Modern Technology and Financial Services Combined
For the past several years, the lives of every individual seemed tobe a difficult and complex way of living. It was a tiring andtime-consuming everyday work to finish and complete the tasks. Wewere bound to live only through our own physical strength that madeeach one of us an inferior individual with a very complex way ofsurviving in the ancient world. Suddenly, as a result ofglobalization and the development of several scientific inquiries,many tasks have been significantly changed as new technologiesdeveloped. These technologies have greatly improved the lives ofseveral people through its efficiency and accessibility to everyindividual. We are not anymore limited to our own capabilities, nordepend on each other`s strength as the only way for a man`s survival.As more and more modern technologies have been made available toeveryone, more and more business entrepreneurs were more focused ondeveloping and improving their financial investments through a wideimpact of technology to every human individual.
Several activities and various tasks have beensignificantly improved through the convenience being provided bytechnology. As technologies becomeimproving and increasing its effectiveness to human individuals, moreand more began to adore its benefits to everyone.Technologies have been made our lives much easier and convenient inalmost every activities or simple tasks that we need to accomplish..Hence, modern technologies have alreadymade a significant part in a man`s daily lives. Technologicalefficiency has provided us more time to enjoy our lives and pursuepersonal development. The accessibility has even broadened theoptions for travel, school, and work. As such, a very big primaryrole of technology has been a common denomination as to how peoplenow depend much on the capabilities of our technologies today. Aswith the emergence of modern technological innovations, nothing isalready made possible through technologies, and it will strive tocontinue its dominance on the lives of many individuals, eitherthrough business services, recreational activities, office works,personal preferences, or anything which is made connected totechnologies.
An Introduction to Financial Services
One of the beneficiary recipients of the impactof technological innovations is the business enterprise. Over thepast decades, numerous incidents of the development of financialservices have been interlinked with the rise in modern technologicalinnovations. No wonder how business transactions, bank transferpayments, online business entrepreneurs have existed due solely tothe emergence of modern technologies that we have at present.According to Roxo da Fonesca (2004), thefinancial services industries have been considered as one of thelargest Information Technology (IT) suppliers which offers financialsupport and services to the leading partners of technologicalinnovations such as mobile phone companies, security devices, andcustomer relationship management (CRM) tools.
As an institution, financial services industries are a veryprofitable and powerful business sectors known today. Their businessgrowth and progress have become so evident that for every year,several financial services and institution have become popular andconsidered as one of the leading financial business organizations inrelation to market consolidation in the line of businesscommunication.
In general, there are two categories to classify the financialservices industry, based on their services being offered on itscustomers (Roxo da Fonesca, 2004). The first category is financialintermediaries, which mainly consists of transactions on financialassets such as loans, mortgages, company bonds, etc. as well as thatof financial liabilities such as company insurance, time deposits,etc. Common industries that are included in the list are savings andmonetary banks, credit union banks, or those considered as thetraditional banking industry services. The second category mentionedare the financial facilitators, whose main objective is to facilitatevarious financial transactions between the primary issuers offinancial liabilities, commonly designated as the households orgovernment institutions, and private investors who purchase thefinancial assets that are available. Common examples of financialfacilitators that are the mediators of finance communications are thestockbrokers, security underwriters and investment bankers.
Money Circulation System
Market system can be categorized as two opposing parties that aremainly involved in financial transactions: firms and households. In amonetary cycle system, households can play the role of a supplier forthe services needed by firms. One example is the labor workforce, inwhich firms hire workers in exchange for the salary being paid tothem. Hence, the household act as suppliers for the factors ofproduction, whereas the firms provide their salaries as payment forthe services being given to them from the workers. Hence, a cycle ofmonetary funds and services take place.
On the other hand, the household, then, can be the receivers of theproducts being made by private and public firms, through payments forgoods and services. Households consume products and services made bythe suppliers` firms which also made a cycle for funds and servicesbeing paid and offered by the two opposing parties of the system.From this type of communication system, the role of financialservices industry is more of a mediator of transactions on paymentsfor goods and services being received and paid off in a monetarycycle system. They act as the center of private and public monetarytransactions involved in the market system composed of firms andhouseholds. Whenever a government take subsequent action, they tendto borrow money from these financial services industry asexpenditures to play a minor role between the transactions imposed byhouseholds and firms, in exchange for a specific government taxapplied to both.
Adaptation Strategies from Technological Innovations to FinancialManagement
Many people agree that technologies have made our lives much easier,more convenient, and more accessible to everything that is happeningaround us. The only thing that prohibits some people to appreciatethe benefits brought by technologies is how will these technologiesadopt to the kind of management that most ordinary people are usedto, or, how will we adopt and provide necessary adjustments regardingthese developments. According to Donohue, Hooker, Lewis & Pryor(2011), the shifting and proliferation of technological advancementsis more certain such that monetary transactions were forced to shiftonto electronic platforms, making most of the financial marketindividuals to completely alter the whole operational process. Asrecommendations on how they would adopt the changing environment onfinancial management, providing strategic procedures is the mostcommon way of equating your knowledge and practical simulations onthese modern technological innovations.
Moreover, there are several ways on adopting financial management andservices to a rise in technological innovations (Donohue et. al.,2011). The first strategy mentioned is related to the growth ofelectronic trading. They mentioned that advanced ways of tradingssuch as algorithmic tradings, high frequency trading methods, etc.have a significant impact on new ways to perform either monetary orservice trades that are available in the market. These advancedprocedures made use of computers as means to be involved in tradingplatforms. These computer algorithms have provided a rapid access tocomputer information and transactions among investors at a fasterrate and frequency of trading. Moreover, about two-thirds of thedollar amount traded in the market can be attributed tohigh-frequency and algorithm users, mostly from the US equity market(Donohue et. al. 2011).
Aside from electronic trading, written rules and regulations werealso formed for financial transactions to prevent any risks onmonetary investments. Much of the proposed new rules and regulationswere focused more on trading and its derivatives, especially inEurope and in the US.
Another provision being applied at the present situation of thecountry is the Dodd – Franck Act, which primarily seeks to provide a"transparency" of the over-the-counter derivatives marketas well as the creation of new swap execution facilities (Donohue et.al., 2011). By providing transparency on monetary transactions and onthe general prices of goods and services, people are more susceptibleto trading and finance communications, and these transactions aremade possible because of an increase in technological developments.By transparency, regulators of financial transactions are beingmonitored, and even respond to certain cases that can result todangers involving various monetary crimes.
Due to the strategies to adapt from technological progress, positiveimpacts have been inflicted on different financial banking systems toprovide a smooth and regulated financial transactions. Marketliquidity and function have been developed because of online computertransactions. Moreover, an increase in spectators and high-frequencytraders have entered the market system, thereby increase ininvestments brought by technological advancements. From theseresults, more and more trading transactions will occur as tradingtransparency will permit more investors and traders to join themarket system. All of these positive effects are all because of therise in technology that had adapted to a new and modified regulatorymarket system.
Marketing Strategies for an Enhanced Financial Services
Aside from the aforementioned strategies stated by Donohue et. al.,Nihalani then wrote on his article some marketing strategic inputsthat are essential in a financial services industry (2011). Accordingto him, the government role on financial services must be felt by themarket through the implementation of stringent regulations for aneffective and efficient financial transactions. As what the monetarycycle system defined, the government expenditures have also provideda secondary effect on financial transactions made by firms andhouseholds. As such, as an institution with the capacity to executelaws and regulations on the market system, the government should beactive regarding the issues being experienced by various financialservices industry. Moreover, the government should also provide newresearch and study on how they can further improve the technologiesthat are available in the market system.
Another marketing strategy focus more on the claw-back provisions ofbanks and various credit payments. These claw-back provisions arethose whose trades on products and services incurs losses that causesother parties to experience crash investments and financialtransactions. As a resolution, payback payments must be given andpaid off for security purposes and to avoid any misjudgment orconflicts in the transaction process.
Moreover, an emphasis on equity derivatives and currency trading mustbe employed so as to provide an efficient trading transactionsbetween firms and investors. According to Nihalani (2011), an equityderivative is defined as a marketing tool intended to provide theinvestors a sort of protection upon taking a position on the stockmarket of the company. This can also be directly associate with theassets held based on equity securities and the maximum losses beinginflicted on the company`s share of stocks. With the advent oftechnologies, equity derivatives provide security protection that caneasily be achieved and be promoted in a company.
The fourth recommendation to enhanced financial services include adecrease in number of big banks, yet provide smaller boutiques orfinancing services companies. According to Nihalani, large banksoften suffer large losses, resulting to financial instability andsecurity problems (2011). If this situation continues for the nextdecades, possible heavy competition between small and large banks mayarise, with the smaller ones at its advantages due to costs andlosses employed in larger banks. Furthermore, if a finance bank haveexperienced large amount of losses, it can already be difficult tocome back to the market investment.
Finally, banks and other financial companies must not depend solelyon short – term funding of capital investments. Long – terminvestments must be the priority of most financial banks as itprovides better financial stability and strength to the company asgreater monetary liquidity can be expected. These investments mayfurther expand international investments and outside financialtransactions, thus providing tighter security and a better image onthe part of the customers.
Sigma Framework and Transformation on Financial Services
Managing of financial services take a lot of work and competitors inthe market industry. Many financial services industries aspire fortransformations that can provide an efficient service to theircustomers. As with the development of technologies, and with the sixsigma framework, financial transactions and trading can be aneffective leverage against the rise of modern methods of transactionsthrough technological innovations. Adopting the power and improvementbrought by technologies can provide the next generation phase abetter view of financial transactions and communication betweeninvestors. Hence, the implementation of six sigma will surely offer agreat success.
According to Perez (2010), the Sigma framework contributes to a pureprocess development technology which act as a key enabler for thetransformation of various financial services industry. Perez alsodefined the present economic issue faced by several financialservices industry at the present generation.
"Banks and other institutions are keenly focusing their effortsin controlling risk increasing operational efficiencies (i.e., costreduction) to face shrinking margins in some cases, maximizing thebenefits or merger integrationand, in light of a likely morestringent regulatory environment, enhancing compliance with bothinternal and external mandates… Institutions are also finding thatthere is a need for re-focusing on their customers and redefining insome cases, their business models. They have had no choice but tofocus their efforts toward containing costs, better managing risk andcapital, re-defining their business models and beingcustomer-centric." (Perez, 2010)
Aside from providing enhanced technological development to businesstransactions, it also aims to reduce defects on the products andservices that it offers to its customers. It can be considered asboth a driver of a process for change as well as an act oftransformation process. Moreover, the need for a technology-leveragedapproach must be considered as to continue the use of thesetechnologies can provide several financial institutions to a higherlevel of quality and productivity procedures.
Asdefined, "SixSigma"canbe directlylinkedto industries and other companies who are into a manufacturing andtransaction business. As for financial transactions, theresponsibilityprovided byfinancialservices industriescan be described byan emblem signifying the accumulated total number of defectedproducts. Hence, most companies who are more involved with moderntechnologies should be provided with a sigma rating. Aside from itsdefected products, the Sigma framework also envisions the highest andbest quality of product that is possible. Many customers are moreconcerned on the product quality rather than its market price. Byfollowing different quality assurance and management methods, processtransactions and other financial considerations are made easier andmuch accessible to even small time business industries.
Accordingto Perez, the Sigmaframeworkfollow two project methodologieswhich consists of five series of test procedures (2010). The firstmethodology, the DMAIC,is formedto provide support and guidance related to an existing businessmarketing company. The series of steps in DMAIC include thefollowing: Definingthe marketsystem,the voice of the customer and their requirements, and the projectgoalssecondly, Measurekey aspects of the current process and collect relevant datathird, Analyzethe data to investigate and verify cause-and-effect relationshipsfourth, developed the existing methods and procedures created by thecompany itself, depending on how will you modify and reinvent theseproceduresand lastly, Controlandnormalize the market operations and theproposedplans that have invented together with the technologies that thecompany has. futurestate process to ensure that any deviations from the target arecorrected before they result in defects.
TheDMEDImethodology, alsocalledas DFSS ("Design For Six Sigma"),enumerates fivelevelsof procedures:first, Definethemarket strategy and the goal of the company involved second, Measureand classifythe processes that play a vital role in the companyandits production objectives third, Explore design conceptsto providealternativeplans fourth, Designback-upprocedures for a better execution of the process and lastly,Implement and validate the proposed planning procedures regardingsmall time business entrepreneurs as solutions for the ineffectualityof the overall process objectives (Perez, 2010).
Examples of various financial bankswho were determined by the results of the Six Sigma framework havebeen commonly assessed and managed in those banks in America andEurope. One applicable example using the Six Sigma Project is thebank of America, who is finding its way to provide a higher productand service quality, cost reduction, and free-up capital forfinancial investments. Moreover, other leading global banks applyingthe Six Sigma framework include American Express, JPMorgan Chase,etc.
Aside from the methodologies andobjectives presented in the Six Sigma Project, this framework wouldnot succeed in the financial services industry without the key themesfor a successful Six Sigma Project. According to Perez (2010),leveraging technological innovations enable the whole projectframework to provide an efficient and much effective Sigma frameworkrevolution. Hence, the key values he presented were all according towhat several organizations have engaged in following the Six SigmaProject. These four key themes of the framework are: Step-by-stepprocess and character trait to a well-managed compliance to Sigmaframework Enhancement of conversion procedures as forms of benefitsof the industry Ensure of customer-centric methodologies andlastly, Enable of enterprise modernization through the adaptation tomodern technological innovations ( Perez, 2010). The impact oftechnology towards business standardization has provided everyorganization a built-in, best practice business procedures to preventany risks on financial transactions. Moreover, technology can alsoprovide support in attaining the benefits more efficiently andsustaining each positive impact by creating teamwork alliance thatcan provide you with different strategies for an enhanced marketingoperations. A sustainable business entrepreneur needed an efficientdata collection to ensure its protective control. The use of astate-of-the-art technology has provided the world of financial banksand institutions a new world of modernization and a nature oftransformation through the Six Sigma revolutionary approach andlegacy framework that is applicable not only on financial servicesindustries but also on other companies seeking for transformation andchange.
Technology and Financial Services Redefined
The impact of technology on various financialservices industry has quickened its traditional view on the growingimpact of technology to the market system. New developments providedby technological innovations have provided an alternative ways on thereinvention and recreation of financial services to its customers.Somuch dramatic such that even the borrowing or spending of money ismade more convenient through the advent of technology. Atransformation of industrial principles, missions, and visions aboutthe development of technology is so much to provide everyone equalbenefits and opportunities brought by technology.
Oneexample of technological impact on financial services startswithdepositsand withdrawalson financial savings banks.Technologicaldevelopments such as anautomated teller machine(ATM) have greatly provided a new generation of saving money by meansof financial institutions that are of great help to its customers.Formationof mobile technology as tools for banking transactions have alsoprovided a slot to the development of these financial servicesindustries. Check deposits and paymentsno longer require a visitto the bankand wait for a longer line. Several banking applications are madeavailable through different mobile applications.For just a click ortwo on your mobile phones or on your personal computers, everythinghas been made possible because of the development of technology, andthis has been what globalization has provided an impact to everyone.
Atpresent,smalltime business entrepreneurs deserve an equal chance to develop andgrow into big time industries. Every business enterprise that areformed as a result of competition should have equal opportunities aswe are all market sellers and buyers. These credit cards and bankcredits should further be applied eventosmall industries. We are already at the stage where everything can bemade possible through technology. These technologies have providedeach one of us a sense of democracy and courage to adapt our owncapabilities and our goals for us to create and reinvent our ownbusiness world. Thus, even a small time work can also be done by bigtime businesses, and vice versa.
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Donohue, J., Hooker, M., Lewis, C., & W.Pryor. (2011). Vision: The Evolving Role of Technology in FinancialServices. State Street Corporation 6.1. Retrieved fromhttp://www.statestreet.com/vision/technology/pdf/TheEvolvingRoleTech.pdf
Nihalani, M. (2011). The Impact of Technology on the Marketing ofFinancial Services. Annals of Management Research 1.1. Retrieved fromhttp://ijmtpublication.com/files/AOMR_1_2011_7.pdf
Perez, J. A. (2010). Financial Services: Leveraging Technology forthe Next Six Sigma Revolution. Oracle Insight. Retrieved fromhttp://www.oracle.com/us/corporate/insight/six-sigma-wp-171719.pdf
Roxo da Fonesca, G. J. C. (2004). TechnologyInnovation in Financial Services Industry (UndergraduateDissertation). Massachusetts Institute of Technology. USA.