Describe How Digitization of Systems Affects Banking - 1650 Words

Describe How Digitization of Systems Affects Banking (Essay Sample) Content: How Digitization of Systems Affects BankingHow Digitization of Systems Affects BankingIntroductionTechnology has taken over most of the modern business processes. Currently, common business processes such as production, marketing and promotion are conducted using technological equipment. Banking is one of those industries that have been affected greatly by the digital culture. Technological aspects have been digitized in order to affect how people handle money in the modern business arena. At a basic level, it is undeniable that all banks have resorted to storing user details electronically in order to ease the work and reduce the amount of space used to conduct business. This paper aims at examining how the digitization of banking systems affects the way people handle money in the current era. Notably, economic scholars have attempted to shift their focus on the influence that the digital culture might have in the banking sector. As such, the paper posits that techno logy has improved the way people handle money in the modern world by making banking simple, convenient and user-based.Background of Banking TechnologyBanking technology represents are progressive transformation that has taken place over the last decade and half. Few years ago, banks used to store user data in manual and tangible methods. Such included papers, folders and cabinets. Evolution of the computer systems, has, however, introduced a lot of change. For example, Haycock (2015) notes that banks today store customer data in electronic forms. Basically, banking technology consists of the typical computer hardware that are used in the other industries. For instance, most of the teller desks in modern banks are equipped with laptops, desktop computers or iPads that help the tellers to access user data faster. What makes banking technology special today is the evolution of complex software that is able to facilitate all the processes associated with banking. For example, banks toda y are using software to determine the credit worthiness of a person and that of their entire family. As such, it is important to determine how these systems affect the way people handle money in the current business platforms.Figure 1: A typical bank tellers desk. Notice the computer on top of the desk.Cashless DepositsTechnology has changed the way people and banking corporations perceive money. In the traditional sense, a customer had to walk to a bank with the cash that he wanted to deposit in his account. However, that has changed. In the modern setting, technology has made it possible to make cashless deposits into ones bank account. The concept has particularly gained popularity with small to medium businesses that have adopted the cashless transactions processes. Payment using electronic cards has made it possible for customers to transfer money from their bank accounts to the bank account of the seller. That means that the seller receives deposits into their accounts without having to visit the bank. The concept of electronic payments has also improved the experience of customers (Cortada, 2006). For example, it is now possible for a person to make purchases without using cash. Cashless deposits have improved the experience of bank customers by saving their time, resources and improving customer satisfaction. Therefore, it cannot be disputed that the evolution of digital culture has enhanced the relationship between banks and their clients.Figure 2: An estimated percentage of consumer payment transactions done using non-cash methods.E-Commerce`Evolution of banking technology has facilitated the evolution of e-commerce. E-commerce refers to kind of business transactions that are conducted electronically. E-commerce has been facilitated by the development of online banking. Online banking is a method of banking system that allows monetary transactions to be conducted over the worldwide web. Web 2.0 has played a great part in allowing the development of o nline banking and e-commerce. For example, the development of web 2.0 has encouraged the development of online payment systems such as PayPal and Skrill. Analytically, technology has increased the number of platforms through which people can send and receive money. This means that it has also boosted the ability of businesses to send and receive money on a global scale (Davies, 2010). With PayPal, for example, a person in the United States can send money to a person located in the United Kingdom instantly. As such, it is prudent to conclude that evolution of technology centered on banking has influenced the development of electronic business transactions.CurrencyAs Westerman (2014) notes, technology has changed how people perceive and ideal with money. A few decades ago, one could not comprehend the concept of money without seeing the notes or the coins that are recognized as part of the national or regional currency. People believed that money existed only in tangible form owing to the presence of coins and notes. However, the peoples perception of money has changed greatly and so has the banks understanding of monetary systems. At least part of the population in the developed nations understand that it is not necessary to carry cash around all the time. In the European Union, for example, Kehal and Singh (2005) notes that people are swiftly adopting the virtual storage and exchange of money. Such a condition means that people now realize that money can exist in soft and that one can make transactions without withdrawing money from their accounts. As a matter of fact, McMillan (2014) observes that in the near future, business partners will start agreeing on virtual transfer of money.Credits and LoansAlgorithms and program codes are the new ways of determining the creditworthiness of a certain customer. Banks have developed special software used to track a persons monetary practices in order to determine the amount of the credit that he can receive. The bank l inks the software containing the codes with the users accounts in order to follow the behavior of the individual customers. In fact, some banks have developed algorithms that can report the literacy levels of individual customers. At an advanced level, these algorithms can be manipulated to processes the creditworthiness of a certain customer. This is different from the condition a few years. Banks had to assess a loan applicants past financial records, employment status, assets in possession, et cetera in order to determine how they would calculate his creditworthiness. Thus, the development of these banking algorithms indicate that technology has revolutionized the way banks offer credit to their customers.Security of MoneyUndeniably, technology has boosted the security and protection of the money stored in banks premises. Technology has seen the development of customized security systems whose aim is to provide safety to the areas that money is stored. For example, evolution of b io-technology has improved the security of safety vaults by ensuring that only people whose biological information is saved in the system can access the rooms. Such a condition means that unauthorized people cannot enter the places that money is stored in currency form. The foregoing security measure is advantageous in two ways. On the one hand, it prevents burglary and forceful entry into the safety vaults. Secondly, it ensures accountability within the people who have access to the regions. Improvement in the targeted security systems translates to less loss on the part of the bank. Such a condition enables the bank to concentrate on provision of services to the customers without fear of loss motivated by theft.Figure 3: A biometric door opening systemHowever, technology has also been blamed for deterioration of security of banking systems. As Coates (2015) claims, advancement in technology attracts more advanced forms of theft; especially if money is the subject matter. In the re cent past, banks have received persistent cases of hacked online payment platforms and forged credit cards. Hacking is a common cybercrime that puts money saved electronically in deep threat (Kshetri, 2010). For example, if a hacker manages to gain entry into a certain account, it means that the other accounts are still as vulnerable. It follows that, therefore, use of technology in the banking arena has introduced a new form of threat. Guerrieri and Bentivegna (2011) observe that hacking is not the only cybercrime that poses threat to electronic banking. Other common forms of online monetary crimes are phishing, interception and cloning of accounts in order to get access. Such conditions indicate that banks must be on high alert.Illegal BusinessEvolution of banking technology has improved the ability of law enforcement agencies to prevent the conduction of illegal businesses. In addition, it also allows them to easily track people who conduct illegal business. For example, most ban king software are equipped with a feature that allows them to detect an abnormal activity in a certain account. The software reports the same and alerts law enfo...