The Impact of Information Technology on the UK Financial Sector :: Business and Management Studies

The Impact of Information Technology on the UK Financial Sector I have studied that in business, information technology can be used if effective in a strategic way in order to gain a competitive advantage and this can be seen in the UK financial services. In such an industry it can be said to be one of the most dynamic and rapidly growing sectors of the economy. Such a rate of change and growth has created a prolific environment for the innovation of information technology. The application of information technology has had a qualitative impact by changing the mode of operation in the financial sector, modifying the range of services provided and linking together geographically isolated financial hubs into a global financial community in order to trade 24 hours a day. For the past two decades organisations have noted that information technology is important for profitability on both the cost and revenue side. In the financial services sector costs arise from two broad areas of operation: those connected with the management of information, and those with the execution of transactions. Financial services have always been a labour-intensive industry. The rising cost of labour, relative to the cost of other factors of production, has imposed a burden of rising costs as a proportion of total revenue earned in such organisations as retail banks. The function of IT has been one very important way in which financial services firms have sought to contain their costs. For example, in commercial banking the application of successive generations of computerisation since the early 1960’s has dramatically reduced the size of ‘back-office’ staffing, while the growth of expensive paper-based systems for money transmission (cheque and credit clearing systems) has been curtailed by the development of paperless computerised payment systems such as BACS (Bankers Automated Clearing System) in the UK and the development of EFTPoS (Electronic Funds Transfer at Point of Sale) systems. The role of information technology has grown and changed continuously in the banking sector. The banking industry has used IT to enable increases in the volume of transactions as well as the development of new products; applications have ranged from back-office (check and accounts) processing, mortgage and loan application processing, and the electronic funds transfer to more strategic innovations such as automated teller machines and new kinds of securities. The use of IT has also had some important customer - supplier effects. For the customers of service providers, it has been used to improve the quality and variety of services in many industries, especially through its ability to amass, analyse, and control large quantities of specialised data. Such improvements include error reduction or increased precision, faster or more convenient service, and improved