B anking i nformation s ystems
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B ANKING I NFORMATION S YSTEMS. L ECTURE 1. What is a Bank?. •  A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activates, either directly or through capital markets. Bank Types.

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B anking i nformation s ystems

BANKING INFORMATION SYSTEMS

LECTURE 1


B anking i nformation s ystems

What is a Bank?

•  A bank is a financial institution and a financialintermediary that accepts deposits andchannels those deposits into lendingactivates, either directly or through capitalmarkets.


B anking i nformation s ystems

Bank Types

1. Retail Banks

2. Commercial Banks

3. Investment Banks


B anking i nformation s ystems

Early Banking History

•  The first banks were the merchants of the ancientworld that made loans to farmers and traders thatcarried goods between cities.

•  In ancient Greece and during the Roman Empire,

lenders who were based in temples made loans andadded two important innovations: accepting depositsand changing money. During this period, there issimilar evidence of the independent development oflending of money in ancient China and India.


B anking i nformation s ystems

Banking History

•  The Bardi and Peruzzi families dominatedbanking in 14th century Florence,establishing branches in many other parts ofEurope.

•  The development of banking spread throughEurope in Amsterdam in the 16th centuryand in London in the 17th century.


B anking i nformation s ystems

Banking History

•  Their services remained local due to the lack ofinformation and communication technologies.

•  Local banks only offered: deposits, withdrawals,and basic loan services.

•  To achieve consistency between branches banksstandardized their record keeping andaccounting practices


B anking i nformation s ystems

Banking History

•  The typewrites invention helped standardizeinternal and external communication.

•  The telegraph made the communication betweenbranches and headquarters easy and fast andbecame part of a daily routine.

•  By the end of the 19th century banks were

connecting their branches so they can operate in anintegrated manner.


B anking i nformation s ystems

Banking History

• 

Mid 1960s IBM invented the magnetic strip and the banks were the first

to use it in their card system.

• 

This led to the cash machines now know as Automated Teller Machines

(ATM).

• In the 1980s, automation of data processing and technology spread to

branches. Banks benefited greatly from internal operations.

• Early 1990s, with computers banks used them as competitive advantages

and introduced new products and services.

• Developments in telecommunications and computing resulting in major

changes to the way banks operated and allowed them to dramaticallyincrease in size and geographic spread.


B anking i nformation s ystems

Saudi Banks

• 

1953 -­‐ AlAhli Commercial Bank

• 

1955 -­‐ Samba Bank

• 

1976 -­‐ Saudi Hollandi Bank - Saudi Fransi Bank - AlJazira Bank - Saudi Investment

Bank

• 

1977 - Riyadh Bank

• 

1978 - Saudi BriBsh Bank - Arab National Bank

• 

1986 - AlRajhi Bank

• 

2004 - AlBilad Bank

• 

2006 - AlInma Bank


B anking i nformation s ystems

Factors Driving Changes in theBanking Industry

1. Social Changes

§ Customer awareness of financial products is increasing andthey are demanding more for less.

§ The number of young people entering the labor force

continues to decline in most of the developed world, while anageing population continues to dominate.

§ The finance industries are responding to this change byoffering a number of pension related products.


B anking i nformation s ystems

Factors Driving Changes in theBanking Industry

2. Political Changes

§ The political environment is changing rapidly.

§ The formation and expansion of The European Union has hadsignificant effects on worldwide financial product offerings.

§ Environmental issues are becoming more prominent, withbusinesses under pressure to “go green”.

§ The rise of new economic and military powers such as China &India.


B anking i nformation s ystems

Factors Driving Changes in theBanking Industry

3. Deregulation

§ New sets of regulations from outside national boundariessuch as EU, and international regulations, are making itdifficult for some organizations to ensure compliance.


B anking i nformation s ystems

Factors Driving Changes in theBanking Industry

4. Changes in the Economic Climate

§ There have been a significant shifts in the significance of differentsectors of the economy.

§ In most western countries, primary (such as mining, agricultural) andsecondary (manufacturing) has been steadily declining, whilst thefinancial services sector is growing in importance.

§ This has increased the prominence of service sector organizations,resulting in more pressure on them to diversify their offerings andlook beyond their immediate markets to create value.


B anking i nformation s ystems

Factors Driving Changes in theBanking Industry

5. More Demanding Customers

§ With an increased choice and easier access and switching,consumers are more demanding than ever.

§ This has also resulted in increased legal rights as well as thewillingness of customers to challenge banks if something goeswrong.

§ Banks are under increasing pressure to deal with these issue insystematic ways .


B anking i nformation s ystems

Factors Driving Changes in theBanking Industry

6. Internal Pressures

§ Banks are faced with the challenge of achieving the right balance

between staffing levels and customer service, right training for staff,investment in technology and what to do with branch networks.

§ Banks seek new ways to create value, different skills and aptitudesare demanded from their management and employees.

§ Increased pressure from new and often well resourced entrants suchas supermarkets is driving down the profit margins from retailbanking products.


B anking i nformation s ystems

Factors Driving Changes in theBanking Industry

•  The driving forces and internal/external pressures

have significant implications for the type of productsand services that banks provide and how they aredelivered.

•  New organizational structures and management

practices are emerging, whilst working patterns arechanging and flexible working is growing.

•  New technologies will only speed up these changes.


B anking i nformation s ystems

Bank Information Systems Definition

A Bank Information System (BIS) is an

arrangement of information (data), processes,people, and information technology thatinteract to collect, process, store, and provideas output the information needed to supportthe bank management organization.


B anking i nformation s ystems

Technology Integration Benefits

Clients

Technology

Bank

Employees


B anking i nformation s ystems

Banks Benefits

The major advantages for the bank to implement IT are:

-  Availability of a wide range of inquiry facilities, assisting the bank in businessdevelopment and follow-up.

-  Immediate replies to customer queries without reference to ledger-­‐keeperas terminals are provided to Managers and Chief Managers.

-  Automatic and prompt carrying out of standing instructions on due date andgeneration of reports.

-  Generation of various MIS reports and periodical returns on due dates.

-  Fast and up-to-date information transfer enabling speedier decisions, byinterconnecting computerized branches and controlling offices.


B anking i nformation s ystems

Employees Benefits

IT has increased their productivity:

-  Accurate computing of time-­‐consuming jobs such as balancingand interest calculations on due dates.

-  Automatic printing of covering schedules, deposit receipts,pass book / pass sheet, and enabling them to give moreattention to the needs of the customer.

-  Signature retrieval facility, assisting in verification oftransactions, sitting at their own terminal.

-  Avoidance of duplication of entries due to existence of single-­‐point data entry.


B anking i nformation s ystems

Clients Benefits

IT has increased the level of competition and forced banks to integrate newtechnologies in order to satisfy their clients. They have already developedand implemented a certain number of solutions among them:

-  Remote banking: access account and services anytime and anywherethrough ATMs.

- Telebanking.

-  Electronic Banking.

-  Faster service: Information is centralized and updates are available

simultaneously at all places, single-­‐window service becomes possible,leading to effective reduction in waiting time.


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