Contents

No Topic Page No.

1 Introduction to Information Technology 1

2 Information Technology Supplements Business

Environment 2

3 Banking Sector 5

4 Insurance Sector 8

5 Stock Exchange 9

6 Corporate Sector 13

7 Use of Internet & Social Media in Financial Sector 15

8 Adapting to the New Regulatory Environment 16

9 The Positive Effects of Information Technology 18

10 The Negative Effects of Information Technology 19

11 Technology with a Purpose: The Next Generation Today 20

12 Conclusion 21

1

Introduction to Information Technology

Our society is being reshaped by rapid advances in Information Technology, computers,

telecommunications networks and other digital systems. It has vastly increased our capacity

to know, achieve and collaborate. These technologies allow people to transmit information

quickly and widely, linking distant places and to create communities that just a decade ago

were unimaginable.

It is difficult to appreciate how quickly Information Technology is evolving. Five decades

ago ENIAC, one of the earliest computers, stood 10 feet tall and stretched 80 feet wide; while

today, one can buy a musical greeting card with a silicon chip that is 100 times faster than

ENIAC. This extraordinary pace of Information Technology evolution is bringing people and

cultures together and creating new social dynamics in the process.

There is a long-standing trend in the computer industry in which the number of transistors

that can be placed on an integrated circuit doubles every two years. This trend, which has

continued for more than half a century, tells us that future advances in processing power and

capacity will not be linear, but exponential. For the financial services industry, this translates

into nearly limitless opportunities to put this emerging wealth of computing power to work.

The advancement of technology has had an enormous impact on the world. Communication

technology in particular has drastically changed the way society operates. With new advances

in communication being developed constantly, people are becoming more and more reliant

on the benefits they provide. Communication technology has become significantly important

in the realms of education, business, politics, interpersonal interactions and crisis responses.

2

Information Technology Supplements Business Environment

Technological advances in the past few decades have greatly increased the competitive nature

of the economic business world. Companies have used software, computers and the Internet

to transform their businesses from local places of business to national and global market

competitors. Many companies have responded to these changes by automating their business

processes and capturing industry-related information and using it to their advantage.

Technology has also forced businesses to remain flexible, adapting their operations to newer

and better technological advances.

Better Reporting Functions

Companies that have multiple locations, whether

nationally or globally, have used technology to

implement better communication services and

software modules that communicate to a home

base via the Internet. This allows companies to

penetrate new economic markets without

sacrificing the needs of communication or

financial and operational reporting. Additionally,

companies can improve their management

information system (MIS) to capture information

for specific locations when making business

decisions.

Financial reporting has also benefited greatly from technology; rather than sending external

auditors to multiple locations, it is possible to create a centralized accounting office to record

and report financial transactions. This improves financial reporting and lessens the expense

related to external audits.

3

Increased Employee Productivity

Computers and business software packages have

exponentially increased employees' productivity

by allowing them to provide data entry functions

or review automated reports. Companies have

automated several traditional manufacturing

processes; instead of using manpower to manually

create and assemble goods, machines and/or

robots now complete these functions. While these

improvements may increase capital expenditures,

they lessen the impact of consistent labour

expenses related to productions. Fewer employees

are needed to monitor the machines and ensure

they are working properly.

Other areas, such as customer service, accounting and administrative support, have also seen

an increase in employee productivity. Employees now review and report electronically

collected data to ensure they are accurate and timely, rather than manually gathering

information.

Improved Business Mobility

Technology has also improved companies' sales

and service departments by allowing employees to

use personal electronic devices to create sales

displays and transmit orders and customer

information to the home office. These electronic

devices shorten the lead time companies spend on

receiving and delivering goods or services,

creating an instant competitive advantage in the

industry. Companies can also send sales

representatives to multiple markets at the same

time, allowing them to penetrate multiple markets

with few overhead costs. Companies may allow

their internal employees to work from home using a company Internet connection, reducing

the fixed overhead expenses from a large corporate office.

Reduction in Storage Space

Prior to the advent of Information Technology,

corporate had to invest in large storage spaces and lot of

paper work was involved. Searching of old records was

a nightmare. The present digital age allows us to store

huge amounts of data / information on tiny storage

devices with large capacities. The financial books for

years can be stored in a small digital device.

4

Reduction in Communication Costs

The cost of communications which used to be very

expensive has drastically reduced with today’s

electronic devices and emails. Sharing of large amounts

of information across the globe has been a boon with the

internet and the world-wide-web.

Financial Data Analysis

Financial data analysis and generation of matrices

have helped users and organisations perform their

decision making activities more efficient and accurate.

Information has become more accessible, reachable,

portable, and editable across mediums and devices

and across users as well.

5

Banking Sector

Information and communication technology is playing a vital role across many industries and

sectors, resulting in a positive impact on economic development cutting across the

geographical barriers. It is important to note that the financial sector and more particularly

banking industry was one of the very first to utilize information technology way back in the

1960s, and has thus the record of influencing the development process through the

technology. The banking sector is an example in which information technology

infrastructures have had implications on the economic development of many nations across

jurisdictions. Studies show that information technology coupled with knowledge management

hold much potential for propelling the development process.

Since the 1990s, the banking sector in India has seen greater emphasis being placed on

technology and innovation. Banks began to use technology initially with a view to take care

of their internal requirements pertaining to book keeping, balancing and for transactions

processing; the all-pervasive face of Information Technology soon enabled banks to provide

better quality of services at greater speed. Internet banking and mobile banking have made it

possible for customers to access banking services literally and virtually from anywhere and

anytime. The biggest barriers, time and distance, to access banking services were crossed by

leveraging technology. The sector has also moved rapidly towards universal banking and

electronic transactions, which changed the way banking is done, during the last decade or so.

Take the case of payment systems where technology has brought in a sea-change. Till 1990s,

one could make payments in this country through two predominant means - cash and cheque.

Today, a tech-savvy customer is empowered to choose a desired service from slew of

products- card payments, NEFT transfer, RTGS transfer, ECS/NECS payments, mobile

payments etc. Further, after using any of these payment methods, the first instrument he turns

to is his mobile phone for confirmatory messages, a feature unique to India. The most

frictionless solution is not a smart phone but a collection of sensor networks that

automatically identify the buyer, scan the items to be purchased, and process payments

without human intervention. No lines, no taps, no swipes, no associates, no cash registers.

Just wireless sensors and networks that automatically process transactions, manage inventory,

etc. Biometric factoring is not that far away, fingerprinting and retina scans.

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. The banking industry has used business

technology to create several new options for consumers, including online banking, instant

access to retirement accounts, electronic application processes and electronic wire transfer

capabilities.

IT can reduce banks’ operational costs 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.

IT can facilitate transactions among customers within the same network (e.g. automated teller

machines (ATMs) by banks)

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The Facts

Consumers typically prefer to 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.

Considerations

Security is always a concern when individuals use the Internet to access personal information.

Banks must be able to use technology to protect consumers while allowing them virtual

access to their information.

Benefits

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 businesses quicker, earning the bank higher

interest rates on their funds.

Geography

Banks can operate multiple locations in several states 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.

MICR Encoding

In 1952 the banking industry was drowning in paper and rapidly losing functionality. Forty-

seven million accounts generated 8 billion checks that year. Each one was manually

processed and physically touched 2.3 banks on average. The Technical Committee on

Mechanization of Check Handling was formed by the American Bankers Association and

charged with creating an automated system for processing checks. Their solution was to

encode checks with magnetic ink in a language that could be read by machines, known as

magnetic ink character recognition (MICR). Machine makers, the print industry and the

Federal Reserve adopted the committee's solution, and it is has been in use for well over half

a century.

The Asynchronous Transfer Mode (ATM)

The patent for asynchronous transfer mode (ATM) went to Docutel, for its Docuteller

machine, first installed in Chemical Bank. The bank ran an ad saying, "On September 3,

1969, our branch will open its doors at 9:00 a.m. and we'll never close again!" Twenty-four

hour banking was born on that September morning.

Automated Clearing House (ACH)

In 1970 the Federal Reserve acquired the necessary computer processors and established the

Clearing House Interbank Payments System to process automated international banking

transactions. The federal government and large businesses quickly saw the merit of the new

technology. They negotiated agreements to use the equipment, facilities and staff of the

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Federal Reserve to process high-volume recurring payments like Social Security checks and

government payrolls. By 1978 a nationwide Automated Clearing House (ACH) network was

in place and direct deposit payroll checks were rapidly becoming commonplace.

Online Banking

ACH capabilities, the emergence of strong security systems and the prevalence of home

computers, combined with a busy society hungry for conveniences, created ideal

circumstances for online banking to flourish. Banks began offering online banking in the

1990s, allowing customers to view their accounts in real time, pay bills without writing

checks and schedule recurring transactions.

8

Insurance Sector

The impact of Information Technology in Insurance business is being felt at an accelerating

pace. In the initial years IT was used more to execute back office functions like maintenance

of accounts, reconciling broker accounts, client processing etc. With the advent of "database

concepts", these functions are better integrated in an administrative efficiency.

The real evolution is however emerged out of Internet boom. The Internet has provided brand

new distribution channels to the Insurers. The technology has enabled the Insurer to innovate

new products, provide better customer service and deeper and wider insurance coverage to

them.

At present, Insurance companies are giving customers a distinct claim id – to track claims on-

line, entertaining on-line enrolment, eligibility review, financial reporting, and billing and

electronic fund transfer to its benefit clan customers. Also calculating the EMI’s amount &

related calculations are done online.

9

Stock Exchange

The National Stock Exchange (NSE) changed the way the Indian markets functioned, in the

early nineties, by replacing floor based trading with nationwide screen based electronic

trading, which took trading to the doorstep of the investor.

Information technology enhances investor growth. The Internet has created global

availability of information. Although there are the ‘Have’s and the Have Not’s’ regarding

technology and technical know-how, the Internet and the World Wide Web, the global open

market and pop culture, and the Information Age economy is quickly spreading throughout

the world. Also the financial statements for most corporations have been published for public

use on the World Wide Web. The access of this public information makes it easier for more

investors to have the information they need to make smart, well-educated decisions for

investing. Since investors are able to be better educated about investing, more investors have

entered the market. Participating in the market is not only easier, but also cheaper. Since the

information is out there for everyone to see, more and more people are becoming their own

investors, cutting out the middleman, which is the broker. Cutting out the middleman allows

the investor to keep the percentage of money he used to pay the broker.

Key developments can be received through new communication networks. Through the

Internet an investor can find large amounts of information on the Stock Market and many

corporations. New technology also allows investors to be able to buy and sell stock and

bonds on-line. The investor can maintain on-line brokerage accounts. An investor can do

this either by keeping up with their accounts daily of by putting a low or high cap one each

stock. An investor can also get information on particular stocks and the history of these

stocks. In some cases an investor can receive on-line advice from a broker if they need help.

However, easy as it is for individual investors to get on-line and invest for themselves, there

are negative aspects of the information technology age for investors. Distorted facts are

possible with such a plethora of information. Investors looking for information may find the

wrong information or information that has been cooked, changed, or distorted in the

corporations’ favour. Also, the more information there is out there, the harder it is to find the

information you need because you have to trudge through all the excessive information.

When a broker makes a decision to invest, the decision is based on many different things

such as the buying and selling price for the past couple years, the stock’s beta, etc… With

ease and inexpensive access brings unsophisticated investors. The unsophisticated investor

thinks to themselves, “how hard could it be?” They do not know what they are doing and

lose their money.

Investment professionals historically relied on the use of shouting and hand signals known as

open outcry as a method for communicating buy and sell orders on stock and futures

exchanges. The system is used at financial exchanges such as the Chicago Mercantile

Exchange and the American Stock Exchange (AMEX). Using the system, traders typically

make quick gestures across the trading floor to indicate a buy or sell order. A trader who

holds his hands up with his palms facing in is gesturing that he would like to buy. When the

trader’s palms are facing out, it indicates a desire to sell. The numbers one through five can

be gestured on one hand with the fingers pointing directly upwards. For six through ten, the

hand is held sideways, parallel to the ground. Counting starts from six when the hand is held

in this way. To achieve blocks of ten, numbers are gestured from the forehead, while

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repeatedly touching the forehead with a closed fist indicates blocks of hundreds and

thousands. Signals can also be used to indicate months, specific trade option combinations

and additional market information. Although rules vary significantly among exchanges, the

purpose of the gestures remains the same.

Ever since the advent of Modern Portfolio Theory, asset managers have used computation

and mathematics to model portfolio risk and return. Being able to effectively quantify

portfolios and markets has allowed managers to address the daily challenges of money

management with objective information and analysis, both of which have steadily increased

in volume, quality and granularity with the advance of computing power. While the

application of technology to portfolio management and asset allocation has helped drive the

greatest accumulation of investment assets in history, it has also had unintended

consequences, effectively creating a kind of self-perpetuating technological arms race that

has been blamed for exacerbating the financial crisis.

In quantitative finance, back-testing refers to the use of historical data to simulate outcomes

of a hypothetical investment strategy. For example, a researcher who wants to test the

efficacy of a particular rebalancing rule could evaluate how it would have performed over

any given time period and set of assets for which he or she has data. While the adage “past

performance is no guarantee of future results” is especially applicable to back tests, they do

provide insight into the relative merits of alternative strategies and are a key component of

the quantitative research toolkit. The modelling of entire markets in this way would not be

possible without high-performance computers that can accommodate massive volumes of

transaction and pricing data. As every new threshold of quantitative analysis is reached,

investors raise the bar and develop expectations of market insight that is both broader,

accommodating more investment scenarios, and deeper, with more precise factual

information about investor behaviour and its impact on securities prices. These expectations

also extend to associated derivatives markets, in which data volumes are substantially larger

and perhaps more indicative of investor sentiment and trends.

As the global pool of investments under management continues to expand, and as the

proportion of these assets that move across borders increases, asset owners and managers

must cast an ever wider net, incorporating into their strategies more markets, assets classes

and securities types. It is a truism of risk management that investors cannot manage what they

can’t measure. And measurement of globally distributed portfolios demands ever-larger

models composed of ever-more numerous and varied securities.

While this challenge may be daunting, it cannot be ignored because all market participants,

dealers, buyers and electronic markets are similarly committing to the new technologies that

define markets. Asset owners and managers have little choice but to continue investing in

Information Technology systems and raw computational power for building intelligent,

networked models that seek to map risk and dynamically evolve both in service to alpha

acquisition and to enhance risk management.

But technology alone cannot resolve critical investment challenges. A state-of-the-art

operating room and arrays of diagnostic technology, by themselves, do not necessarily

foretell a successful medical procedure any more than super-computer databases and

networked workstations alone can manage a globally allocated investment portfolio. The

human factor experienced financial practitioners expert in both the theory and application of

financial practice is an important determinant of successful financial outcomes. In the

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complex partnership between expertise and technology, the arms race of ever-more powerful

systems engaging ever larger and more complex markets shows few signs of abating.

Technology has dramatically advanced the trading of financial instruments over the past two

decades. In that time, the practice of “open outcry” trading has been replaced by electronic

trading platforms for equity, bond and currency markets, among other areas. This shift has

fundamentally changed the way these markets behave and has led to higher trading volumes.

Technology is the best tool for adapting to new regulatory conventions. To ensure

compliance with new rules, derivatives market players will need to take a hard look at current

technology platforms and retrofit them to the new market realities. The bar is much higher

than it was before and demonstrating regulatory compliance will be challenging.

Regulatory reform is an expanding and changing variable around the world. Perhaps the

biggest challenge is the uncertainty about the shape of future regulations. Yet, while no one

knows exactly how far regulators will go, new rules stand to make the markets a better, safer

place for everyone.

Technology is the only solution to effectively meet the challenges inherent in new trading

regulations. It has already turbo-charged the process of switching from a relationship model

to the tried-and-true Chicago market model — a model that has ensured the safety of

customer risk positions and margin money over the past 100 years which will democratize the

markets and level the playing field for all. Further, success in eliminating credit risk hinges

on the ability to harness technology to assess and analyze valuations and risks in real time. To

do this, market transparency through electronic execution platforms is required.

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Technology is the great equalizer. When equally distributed, it trends toward transparency

and open competition. Advancing and improving upon technology protects the best interests

of the world’s economies and ultimately will help all market participants grow their

businesses.

13

Corporate Sector

Technology affects almost every aspect of our lives. Just look around you and you'll see how

wired we are. Thanks to the Internet, virtually anything you desire can be delivered to your

door in a matter of days. Technology and the advances in communication and information

technology, has changed the face and the pace of business

The Internet enables airlines to provide online flight booking, banks to offer online account

management and bill pay and allows any company to sell any product online. In general, the

Internet has proven to be an inexpensive way to reach more customers. Nowadays, if you

can't find a business online, or if it has an outdated, ugly Web site, it looks downright

unprofessional.

The finance department in a corporation is in charge of taking accounting data and creating

reports that the managers within the company, all the way up to the CEO, need for decision

making purposes. Information Technology refers to the software tools and computer systems

the company uses to automate these functions and organize the data flow to improve the

management team's decision making capabilities.

Enterprise Resource Planning

Even very small companies use accounting software packages like Tally, that generate

financial reports such as income statements and cash flow statements. This simple form of

Information Technology allows a small business owner to save accounting time and have

management reports available on timely basis. Today balance sheets and other financial

records can easily be created and maintained and distributed online to stakeholders.

Mid size and larger companies use more sophisticated Information Technology systems

called enterprise resource planning or ERP, which are groups of software modules that serve

the needs of all functional areas of the company. As its name suggests, ERP helps the

company plan the use of its resources, a process that the finance department oversees.

Faster Flow of Information

Information Technology systems allow a company to link up every department within the

organization. Information generated by the manufacturing, marketing and finance divisions

can be shared for example. This information is available real-time, meaning as soon as it is

created on the system. Accessing it does not require a great deal of research or manual effort.

The time finance staff used to devote to "digging" for the numbers they needed can now be

devoted to analyzing and interpreting the information -- finance's primary role in the

organization.

Customized Reporting

The Information Technology systems used by the finance department have a report

generating functionality that speeds up the process of producing management reports. The

system provides a certain degree of customization -- the reports can be configured based on

the specific needs of the management team. Automation of these reporting systems means

that routinely generated reports, such as those produced at the end of each month, can be

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created quickly. With many of the decisions management has to make, time is of the essence.

Information Technology systems address this need for rapid, customized reporting capability.

Collaboration

Many organizations take advantage of collaborative effort across departments, the concept of

each department benefiting from other departments' expertise. The finance team acts as in-

house consultants to other departments within the organization. When all departments use a

centralized Information Technology system, it drops the barriers that formerly blocked the

flow of information. The company now has a centralized database that all team members can

access -- subject to certain security rules. In the case of a company with multiple offices or

international divisions, this ability to access the same information from around the globe

saves time and improves efficiency. If finance requires manufacturing cost data to create a

report for an upcoming board meeting, operations personnel can quickly transmit the data in

the format the finance department requires and understands.

Better Forecasting

Better forecasting means producing a forecast that is a more accurate prediction of what the

company's financial results are likely to be. Finance staff members need access to in-depth

information to create forecasting models that depict how the organization actually works.

Having access to information from all segments of the company makes accurate forecasting

much easier. Finance has real information and does not have to rely on guesswork when

creating assumptions for the forecast.

15

Use of Internet & Social Media in Financial Sector

The open, public nature of the Internet threatens the closed information networks developed

by the financial industry in the late 20th century. As a result of this conflict, banks are at the

forefront of both information sharing and information security technology. Online

commercial transactions began in 1995, and by 1998 the Internet was processing more than

$50 billion worth of transactions. In the 21st century, the annual worth of Internet

transactions is higher and requires more networks, more computers and more security

programs. Financial institutions cannot compete without a broad but secure information

network, so information technology is essential to their success.

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.

16

Adapting to the New Regulatory Environment

In the last few years, there have been new laws targeting financial services entities, making

financial services the most highly regulated sector. More specifically, much of this legislation

is concerned with the protection of non-public information (NPI) and personally identifiable

information (PII). With major customer data breaches reported by the media on a daily basis,

and with identity theft as the fastest growing financial crime, it is not surprising that

regulators are focusing their attention on this growing issue. Even more legislation is on the

horizon.

Non-Public Information (NPI) and Personally Identifiable Information (PII) Non-public information (NPI) is an encompassing term that refers to all information

appearing on applications for obtaining financial services (credit card or loan applications), or

on account histories (bank or credit card). It also includes the customer’s status with the

organization: either a current or previous customer. NPI can include: names, addresses,

telephone numbers, Social Security numbers, PINs, passwords, account numbers, salaries,

medical information, and account balances. In general, NPI is broader than its counterpart,

personally identifiable information (PII).

PII is typically regarded in the information security and privacy fields as any piece of

information which can potentially be used to uniquely identify, contact, or locate a single

person. PII can include: national identification numbers, street addresses, driver’s licenses,

telephone numbers, IP addresses, email addresses, vehicle registrations, and ages.

While identity theft is the number one financial crime, the theft of intellectual corporate data

is also on the rise. Laws are enacted specifically with a mandate to the financial services

entities to protect customer personal information and to combat identity theft. In addition

there are a number of data protection laws, which also apply to financial services

organizations. The remaining laws relate to protecting intellectual corporate data and

information assets, but the same security safeguards apply to all.

The Reserve Bank of India runs a Department of Information Technology (DIT), the primary

function of which is Computerisation in RBI (Regional Offices and Central Office

Departments), Design and development of projects for use of banks and financial institutions

and Monitoring progress of technology in banks.

The Information Technology Act 2000 created legal procedures for electronic transactions

and e-commerce. It addressed the following issues:

Legal Recognition of Electronic Documents

Legal Recognition of Digital Signatures

Offenses and Contraventions

Justice Dispensation Systems for Cybercrimes

The Amendments to the Act has provided additional focus on Information Security. It has

added several new sections on offences including Cyber Terrorism and Data Protection. A set

of Rules relating to Sensitive Personal Information and Reasonable Security Practices

(mentioned in section 43A of the ITAA, 2008)

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Some of the cyber law observers have criticized the amendments on the ground of lack of

legal and procedural safeguards to prevent violation of civil liberties of Indians. There has

also been appreciation about the amendments from many observers because it addresses the

issue of Cyber Security.

It empowers the Government to intercept, monitor or decrypt any information generated,

transmitted, received or stored in any computer resource, in the interest of the sovereignty or

integrity of India or for investigation of any offence. They can also secure assistance from

computer personnel in decrypting data under penalty of imprisonment.

This is widely criticized and has also led to numerous abuses reported by the press and even

challenged in Lucknow and Chennai High Courts for its constitutional validity. The Bombay

High Court has held that creating a website and storing false information on it can entail

cyber crime.

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The Positive Effects of Information Technology

Technology has changed much of the

world, but the effects are rarely more

pronounced than in the area of business.

Businesses today use technology in

almost every facet of operation. They

communicate with advanced network

systems; they analyze data and plot

forecasts using complicated programs;

they utilize all types of digital media for

marketing campaigns; and they

streamline operations with new

inventory and check-out systems.

Technology is not without its downsides,

but business cannot deny the impact it

has had on every level.

Speed

Technology allows businesses to do everything faster. Many

processes that once required ledgers, check-books and journal

notations have now moved onto computer systems. Logging

in and out, updating inventory information and

communicating can now happen much more swiftly. This

allows businesses to react immediately to any changes.

As communication and information travels faster and faster,

the world seems smaller and smaller, and this has large

implications for the way we conduct business. Storing

important in files on a computer rather than in drawers, for instance, has made information

easily accessible. Using e-mail allows businesses to communicate and send these files

quickly to remote locations outside of an office.

Accuracy

A properly designed computer program does not make any

mistakes, and its computations (not its inputs) are free from

human error. This means that a calculation done by a

computer program (like Excel) will always be accurate and

trustworthy. Finance Packages like Tally give you up-to-date

tallied Balance Sheet at any point in time.

Unless the coding or the inputs are wrong, there is no chance

a program can produce inaccurate data.

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The Negative Effects of Information Technology

Competition

Technology moves very quickly, constantly evolving and

creating new devices and faster systems. Businesses note

these changes and attempt to move with technology,

adapting it to their present and future needs while also

keeping a wary eye on the technology competitors are using.

The end result is an increase in the evolution of technology

and its application to business, a process by which everyone

benefits.

Expensive to buy Software Licenses & Out of life hardware

no AMC within a short period of time. Training employees

cost on new modules prove expensive.

Confusion

While technology is useful, its fast pace and complex systems

can be confusing. If companies want to update their systems or

change the type of technology they use, they have to retrain

not only employees, but often customers. New employees

must also be trained in using business systems, which can

create confusion.

Distorted facts are possible with such a plethora of

information. Investors looking for information may find the

wrong information or information that has been cooked,

changed, or distorted in the corporations’ favor. Also, the

more information there is out there, the harder it is to find the

information you need because you have to trudge through all the excessive information.

Customised financial software packages that generate various reports and financial ratios

with in-depth analysis and jargon, can sometimes be quite confusing.

Availability

Technology is very available, meaning that it is easy for

competitors of all sizes to use and learn. This makes it

difficult for businesses to keep up with technological changes

and vastly increases the number of competitors in their

market as smaller business can use technology to offer value

to a wider range of consumers.

Crime

Technology also increases the possibility of crime. A tech-

savvy employee can embezzle funds and make it difficult for

the company to trace. Hackers can access personal and

financial data of customers who trust the company to keep

their information safe. Businesses must spend time and money

developing safeguards against these events.

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Technology with a Purpose: The Next Generation Today

Technology has long been an essential behind-the-scenes partner in the financial services

industry, providing the innovative incremental advances necessary for the industry to upgrade

and expand its services. Improvements in storage capacity and processing speed, for example,

have had a profound impact on data management and transactional capabilities, with

accompanying reductions in cost. Yet despite these and other advances, the industry has

struggled to fully leverage the power and promise of technology, with market participants

eager for solutions that are not only faster and cheaper, but that also offer greater security and

efficiency.

With the critical technology and related business challenges facing the financial services

industry, a solution is at hand for those able to meet it. The idea of a seamlessly integrated

approach to processing, managing, delivering and correlating data has the potential to change

not only the technology landscape but, more importantly, the business landscape as well.

Tools available today, coupled with emerging new business approaches geared to address

current organizational challenges, can shift this idea from a future possibility to an actual

solution for today. Third-party providers, with their experience, expertise and deep resources,

can help realize the vision now. At the same time, although the stakes are high for providers,

the opportunities are enormous. Firms that excel at execution in achieving optimal computing

power and that have the capability to leverage it will be best-positioned to reap the benefits.

As technology innovation is increasingly viewed as a strategic imperative, rather than a

support function, a game-changing chapter will begin to unfold across the financial services

industry.

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Conclusion

The stage is set for an exciting era of innovation as increasingly powerful and sophisticated

technology becomes intertwined in the DNA of the financial services industry. It is this

continuing convergence of advanced business processes and technology that is steadily

moving us closer to achieving the true, seamless integration of information, tools and front-

office capabilities. This phenomenon has the potential for significant impact in the financial

services industry. Not only will it help facilitate the full spectrum of risk and return

management, but it promises to fundamentally change the way investment decisions are

considered and made.

Indeed, we are nearing the day when this increasingly powerful technology, properly and

efficiently deployed, will be able to provide institutional investors with an unprecedented

level of awareness of their business environments, helping to better inform their decision-

making processes and empower them to manage risks and optimize returns in ways simply

not possible in the past.

The role of technology and innovation in the financial services industry is evolving more

quickly and with greater potential impact than ever before. For service providers and the

clients they serve, the potential benefits are numerous, and include the promises of more

informed, holistic decision-making, more powerful predictive capabilities and enhanced risk

and compliance frameworks in which to operate.

As our industry continues to embrace and incorporate these amazing technological advances,

we are able to extract more intelligence and potential value from raw data today than ever

before. This trend is certain to continue going forward. And, in addition to helping market

participants to grow their respective businesses and portfolios, this evolution of technology in

the financial services industry will help lead to increased transparency and openness,

protecting the best interests of the respective market players, their clients and the economies

from which they operate.

While there are clearly some compelling business advantages associated with this enhanced

role of technology and innovation in the financial services industry, there are also a number

of obligations. Going forward, industry participants will need to respond to the numerous

challenges presented by the rapidly changing regulatory environment we’ve witnessed since

the global financial crisis. The regulatory landscape continues to evolve and the number of

parties interacting with one another continues to increase. All the while, providers are

expected to react more quickly, continue to create new functions and features, and seamlessly

integrate those new features with the rest of their service offerings.

To ensure ongoing compliance with this new and constantly evolving set of rules, providers

will need to be able to quickly and efficiently retrofit their technology platforms to suit these

newly introduced regulatory conventions. Coping with the challenges associated with a

regulatory landscape in a state of constant flux will be a key challenge facing the financial

services industry going forward, but it, too, is a challenge that can be overcome through the

strategic application of technology.

As for the institutional investors themselves, they continue to clamour for newer, more

complex and more flexible ways to manipulate, enrich, adapt and view their business data.

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Portfolio managers who were once content to revisit risk models quarterly or monthly are

now demanding access to information on a much more granular and timely basis. And now,

the bar is being raised even higher, as institutions search for ways to use this data not only as

a detailed reflection of the recent past, but also as a telltale window into the future. Realizing

the benefits of private cloud computing will be critical going forward.

As we’ve seen, for the most part, the technology required to achieve these goals already

exists. One of the primary challenges in implementing it, of course, is that many financial

organizations are still reluctant to make the sizable and ongoing technology investments

required to meet their increasingly complex business needs in this fast-changing

business/technology paradigm.

Going forward, those organizations with the foresight to make wise, strategic investments in

technology will lead the industry. Those organizations bold enough to embrace innovation

and embed leading-edge technologies into every aspect of their operations will be well-

positioned to thrive, while those that fail to capitalize on the opportunities presented by this

new business/technology paradigm risk being left behind altogether.

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