018. Exploratory Study of Internet Banking Technology Adoption. Technology Adoption and Social Issues: Concepts, Methodologies, Tools, and Applications: Concepts, Methodologies, Tools, and Applications, p.333.
Venkatesh, V., Thong, J.Y. and Xu, X., 2016. Unified theory of acceptance and use of technology: a synthesis and the road ahead.