The New Era in the Banking System

The New Era in the Banking System

Subject: the transformations of operations and IT in banks

Abstract: In this article is presented the shift of paradigm in the strategic integration within the financial sector of operations and IT. It is explained each of the sources of growth of the banking system: innovation, deregulation, and technology. The fierce competition in the banking system led to continuous innovation of financial products, thus making every financial asset tradable. Deregulation widened the markets, enabling a broader service portfolio. The technological developments resulted in a totally new range of products and services. All these changes require the redesigning of the IT architecture in order to enhance quality and reduce costs of the banks.

Keywords: information technology, innovation, deregulation, banking.

JEL codes: G1, F3

Werner Siemens and Henry Ford, two of the world's most admired industrialists, were heavily invested in vertical integration. Nowadays, one of the world's most valuable companies, Apple, has in-house designers and marketing, and outsources all operations. These facts proved to be relevant to banking system because banks started out much the same way as Ford and Siemens but are positioned today to behave more like Apple.

Half a century ago, mass-market banking started in a big way in Occidental Europe, offering traditional payment, savings, and mortgage services. Because banks were early adopters of information technology (IT), they developed in-house systems to give their customers what they needed, when they needed it. Meanwhile, the financial services industry grew exponentially through a combination of innovation, deregulation, and technology evolution.

Debit cards, credit cards, and mutual funds were...