Role of IT in banking sector

Information Technology- IT refers to the hardwares, softwares, and other logical procedures that help in the efficient storage, processing, retrieval, and availability of data.

Banking Sector- Banks are organizations which deal with money. They accept deposit from people and lend that money to people who need it for business purposes, personal needs, etc. They are the institutions which help in the proper allocation of monetary resources and aid the development of the country.

Banks are not warehouses where the money deposited is kept for storage or protection purposes. They are the nervous points of an economy which play an important role in the monetary circulation. Thus the need of a strong information system arises which can help them keep a track of all the data they need for their workings.

We can easily find out the inter-relationship between banking system and information technology by understanding the 3 components of IT:

1. Data processing- done by softwares and hardwares

2. Data storage and retrieval- done by softwares and hardwares

3. Data availability- attained by use of networking

In the recent years IT has enabled banks to extend their services, reach and consumer base to a great extent. Various services have been introduced by banks using the help of Information Technology, such as:

1. Internet Banking

2. Tele/Mobile Banking

3. ATMs

4. Debit cards, Credit cards

5. Virtual cash

IT has also enabled banks to grow and expand, without geographical barriers. Due to IT developments, funds can be transferred from one point on the globe to the opposite point in seconds. This has been achieved by using Real Time Core Banking Solutions. Money travels as fast as electricity and hence business speed is improved.

Real time systems help the banking data being updated/added/deleted within seconds which becomes visible throughout the system all over the world.

Though, IT has certain drawbacks too:

1. Chances of e-robbery

2. Hacking and security issues

3. Dependency on factors such as internet which may be disrupted, etc

If we compare the advantages and disadvantages, we can see that the credits over-weigh and its very much visible. If we compare banking infrastructure of 2009 v/s 1999 we can easily understand the difference that Information Technology has made to the banking sector. Automation of manual work, reducing paper usage, introduction of new services, control, and speed are just some of the benefits IT has provided, and evolution in the IT sector will surely keep providing more boost to the banking sector.