0EMMA FINANCIAL PLAN

Emma Financial Plan

Emma Financial Plan

Information technology

The term, information technology, was coined in the mid-1980s. It refers to the combined package of computers, telecommunications and information resources. The British Advisory Council for Applied Research and Development favours the following definition:

“The scientific, technological and engineering disciplines and the management techniques used in information handling and processing; their applications; computers and their interaction with men and machines; and associated social, economic and cultural matters.”

While academics dissect and debate the elements of this definition, this module is not a study of information technology but, rather, the use of IT in the provision of financial services. We can get a much clearer idea of this application by considering the four basic types of information technologies.

Sensing Technologies

Devices which gather information and translate it into a form that can be understood by a computer. Bar code scanners are a well-known example. In financial services, scanners are used to read the hieroglyphics on cheques and the magnetic stripe or chip on plastic payment cards.

Analysing technologies

The computer hardware and software (programs which instruct the computer, telling it what to do). In the context of financial services, this would apply more to the internal processing of the financial institution but would also include financial management packages for personal and business customers.

Display technologies

Devices and software which enable the user to see or hear the processed data. Computer and television screens are common examples which are also a feature of screen-based telebanking systems. Automated voice response, where the user listens for the balance on their account, confirmation of bill payments, etc., is also a telebanking service.

Communication Technologies

Technologies which link and communicate information between the other technologies. Fax machines and local area networks (LANs) for e-mail communication are commonplace in offices today but this type also includes the telephone and telephone lines. The telephone line or radio signalling through mobile phones is the key aspect which distinguishes the telebanking servic

After studying this unit and completing the activities it contains, you will be able to:

demonstrate the mismatch between investors and borrowers and the need for financial intermediation

relate financial products, services and advice to the different types of financial institution

highlight the developments in financial services over the last 40 years and relate traditional service provision to contemporary service provision

demonstrate the cost/convenience match in contemporary financial services provision and prepare models of consumer choice

We analyze how two dimensions of technological progress affect competition in financial services. While better technology may result in improved information processing, it might also lead to low-cost or even free access to information through, for example, informational spillovers. In the context of credit screening, we show that better access to information decreases interest rates and the returns from screening. However, an improved ability to process information increases interest rates and bank profits. Hence predictions regarding financial claims' pricing hinge on the overall effect ascribed to technological progress. Our results generalize to other financial markets where informational asymmetries drive profitability, such as insurance and securities ...