Finance

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CP3T17 WORD ASSIGNMENT
SCIENCE COMPUTER
TITLE :
HOW INFORMATION TECHNOLOGY IMPROVES FINANCE ?
NAME :
1. AFQAR BIN BAHARIN
2. ALDO JATENG BIN WILSON
3. KELCIE MAINTIM
4. NUR SABRINA BT. ROZMAN
5. NUR SAIYIDATUL AFIFAH BT. HALIM
6. HAFIZAH BINTI HASSAN
NO.MATRIKS
 MS1315518237
 MS1315519016
 MS1315518221
 MS1315519835
 MS1315519175
 MS1315602012

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Information Technology is the application of computers and
telecommunications equipment to store, retrieve, transmit and manipulate data,
often used in the context of a business or other enterprise.
This term is commonly used as a synonym for computers and computer
networks, but it also encompasses other information distribution technologies such
as television and telephones. Several industries are associated with information
technology, such as computer hardware, software, electronics, semiconductors,
internet, telecom equipment, e-commerce and computer services.
In a business context, the Information Technology Association of America
has defined information technology as ―the study, design, development,
application, implementation, support or management of computer-based
information system.‖
The responsibilities of those working in the field include network
administration, software development and installation, and the planning and
management of an organisation’s technology life cycle, by which hardware and
software is maintained, upgraded and replaced.
Humans have been storing, retrieving, manipulating and communicating
information since the Sumerians in Mesopotamia developed writing in about 3000
BC, but the term Information Technology in its modern sense first appeared in a
1958 article published in the Harvard Business Review, authors Harold J Leavitt
and Thomas L. Whisler commented that ―the new technology does not yet have a
single established name. We shall call it Information Technology.‖

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Based on the storage and processing technologies employed, it is possible to
distinguish four distinct phases of IT development like premechanical, mechanical,
electromechanical and electronic.
Finance on the other hand, is the study of how people allocate their assets
over time under conditions of certainty and uncertainty. A key point in finance,
which affects decisions, is the time value of money, which states that a unit of
currency today is worth more than the same unit of currency tomorrow. Finance
aims to price assets based on their risk level, and expected rate of return. Finance
can be broken into three sub categories which is public finance, corporate finance
and personal finance.
Personal finance may include paying for education, financing durable goods
such asreal estate and cars, buying insurance such as health and property insurance,
investing and saving for retirement.
It may also involve paying for a loan or debt obligations. Corporate finance
on the other hand is the task of providing the funds for a corporation’s activities
which if for a small business is referred to SME finance. Corporate finance
generally involves balancing risk and profitability, while attempting to maximize
an entity’s wealth and the value of its stock.
Public finance describes finance as related to sovereign states and sub-
national entitles like states or provinces, counties and municipalities and related
entities like school district or agancies.
An example of application is Online Banking. Online banking allows
customers of a financial institution to conduct financial transactions on a secure
website such as Maybank2u.com and Cimbclicks. Another example of application

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is Electronic Payment System. Electronic Payment System is making payment like
credit card bills or internet bills over an electronic network such as the internet.
Information Technology have improved finance in many ways. One of it is
Information Technology capability have improve bank performance. A
reportevidence from Turkey shows that, it is no doubt IT has become a key
element of firm capability and a source of sustainable competitive advantage. In
today’s rapidly changing business environment, information technologies (IT) has
become an essential component of firm capability and a source of sustainable
competitive advantage. IT is restructuring the basics of business and customer
service, operations, product and marketing strategies, and distribution are almost
entirely dependent on IT.
Considering the intrinsic nature of banking activities that include processing,
managing, and strategically using information, it has become much more
significant for banking and finance industry.
In accordance with the current IT developments and to remain competitive,
many financial institution have transformed their service delivery system. Many
banks prefer to deliver services using IT-based channels and reduce the reliance on
branch offices. Prior research has shown little or no correlation in support of the
relationship between IT investment and financial performance, which is often
referred as the IT productivity paradox.
This paradox also exist in the banking industry. For instance Chen et al.
(2007) searched the relationship between IT investment and bank performance and
found little relationship between IT investment and bank profitability or efficiency.

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IT investment is assumed to lead to better IT capabilities which in turn lead
to competitive advantage. A firm’s IT capability, involves its abilities to mobilize
and deploy IT-based resources in combination or co-present with other resources
and capabilities. Firms with higher IT capability take the increasing productivity,
and decreasing cost.
From a resource-based perspective it is certain that sustained competitive
advantage can accrue from ―a pool of human capital‖ which is larger than those
groups, such as senior managers and other elites, who are traditionally identified as
determining organizational success or failure. This is achieved by the human
capital adding value, being unique and imperfectly imitable. Edvinsson (1997)
addresses that it is mainly the human capital that determines the success of any
strategy including IT based approaches.
Thus a firm’s IT strategy should be supported with human dimension that
facilitates organizational learning as a main determinant of IT success. So, it is
important to consider the influential factors of human resources or human capital
when evaluating the contribution of IT to a firm’s performance. Therefore, human
capital supporting the IT capability is positively related with bank performance.
In order to investigate the relationship between It capability, human capital
support and bank performance, this study uses return on capital (ROA), return on
equity (ROE) and capital adequency ratio (CAR). Return on Capital (ROA) is
because it measures how effectively a bank has utilized its existing physical capital
to earn income.
This has been comprehensively used in past research on bank firms and non-
bank firms. Return on Equity (ROE) is used because it evaluates a firm’s ability to
generate profits from equity without regard to how those capital are financed. This

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ratio has also been widely used in past research on bank firms and non-bank firms.
Capital Adequancy ratio (CAR) measures how effectively a bank has utilized its
existing equities. Moreover it is a legal obligation to estimate CAR.
A method by using Data and Measures is used in order to investigate the
relationship of IT and Finance and how it improves bank performances. In order
to empirically investigate the hypothesis, bank employees were surveyed and bank
performance ratios (ROA, ROE, and CAR) are estimated using data from their
financial reports. 15 banks are identified as the target group because of the
availableness of their knowledge. Tools such as e-mail, letter, and face to face
interviews are used for gathering .
The relationships between the variables are tested using correlation,
reliability, regression and factor analyses through SPSS 13.0.Technically,
throughout the research done, we could say that Information Technology (IT) have
improve finance throughout bank performance as was proved in the research in
Turkey as said.
IT capability was measured using four items adopted from Benito’s study in
2007. Human capital support was measured using three items from Benito’s study
in 2007.
Since the scale were used with a new sample, 7 items were submitted to
exploratory analysis. Aprincipal component analyses and scree plot indicated that
three factors should be retained. The best fit of data was obtained with a principal
factor analysis with varimax rotation. There were several factor analyses for
independent variables.

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In IT capability, factors analyses was renewed information technologies,
systems, software and related tools, constantly improve information technologies,
system, software and related tools, constantly improve computers in order to take
the advantages of information technologies and focused on information and
communication technologies for improving customer relationships.
In human capital support, employees are submitted to training programs
about new software and systems, employees are submitted to training programs
about new equipments and tools and were hire qualified people who can
effectively use new technologies and system.
In conclusion, No doubt IT has become a key element of firm capability and
a source of sustainable competitive advantage. The increasing use of IT has
resulted with a need for evaluating the productivity impacts of IT in general,
banking and finance in particular. This study tries to find out whether IT capability
improves business profitability of banking firms. The findings of the study
demonstrates that IT capability and human capital support scales which are
developed in Western countries, are appropriate for an emerging economy and
eastern country, Turkey.
The findings also shows that human capital support for IT is positively and
directly related to ROA and ROE. This means that employing high qualified
people who can effectively use new technologies and system, submitting the
existing employees to training programs to enhance their skills to use new
software, system, equipment, and tools results with an increasing profitability for
banking firm.
On the other hand, we couldn’t find any direct statistical association between
human capital support and CAR. This may be because of the charactheristic of

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CAR. Indeed CAR is a legal obligation for banking firms from the authority of
Banking Regulation and supervision Agency (BRSA) rather than a performance
indicator. Suprisingly, the results provide no empirical evidence in support of the
relationship between IT capability has no relationship with bank performance
measures, rather it influence the bank performance via human capital support due
to the significant correlation among them. In a sense IT capability may trigger
human capital support.
The findings of this study cannot be taken as definite evidence because
several limitations to the study results deserve commentary. First, this study is
conducted on fifteen banking firms. Result may differ for a bigger sample. Second,
these results reported here emerge from a developing country, Turkey. Despite
these limitations, this study provides important implications from theoretical and
practical perspective. This study indicates that human capital support is an
important element of profitability for banking firms.
Therefore, it could be said that Information Technology have improves
finance through banking firms by their performances as proven in this study which
have just been explained. Information Technology have improve bank
performances in so many ways not just through the relationship of IT capability
with human capital support but also in paying all sorts of bills through the internet,
buying the things you desire online through your bank and many more.
Information Technology have help people to communicate through online
accordingly to their finance and for us to get access to our finance account without
having to go to the bank. Of course, information technology have also help in
making sure that those methods is not easily access by other people.

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By information technology improving bank performances, it has also get
the trust of the customers of the banking firm and other than that , it has made the
employees job better and easier for them to do and with more effiency.
Technically, Information technology is really important and without it,
finance couldn’t be improve as good as today’s banking firms.
On-line businesses also include in finance. It is because the internat functions
nicely as a way to facilitate communications both within and between company.
The internet also an excellent venue for advertising and conducting trade with
consumers. It is currently possible to shop for goods and services through on-line
catalogs; subscribe to on-line versions of magazines and newspapers;and purchase
software. This just a few types of business transactions taking place on the on-line
maeketplace.
In additions to lowering transcations costs, the internet is transforming into a
global environment in which businesses and consumers are no longer restricted by
their geographical locations. For companies, this means more potential customers;
for consumers,this means a greater selection of services and products. This
revolution is literally changing the way a lot of companies do business. Here are a
few of the new and interesting business models on the internet.
ADVERSTING
- example; Altavista.
- -Altavista is a search engine.

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- -Adverstisers pay for the search service, and consumers can be targeted
for specific types of ads on the basic of their search requests. This
specialized type of adversting is very effective at reaching target markets.
MARKETING
- Example; AmericaNet.
- This service helps businesses get started on the Web and also has a
section for classified ads.
- Businesses can either purchase Web presentations or advertise through
AmericaNet.
PARTNERSHIP
- Example; FedEx eBusiness Tools
- fedEx offers eBusiness Tools as away to partner with businesses who
want an online presence.the tools provide ways to build and manage
on-line stores and catalogs, process orders and payments, and ship and
track orders.
RETAIL
- Example; L L Bean.
- L L Bean sells outdoor gear and clothing.
- Consumers can view, select, order and pay for their menchandise online.
SERVICE
- Example; Travelocity.com
- This is a full service travel agency (great for comparing airline fares.
- Travels can examine, reserve, and pay for tickets on-line as well as book
hotel rooms, reserve rental cars, and book vacations and cruises.
SOFTWARE

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- Example; Netscape.
- Buyers are able to download software, use it an pay for it on-line. One of
the key features here is that potential buyers can try a product out for a
month or so before purchasing it.
SUBSCRIPTION
- Example; The Wall Street Journal Interactive Edition.
- This is an electronic newspapaer. Some features are available to non-
subscribes.
- Subscribe can view continuously updated version of the newspapers on-
line 24 hours a day. This is the fastest method for getting the most current
news. Since many business investments are timecritical, having the latest
available information can be paramount.
Notice that in each situation, business costs are reduced by using the Internet, and
the convenience afforded the customer over the traditional method of conducting
business is significant. This combination will lead to many more successful
businesses and satisfied customers.

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 E-COMMERCE
E-commerce is the term used to describe conducting business
transactions-generally financial transactions—via communications technology. It
was originally performed via private network; for instance, the banking industry
has carried out electronic funds transfers (EFT) via private networks for many
years. Today, however, e-commerce is most often performed via Web sites.
Business that sell goods and service via only the Web are often called dot-coms
because they typically have a .com top-level domain in the URLs used to access
their Web sites. Many business today have both an online stores and abrick-and-
mortar store (a physical store); this business are sometimes reffered to as click-
and-mortar stores or brick and clicks.
Both computers and mobile devices are frequently used for e-commerce. In
addition to buying conventional goods and services online, mobile devices can be

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used to buy fast food, pay for a cab or parking, buy theater tickets, or send money
to other individuals while you are on the go. E-commerce performedvia mobile
phone or other mobile device is referred to as e-commerce and it is going rapidly-
according to one estimste, mobile payments in the U.S will total $214bilion
annually by 2015. M-commerce includes buying goods and services from online
stores using a mobile device, as well as other mobile financial transactions , such
as redeeming mobile coupons,paying bills, or transferribg money between accounts
or individuals. M-commerce transactions can take place via a mobile Web
page,mobileapp,or text message. If a proof of purchase is needed for the
transaction (such as a movie or plane ticket that must be presented for admittance),
it usually appears on the mobile phone screen as a barcode that can be scanned by
a barcobe reader when it is needed. An emerging m-commerce option is Near Field
Communications (NFC) technology, which uses RFID to facilitate
communications between devices including transferring payment information
receipts, boarding passes, and other information wirelessly between payment
terminals and mobile phone. Worldwide, vending machines are increasingly going
cashless-supporting only NFC, credit cards and other electronic payment
methods,instead of cash-particularly in locations where theft is an issue.The
collection of hardware,software,people,policies and strategies used to perform and
support e-commerce is reffered to as an e-commerce system.
But it also have disadvantages to the businesses and the customers ;
For businesses ;
 Must have an effective,always working Web sites.
 Lost businesses,since some people will never perform online transactions.
 Higher rate of fraudulent transactions.

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 Recurring threat of new competitors offering lower prices
For customers;
 Potential for fraud.
 Buying goods without seeing them in person
 Possible expensive returns.
 ONLINE PAYMENT SERVICE AND OTHER TYPES OF DIGITAL
CASH.
Online payment methods that electronically transrer money from a buyer to the
seller have become increasingly popular-esspecially for online auction payment.
These payment options are sometimesreffered ta as digital cash. The most common
way of exchanging digital cash is via an online payment service; other forms of
digital cash include digital gift certificates, digital gift card, and digital coupons.
There are a numbers of services available online to help shoppers electronically
pay for purchases. One of the most widely used is paypai-an online payment
service that allows individual to transfer money easily from their online payment
account to someone else. Oline payment services are often used to pay for online
auction purchases , but other e-commercesites can accept payPal payment as well.

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To accept PayPal payments, many e-commerce sites simply add a PayPal payment
button to their order form; this button typically brings the buyer to the PayPal
siyes,where the buyer can sign in to his or her account and then enter the necessary
data to finalize the transaction. A new option for embedded payments will allows
e-commerce sites to process PayPal payment from their checkout page. PayPal
payments can also be made directly through Facebook pages.
HOW THE INFORMATION TECHNOLOGY IMPROVES OUR FINANCE ?
Information Technology (IT) enhance companies to develop with the demands
and changes in global market by provider information of financial market
data to give clients a competitive advantages.
Information technology (IT) is a growing field and is very important in almost all
professional office and financial. This field got the fast pace more than any other
invented technology; last few years were growing years for this useful technology.
It is believed that business growth is correlated with the IT advancement; many
believe that business can flourish with a good IT system. Information technology
focuses on the development of electronic networks that exchange information.
Because all financial transactions involve the exchange of information, the
increasing popularity of online finance coincided with advances in information
technology. According to Professor Jane K. Winn of the University of Washington
School of Law, "Financial institutions were at the forefront in creating the global
information economy as it exists today." Finance today relies on information

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technology. With strong signs that the IT industry will continue to grow across a
range of industries. IT is quickly becoming a very important component which
ensures businesses can run effectively and efficiently. One key growth area is the
financial industry where IT opportunities will increase.
Information technology has many uses in finance. Companies nowadays use I.T in
many different ways from financial trading to reporting the earnings of a business.
A company has the financial services industry in Ireland and uses its Information
System on a daily basis. Information technology allows such companies in this
industry to quickly calculate‖ financial statistics‖, as well as for the use in
electronic transfers of money, but in Ireland at present the major key area within
the financial sector is funds, A good IT system in funds is ofmajor benefit to
companies and allows them compete for new business . There are many businesses
which are in need of the software packages for satisfying their operational as well
as functional needs. For fulfilling this requirement, these companies sign deals
with the software manufacturing companies. Information technology is useful in
ensuring the smooth functioning of all the departments in a company such as the
human resource department, finance department, manufacturing department and in
security related purposes. The companies in the automobile manufacturing sector
are able to get rid of any sort of errors or mistakes in the proper functioning of the
tools used for designing and manufacturing purposes. Due to the development of
the information technology sector, the companies are being able to keep
themselves aware of the changes in the global markets. The software applications
and the hardware devices are known to be the main elements of the use of
information technology. The web browsers, the operating systems, ERP's and
special purpose applications are the software which are used in information
technology. IT plays an important role in easily solving the mathematical problems

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and in the project management system. It has a great use in the automated
production of sensitive information, automated upgradation of the important
business processes and the automated streamlining of the various business
processes. It has also played an important role in the areas of communication and
automated administration of entire systems.Companies typically prefer to do
business with banks or financial institutions that offer many different services that
they can access through some kind of technology based device. The ability by a
customer to access their information quickly and securely through there
information system allows many banks to increase their customer base and thus
showing the high importance of the I.T in Finance. Information Technology (IT)
very important to enables companies to cope with demand and changes by provider
of financial market data, charting solutions, trading platforms, mobile solutions and
custom services and also help to find the solutions and services for brokerages,
banks, financial websites & investor relations websites. 500,000 active end users
worldwide. More than 300 servers under management in multiple data centers.
Ultra-low latency market data provided from direct connections to the world's
largest exchanges high performance and high-availability solutions with a strong
focus on security with more than 10 years of industry experience, we can propose
solutions which will provide a competitive advantage to businesses of any size.
Besides, our corporate vision are also provide easy-to-use, fast reliable and
affordable data, trading & charting solutions to give our clients a competitive
advantage to maintain constant communication with our customers during
development and integration phases. Provide full support and advice after delivery
employ highly qualified in-house developers, engineers and project managers
innovate and improve our offer based on feedback of our customers and end users
customers can easily transfer and complete online transaction. Instead of people

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using checks which are quickly becoming outdated for example, a company with a
good information technology can clear a transaction at a click of a button. A debit
or credit card purchase can be very quickly compared with the customers account
balance, this either then allows the transaction or not. But a lot of big Finance
companies that are in funds area develop they information systems for use in
producing NAVs as quick and accurate as they can, good I.T systems within a
company of this nature provides the company the most up to date information on
market prices on stocks and also the system itself must be user friendly and
accurate. Convenience a person looking after the own finance can received great
value from information technology in finance and with the development of IT this
has made personal finance so much easier and quicker . Banks provide data on
current and savings accounts on line as well as with drawals. A customer can
download all there account transactions and if the need arises can store them in
records on a home computer, companies can also nowadays do the same and nearly
always have they own accounting system built into the Information system
network to make things even easier for them and it also make things more accurate.
The Finance Industry can use Information Technology to create benefits from the
likes of the social media. Social Media sites on the Internet provides financial
institutions with useful information on their customers. By trying to get online
communities associated with their products, companies in the financial industries
not only received information but it can also encourage ― brand loyalty‖, it also
allows finance companies to contact the‖ younger demographics‖ that will be their
future customers according to this side. These are common fields of many
businesses; many fields may vary from business to business. Information
technology can assist all fields. In this age of globalization information technology
becomes a part and parcel of all business types. It development enables companies

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to cope up with demands and changes in global market. Use of proper software and
developing the solutions to problems are main elements of IT use in business. It
helps to deduce the problems and solving them. IT is a technology and it gives the
best result if handles by highly professionals and genius staff members. Before
hiring IT staff, make sure that this staff will be productive for you and your
investment will not be wasted. Many companies provide staff for IT department.
To search the companies around your area you may use the internet such as, write
IT staffing Philadelphia or your area name and hit the search on Google, you may
find many companies providing IT staff, go for appropriate. IT performs a
significant part in effortlessly resolving the mathematical problems and in the
management. Remember that as IT is important for your business, IT professionals
are also important. This research explores the concept of the information
technology (IT) competence of business managers, defined as the set of IT-related
explicit and tacit knowledge that a business manager possesses that enables him or
her to exhibit IT leadership in his or her area of business. A manager's knowledge
of technologies, applications, systems development, and management of IT form
his or her explicit IT knowledge. This domain further extends to include knowing
who knows what, which enables the manager to leverage the knowledge of others.
Tacit IT knowledge is conceptualized as a combination of experience and
cognition. Experience relates to personal computing, IT projects, and overall
management of IT. Cognition refers to two mental models: the manager’s process
view and his or her vision for the role of IT. The outcomes expected from IT-
competent business managers are chiefly two behaviors an increased willingness to
form partnerships with IT people and an increased propensity to lead and
participate in IT projects. More than that, Financial Service providers banks,
savings and loan associations, and credit unions probably will concentrate on

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transaction processing and place less emphasis on gathering deposits and providing
financing. Emphasis will be placed on computer and telecommunication-based
systems for delivering financial services. Included in the services offered will be
data processing, securities brokerage, and, possibly, insurance. In the future,
branches will be dominated by a variety of machines the consumer will use to
directly interact with financial service systems. Institutional personnel will serve
more of an advisory role and handle customer transactions, such as payments and
withdrawals, only in exceptional cases. Securities broker/ dealers, long providers
of transaction services, will compete directly with banks, savings and loan
associations, and credit unions in many areas. Today they already offer a variety of
services such as money market funds that are designed to give the customer ease of
access to financial assets. This trend will continue, and the future is likely to see
higher levels of activity by securities broker/dealers in processing an increasingly
broad variety of transactions. Retailers of food and general merchandise and
possibly other types of organizations will be attracted to the financial service
industry. They will see opportunities to profitably apply technological resources
which are in hand or within reach to offer transaction processing services. Firms
that have established information processing and telecommunication facilities are
likely to be particularly active in the financial service industry. New entrants into
the industry will have roots in such varied areas as retail food and dry goods
merchandising, petroleum production and distribution, and communications.
Traditional providers of financial services are likely to continue the present trend
toward diversifying their offerings, often entering into areas that have been closed
to them in the past. Users of Financial Services will be delivered to the customer at
a convenient location with little need for clients to visit the offices of a financial
service provider. The present tendency of corporate financial officers to use

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terminals in their offices to manage funds will extend to smaller businesses.
Although the trend is not yet clearly established, individual consumers are likely to
use home terminals to interact with financial service delivery systems. Consumer
financial services packages are likely to be offered in conjunction with other
information-based consumer services such as home shopping, investment
advisories, recreational services such as computer games, travel reservations, and
the purchase of tickets to sporting and theatrical events. Financial service
institutions may develop and operate the network used to distribute these services
or they may participate in networks assembled and operated by others. Consumers
may use terminals to order banks to pay bills or to purchase securities. They may
enjoy more flexibility in services used. For example, rather than carrying a fixed
amount of insurance, a terminal could be used to vary it in response to changing
needs (e.g., increasing coverage for theft while jewellery is kept at home rather
than in the bank vault). Orders to buy or sell stocks and bonds could be entered
from home and executed on an automated exchange. Consumers may use home
information systems to analyze their financial positions and to help make decisions
on investment opportunities. Using these and other capabilities will give the
consumer greater personal control over his assets. Consumers may find that they
need an account with a financial institution to have access to a variety of services.
Some employers may require direct deposit of payroll checks. Alternatively,
employers may offer employees the option of writing checks against salary held in
a company account in return for being paid daily. Consumers may need an account
to be able to use shop at home and travel reservation services. Although technical
differences will remain, operational distinctions between services offered by
various classes of providers will diminish. It will be more difficult for users to
differentiate between them. For example, though a money market fund offered by a

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securities dealer is quite different from a demand deposit offered by a bank, both
meet similar needs for consumers as accounts from which funds can easily be
withdrawn. As a conclusion, IT helps clients get what they want in improves their
finance by using data collected from customer to analyze their preferences.
Gaining insights into your business from customer data so you can more
effectively target marketing. Streamlining and automating business processes to
improve efficiency and keep costs low. Finding ways for customers to interact with
your business when they want and encouraging your staff to embrace new ways
improving customer treatment by providing tools and training to deliver better
service. The information technology that runs social media on the Internet provides
financial institutions with valuable information on their customers. By encouraging
online communities associated with their products, finance companies not only
acquire information but also encourage brand loyalty. For example, websites such
as TradeKing allow online stock traders to discuss their picks and advise
newcomers. Socially driven information technology allows finance companies to
contact the younger demographics that will be their future customers.
Besides that , the information technology also improves the banks , savings
and loan association and credit . It will concentrate on transaction processing and
place less emphasis on gathering deposits and providing financing. Emphasis will
be placed on computer and telecommunications-based system for delivering
financial service.Then , included in the services offered will be data processing
securities brokerage , and possibly , insurance. In the future, branches will be
dominated by a variety of machines the consumer will use to directly interact with
financial service system. The institutional personnel will serve more of an advisory
role and handle customer transaction , such as payments and withdrawals, only in
exceptional cases.

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Securities broker/ dealers, long providers of transaction services will
compete directly with banks , savings and loan association and credit unions in
many areas. Today, they are already offer a variety of services such as money
market funds that are designed to give the customer ease of access to financial
assets. This trend will continue and the future is likely to see higher levels of
activity by securities broker / dealers in processing an increasingly broad variety of
transaction . Retailers of food and general merchandise and possibly other types of
organizations will be attracted to the financial service industry. They will see
opportunities to profitably apply technological resources which are in hand or
within reach to offer transaction processing services.
After that , firms that have establish information processing and
telecomminucation facilities are likely to be particularly active in the financial
service industry. New entrants into the industry will have roots in such varied areas
as retail food and dry goods merchandising petroleum production and distribution,
and communications. Traditional providers of financial services are likely to
continue the present trend toward diversifying their offerings, often entering into
areas that have been closed to them in the past.
Furthermore , financial services will be delivered to the customer at a
convenient location with little need for clients to visit the offices of a financial
service provider. The present tendency of corporate financial officers to use
terminals in their offices to manage fund will extend to smaller businesses.
Although the trend is not yet clearly established, individual consumers are likely to
use home terminals to interact with financial service delivery systems.

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Consumer financial service packages are likely to be offered n conjunction
with other information-based consumer services such as home shopping ,
investment advisories, recreational services such as computer games, travel
reservations, and the purchase of tickets to sporting and theatrical events .
Financial service institutions may develop and operate the network used to
distribute these services or they may participate in networks assembled and
operated by others.
Consumer may use terminals to order banks to pay bills or to purchase
securities. They may enjoy more flexibility in services used. For example, rather
than carrying a fixed amount of insurance, a terminal could to be used to vary it in
response to changing needs.Orders to buy or sell stocks and bonds could be entered
from home and executed on an automated exchange. Consumers may use home
information system to analyze their financial positions and to help make decisions
on investment opportunities. Using these and other capabilities will give the
consumer greater personal control over his assets.
Consumers may find that they need an account with a financial institution to
have access to a variety of services. Some employers may require direct deposit of
payroll checks.Alternatively, employers may offer employers the option of writing
checks against salary held in a company account in return for being paid daily.
Consumers may need an account to be able to use shop at home and travel
reservation services.
Other than that, information technology(IT) financial management helps an
IT organization determine the financial value of IT service provided to its
customers.ITIL refers to this activity as service valuation, whereby each service
provider and the customer’s own assets.

GROUP 2
25
Service-based IT financial management aligns the basic activities,
accounting, charging and budgeting with other customer facing ITIL processes.For
example, the IT organization tracks expenses against the service catalog on a
continuous basis multiyear effort that measures existing financial commitments
and estimates future expenses related to its service. Because most IT organizations
need to recover costs or generate a profit, they implement a charging process, and
customers are billed for the IT services that they consume.
Accounting , charging and budgeting activities provide critical outputs and
improve service through investing in the high value services through rigorous
services investment analysis, business cases, and portfolio management. Similarity
, these outputs can lower costs through monitoring expenses related to a given
services and determine whether it can be provided more effectively , referred to as
service provisioning optimization in ITIL. We first define these basic financial
management activities in the following subsection.
Furthermore, information technology also helps an organization monitor IT
expenses against budgeted goals and prevent budget deficts and losses. IT
accounting also providesthe information with data to value a given services, an
organizationcan conduct service valuation analysis and optimize its investmentsin
the highest value services.Finally, IT accounting provides an organization with a
standard language that internal and external customers business partners , and IT
can use to evaluate the cost and benefits of IT services. This standard language
includes a standard basis for estimating costs across services , standard rates , and
standard approaches to measuring utilization or consumption of services. This
common framework improves customers satisfaction.

GROUP 2
26
As IT accounting and charging methods improve, the organization may use
them to forecast demand for the services defined in the services catalog or in the
underlying services pipeline. This information can then be used to develop
appropriate capacity within the capacity management process. ITIL refers to this
practice as demand modelling, which helps to ensure that an adequate level of
service can be provided to customers. It also helps customers budget for specific
services.
Demand modelling used in conjunction with charging can help also the IT
organization to influence customer behaviour. For example , you can use lower
―off-peak‖ billing rates to encourage customers to use IT services at specific
times in the day. This influence can help IT service providers work with customers
to avoid costly spikes in cost, for either the customer or the service provider. These
practices are summarized in the charging discussion later in this chapter.
Mature IT financial organizations also use this financial management
information to determine the benefits of financial investments made in IT projects
through service portfolio management , sevice and business cases.By
understanding, tracking and budgeting for sufficient resource , time and budget for
the project.
Other than that , information technology has changed the way companies
conducy business domestically and internationally . The banking and finance
industry has made great strides in implementing current technology in their
business operations.
The banking industry has used business technology to create several new
options for consumers including online banking , instant access to retirement
accounts , electronic wire transfer capabilities.Then, consumer typically prefer to

GROUP 2
27
do business with banks that offer a wide variety of services. The ability to access
their information quickly and securely through the Internet allows banks to
increase their customer base , increasing overall profitability.
Furtherrmore , the information technology can improves finance by
security.Security is always a concern when individuals use the Internet to access
personal information .Identifications and passwords limit access to confidently
information.Instead of binders and papers lying around , security can be greatly
enhanced with the proper computer programs.Using a program, accounting
information can be encrypted in a way to prevent unauthorized use, making it quite
safe. Banks must be able to use technology to protect consumers while allowing
them virtual access to their information. A lost , stolen or misplaced laptop or
desktop computer can be tracked using security software that cab be activated
remotely.
Banks can improve the transaction time it takes to transfer money and move
financial information between accounts or other banks using technology . This
improvement allows banks to collect funds from consumers and business quicker,
earning the bank higher interest rates on their funds.
Besides , banks can operate multiple locations in several or countries using
business technology . Information can be quickly transmitted to other branch
locations regarding funds and financing paperwork, allowing managers to make
better business decisions. Information technology allows finance to function on a
global level. ― Financial markets can be thought of as the first organized, global
information markets operating though networked computers,‖ Winn says. Without
information technology , financial markets couldn’t react to global developments
and finance companies couldn’t consistently acquire information at the same time

GROUP 2
28
as their competitors . For example, the Internet allows continuous access to credit
scores and credit ratings to all lenders , insurance companies and businesses that
need financially responsible customers.
Information technology focuses on the development of electronic networks
that exchange information. Because all financial transaction involve the exchange
of information , the increasing popularity of online finance coincided with advance
in information technology . According to Professor Jane K. Winn of the University
of Washington School of Law , ― Financial instituitions were at the forefront in
creating the global information economy as it exists today.‖ Finance today relies
on information technology.
The social media is also improve the information technology by finance. The
information technology that runs social media on the Internet provides financial
instituitions with valuable on their customers. By encouraging online communities
associated with their products , finance companies not only acquire information but
also encourage brand loyalty . For example , websites such as TradeKing allow
online stock trades to discuss their picks and advise newcomers. Socially driven
information technology allows finance companies to contact the younger
demographics that will be their future customers.
During the financial , information technology has impacted accounting
processes in a very good way.It is difficult to find anbody doing manual
accounting with paper and pencil these days. Since accounting department , from
the old days of the battery operated calculator to the fast computers of day.

GROUP 2
29
The most obvious impact of technology in accounting is the presence of
computers , printers , scanners and faxes . Information technology ( IT )
transformed the accounting world – no more green papers sheets andpencils. The
good news is that prices are affordable on most of the equipment easily and at a
reasonable cost. The machines are sophisticated, fast and easy to use.
Besides the equipment , accountants appreciate the software . For example ,
spreadsheet programs are highly efficient at helping accountants with calculations
and reporting . There are accounting programs in the market that are easy to use
and affordable , making them very popular with small businesses. Software can
help accountants in their daily tasks , such as paying bills , recording transaction
and reporting. The program keeps all data organized and in a centralized location.
Besides that , the internet opened many doors and made life easier in many
ways , especially in the accounting area where documents can be shared , research
can be conducted and taxes can be filed – all online . Connection to the internet can
be wireless and simple. Business don&#039;t have to buy software to run
some programs . Instead , some sites host the programs online , where files also
can be saved.
After that , because of the close synergy between accounting and
information system , many universities have started offering four-years degrees in
accounting and information system.Quite a few universities offer a major in
accounting and a minor in information system. The program usually includes the
typical accounting concepts and information technology ( IT ) .The accountant of
the present and future must be technologically savvy to be relevant and the
universities are preparing new graduates for this challenge.

GROUP 2
30
The Department of Finance & Information Technology provides financial
and computer support services to for all County operations and is responsible for
the maintenance and dissemination of reliable and accurate financial data and
reports. Duties include payroll, accounts payable, purchasing, budgeting, general
accounting, personnel and financial reporting. The Finance Director coordinates
and assists in the preparation of the annual financial report. The department is also
responsible for establishing policies and guidelines specific to these functions.

GROUP 2
31
Technology support services oversees the centralized computer and network
systems, provides strategic planning of County technology needs, maintains and
supports integrated systems ( telephone, electronic mail, financial software
system), provides technical support for computers and other devices and
coordinates the Web site for the County.
Finance can improve in banking system in nowadays. It is disheartening that
some of human being in this world using this opportunities to hack the bank to use
in criminal disease. Information technology has changed the way companies
conduct business domestically and internationally. The banking and finance
industry has made great strides in implementing current technology in their
business operations.Information technology has many uses in finance. From
trading financial instruments to keeping records of personal budgets to reporting
the earnings of a business, computer technology is used by financial companies
daily. Information technology allows the rapid calculation of financial statistics, as
well as electronic transfers of money.Information technology (IT), as defined by
the Information Technology Association of America (ITAA), is "the study, design,
development, implementation, support or management of computer-based
information systems, particularly software applications and computer hardware."
But in today's society, the term has grown to encompass not only technology,
telecommunications and computing, but has expanded to comer everything related
to processing and transfer of data as well. In this respect, the role of IT in the
finance industry certainly is an important one.
In nowadays, this paper develops and tests a model to examine the effects of
information technology (IT). It is believe that IT can improve banking in two
ways: IT can reduce operational cost (cost eﬀect), and facilitate transactions among
customers within the same network (network eﬀect). The empirical studies,

GROUP 2
32
however, have shown inconsistency on this hypothesis; some agree with the Solow
Paradox, some are against. Since most empirical studies have adopted the
production function approach, it is difficult to identify which effect has dominated,
hence the reasons attributed have been the difference in econometric methodology
and measurement. This paper attempts to explain the inconsistency by stressing the
heterogeneity in banking services; in a differentiated model with network effects,
we characterize the conditions to identify these two effects and the conditions for
the two seemingly positive effects to turn negative in the equilibrium. The results
are tested on a panel of 68 US banks over 20 years, and we find that the bank
profits decline due to adoption and diffusion of IT investment, reflecting negative
network effects in this industry.
The usage of information technology (IT), broadly referring to computers
and peripheral equipment, has seen tremendous growth in service industries in the
recent past. The most obvious example is perhaps the banking industry, where
through the introduction of IT related products in internet banking, electronic
payments, security investments, information exchanges (Berger, 2003), banks now
can provide more diverse services to customers with less manpower. Seeing this
pattern of growth, it seems obvious that IT can bring about equivalent contribution
to profits. In general, existing studies have concluded two positive effects regarding
the relation between IT and banks’ performance. First, IT can reduce banks’
operational costs (the cost advantage). For example, internet helps banks to
conduct standardized, low value-added transactions (e.g. bill payments, balance
inquiries, account transfer) through the online channel, while focusing their
resources into specialized, high-value added transactions (e.g. small business
lending, personal trust services, investment banking) through branches. Second, IT
can facilitate transactions among customers within the same network (the network

GROUP 2
33
effect) (see Farrell and Saloner, 1985; Katz and Shapiro, 1985; Economides and
Salop, 1992). Let us consider the case of automated teller machines (ATMs) by
banks. If ATMs are largely available over geographically dispersed areas, the
benefit from using an ATM will increase since customers will be able to access
their bank accounts from any geographic location they want. This would imply that
the value of an ATM network increases with the number of available ATM
locations, and the value of a bank’s network to a customer will be determined in
part by the final network size of the bank. Indeed, Saloner and Shepard (1995),
using data for United States commercial banks for the period 1971-1979, showed
that the concern of network effect is important in the ATM adoption of United
States commercial banks (see also Milne, 2006). In view of these two effects
above, it should be surprising to know that the evidence, however, shows some
inconsistency in concluding the contribution of IT to banks’ profit. 2Some studies
echo the so called Solow Paradox in concluding that IT will actually decrease
productivity. As stated by Solow (1987), "you can see the computer age
everywhere these days, except in the productivity statistics". Shu and Strassmann
(2005) studied 12 banks operating in the US for the period of 1989-1997 and found
that although IT has been one of the most marginal productive factors among all
inputs, it cannot increase banks’ profits. On the other hand, there are some studies
agreeing with the positive influence of IT spending to business value. Kozak
(2005) examines the impact of the progress in IT on the profit and cost efficiencies
of the US banking sector during the period of 1992-2003. The research shows a
positive correlation between the level of implemented IT and both profitability and
cost savings. The inconsistency in empirical results can be attributed to differences
in measurement and econometric methodologies (Berger, 2003; Tam, 1998).

GROUP 2
34
Alternatively, the current paper attempts to provide an interpretation by stressing
the heterogeneity in banking services.
Indeed, compared to manufacturing industries or agriculture, banking
industries present higher diversification in providing customer services. In this
case, a differentiated model with network effects would probably describe the
market better than the production function approach, which describes each bank’s
profit (output) as a specific production function of inputs. Notice that most
empirical studies have constructed their testing on productivity or growth. In
addition, while most production approaches only present a mixture of IT influences
on both demand and supply sides, a differentiated model can distinguish a network
effect from the demand side (in banking services) from a cost reduction effect from
the For example, Berger (2003) pointed out two approaches in measuring
productivity: either by the govermment productivity indexes or by a modified form
of the Solow (1957) neoclassical growth model (Oliner and Sichel, 2000).
Computers may affect productivity because they are a specific capital input to the
production process. This is the approach taken in most existing studies, including
both the national and industry-level studies just cited, as well as studies at the plant
or firm level, such as Brynjolfsson and Hitt (2000), Dunne et al. (2000), Stolarick
(1999), and McGuckin et al.(1998). 3supply side. Most importantly, a
differentiated model can characterize the competition in the industry, which cannot
be distinguished from the cost effect in the production function approach.
Specifically, our paper examines the effect of IT in a modified Hotelling model
with network effects due to Rohlfs (1974), and the theoretical conclusions are
tested on a panel data of 68 US banks for the period 1986-2005. The keypoint to
understand the inconsistenc is to contemplate IT’s influence to the whole industry,
rather than to the individual banks. For individual bank, it is true that both cost and

GROUP 2
35
network effects are positive. When all banks in the industry have the same access
to this cost-saving technology, will the cost advantage from adopting IT vanish due
to competition (in particular, price competition in banking industries). Will the
presence of multiple networks bring determinative benefits to each bank in the
industry? By investigating the equilibrium in a Hotelling model with network
effects, we are able to explore the overall effect of IT to the whole industry. The
main findings are summarized as follows. First, we derive a simple test on the
existence of network effect by checking the relation between market share and IT
expenditure.
If there is only a cost reduction effect, each bank’s market share will
increase with IT; however, if there is also a network effect, the market share does
not necessarily increase with IT. This result can be useful if a proxy variable for
the size of network is invalid (Saloner and Shepard, 1995, use the number of
branches possessed by a bank as a proxy for its expected ATM network size in
equilibrium). Our test on the US banks shows that, the market share is positively
related to IT expenditure indicating that there is a network effect. Second, we are
able to distinguish the cost reduction effect from the network effects. Since the
equilibrium price will decrease with IT expenditure, if we could isolate this price
effect by treating prices as one of the explanatory variables in the model,
Proposition 2 shows that if the overall impact of IT on profits is negative, then the
cost reduction effect is negative. Moreover, since in this case the market share still
increases with IT, this negative result will indicate Berger’s (2003) observation
that banks may have essentially "given away" th benefits from the ATM
technology in the 1980s as the industry became more competitive due to
deregulation, and rents from market power shifted to consumers (p. 142). Our
estimation of the US banks also show that if prices are treated as an explanatory

GROUP 2
36
variable, the overall impact of IT on profits is negative. Finally, in line with both
sides of the existing literature, we predict that banks’ profits can be positively or
negatively related to IT expenditure. In the equilibrium, each bank’s price will
decrease with its IT expenditure, but the impact on the profits will have to depend
on whether its market share has increased. The overall effect on the whole industry,
however, will depend on the relative sizes of weighted sum of IT and the average
of IT. Here, the weight is measured by each bank’s profit share. For the data of
US banks, we conclude that banks’ profits are negatively related to IT expenditure,
showing that the weighted sum of IT in the US is less than the average of IT.
Overall, a differentiated model not only fits in the banking industry more,
but also enables us to distinguish the network effect from demand side and the cost
reduction effect from supply side. Our empirical study on the panel data of US
banks shows that due to severe competition, each bank has over-invested in IT
equipment, while the benefits from networks and cost reductions are competed
away. The remainder of the paper is organized as follows. Section 2 presents the
modified Hotelling model with network effects and derives three results concerning
the relation between IT and equilibrium behaviors. In Section 3, the theoretical
conclusions are tested on a panel data of 68 US banks for the period of 1986-2005.
Section 4 concludes the paper.
It also became pronounced immediately the line between accounting,
finance and InfoTech was removed from the business world. The advent of
information technology removed boundaries that have for ages been a major
barrier to globalized trading and business. In fact, it is difficult to imagine what
business executives will face if IT completely isolated from business now .I can
assure you that the global business network will crumble in a twinkle of an eye.

GROUP 2
37
Finance and IT have manmade Siamese twins that will take divine intervention to
separate.
Though the importance of information technology in business and
finances are somewhat obvious, not everybody appreciates these importances of IT
in finance. This article is written to bring together the importance of InfoTech in
finance in such a way that everybody will understand. The article is divided into
two sections; one setion dealing with positive roles of IT in finance and the other
talking about the negative roles of IT in finance.
Bibliography
Books

GROUP 2
38
Morley D. (2013).Understanding computers Today and Tomorrow 14th
Edition.
2013 course technology cengage learning.
Websites
Wagner, Todd, Treating Your Customers Right, November, 2003.
Wasserman, Elizabeth, Tech Talk: Online Game Site Develops
ForumIncTechnology.com, 2009.
Zetlin, Minda, Helping Customers Help Each Other Online, IncTechnology.com,
2007.
Zetlin, Minda, Making Chat Work for Customers, 2008.
Sean Mullin, Demand Medin, www.smallbusines chron.com.my.Jun 2007,
AyseGunsel. (2011). Does Information Technology Capability improve bank
performance.

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