Essay Sample on the Role of Information Systems in Banking

In the current digital age, technology has become a common feature in life. In particular, information systems technology has become extremely important for the growth and survival of businesses across the globe. Most importantly, the development of information system has led to the rise in industries that heavily rely on technology. The capabilities of information systems (IS) facilitate the improvement in business processes (Baltzan, 2012). The banking sector is one of the major areas that have reaped the benefits of using computer technology and information systems. Heavy competition in the finance sector has led to the adoption of information systems, especially in banks. Therefore, banks must operate complex information systems technology to derive a competitive advantage over rivals in the service industry (Wilson & Goddard, 2016). As a result, information system supports each and every function within a bank from assessing loan applications, issuing a credit, detecting money laundering, and making account payments to customer service. The paper will analyze the uses, benefits, drawbacks, laws and ethical issues of using information systems in banking.

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Uses

Information systems technology is an integral aspect of banking in the modern world. Banks use information systems for management decision-making. Bank managers need to stay updated on the institution's activities. Information systems offer a platform of data storage, retrieval, analysis, and reliability helping the bank's management to rely on the accuracy of the data to make decisions (Bidgoli, 2015). Furthermore, technology promotes control of all banking activities. A bank's management not only uses the information to secure or control customer operations but also to monitor the employees' operations. Preventing theft and fraud among employees is necessary while dealing with financial transactions. Therefore, information systems allow employees to log in to designated access point and carry out their relevant functions. Also connected to management is the use of information systems in bank operations. The complex technology enhances the performance of a bank by processing customer data, supervising financial transactions, maintaining customer deposit accounts, and ensuring proper customer service. Furthermore, by supporting the banks' operations, IS increases efficiency, employee productivity and customer satisfaction (Bidgoli, 2015).

Business communication is an essential factor in the banking sector. The bank management is responsible for gathering and distributing information. Information systems create efficiency in the process by allowing managers to communicate frequently. For example, banks use emails to disseminate information to stakeholders such as customers. Furthermore, information system helps bank employees to efficiently store customer documents in folders which make it easier to share the information in a systematic way. Closely related to effective communication in banking is record-keeping. It is important for banks to keep accurate records of their activities for regulatory and financial purposes (Wilson & Goddard, 2016). Record-keeping facilitates the diagnosis of problems and the use of corrective action. Information systems technology is used to store documents and maintain a clean sheet of revision histories. The adoption of cloud computing helps banks to safely keep records of their operations and customers online as back-up and reduce the costs associated with the physical storage of data (Baltzan, 2012).

Most importantly, information systems technology facilitates smooth access to a bank's financial services. The development of Automated-Teller Machines (ATMs), online banking, and mobile banking help customers to access their funds with ease (Reed, Walden & Edgar, 2014). IS supports these operations through networked computer systems that help customers to retrieve their money anywhere on the globe. The information system has supported the continued use of paperless money where bank customers use their visa or master card, phone or the internet to pay for both in-store and online purchases and the transactions and the bank records information in real time.

Benefits

Information systems technology has transformed the banking sector by creating efficiency in service delivery and operations. Due to IS banks carry out more work in less time. The rapid access to information by both customers and the bank's employees is fundamental to maintaining a competitive edge. As a result of automation, customers can interact online with bank employees or computer automated services to answer queries without necessarily visiting the branch. It saves the customer time, money and energy as banks no longer experience long queues like in the past (Bidgoli, 2015). Providing better customer care service is crucial in banking. As a result, the information system has nurtured customer loyalty and satisfaction. Likewise, banks save costs associated with hiring more employees. Information system helps banks to meet their obligations to customers using minimal time and less staff.

Information system facilitates quick decision making in banking. The quick access and analysis of information enhance the management's ability to make quick and accurate decisions. For example, when a client is applying for a loan, a simple click of a button can retrieve the personal information of the customer through the IS system and the terms of the loan are discussed. Furthermore, customers can apply for short-term loans using electronic or mobile banking platforms and the loans are disbursed within minutes after request (Aljawarneh, 2016).

Moreover, information system promotes the faster processing of transactions. Bank customers can use debit cards anywhere on the globe and receive their money instantly. Besides the physical access to ATMs, information system helps bank users to manage online transactions with ease. People can carry out their bank transaction over the internet, check their bank statements online and even engage in money transfers. The information system provides the security necessary to protect customers from fraudulent activities such as being hacked or identity theft by outside sources. With this note, information systems technology ensures high-end encryption of bank's data from theft since the financial institutions are obligated to take care of their customers' resources (Reed et al., 2014).

Drawbacks

Security is a big concern for the banking information system. The bank is the number one target for hackers and other malicious groups. Therefore, banks must frequently keep the information system security team updated about the latest threats and technology. As a result, banks incur a lot of costs in seminars, training, and workshops either within the institution or in specialized institutes. Similarly, online banking is a risky affair despite the security measures placed by banks to protect their customers from fraud. There have been cases where hackers and other unauthorized personnel have stolen money from bank accounts. Identity theft is also a big security threat when it comes to safeguarding the privacy of bank users. Some people have fallen victims of cyber attack and identity theft where their money have been wiped out of their bank accounts without their consent (Aljawarneh, 2016).

Banks also experience internal threats because the information system is monitored by their own staff. Monitoring the employees' activities is a challenge because they can leak inside information to third parties due to conflict of interest. Besides, the shortage of information system security staff creates an obstacle for banks. The financial institutions must provide high compensation packages and a warm working environment to security teams to minimize staff turnover and retain the skilled resources (Aljawarneh, 2016).

The human factor plays a significant role in information systems technology. A human era in updating customer information or in record-keeping could make banks lose millions. If undetected, human error could lead to a loss of faith in the system. Moreover, a system error may affect the bank's operations because every function relies on the integrity of information systems technology.

Laws

There are various laws and regulations that govern the use of IS in banking. Banks are required to comply with data privacy within the security scope of using integrated information system technology. Therefore, banks are required to implement measures aimed at protecting data privacy while carrying out banking activities. That data stored, transferred or processed must comply with a strict degree of confidentiality. As a result, it is mandatory for banks to install end-to-end encryption of communication to safeguard the interest of bank users and the institution itself. Also, maintaining cybersecurity is a fundamental aspect of the banking information system. Banks are required to have a security team ready to respond to cyber threats that may stall operations. As such, the security team should restore the integrity information systems services within the minimum time possible in the advent of a cyber incident (Aljawarneh, 2016).

Likewise, banks must maintain customer data privacy policies. Banking institutions are prohibited from selling or transferring customer data to third-party persons without their consent. The bank should inform customers about the discretion of their data and if transfer to third persons is authorized, the client must sign a consent form for authorization purposes.

Ethical Issues

The rapid advancement in information systems technology raises ethical concerns in its application. From a technical point of view, information system leads to ethical concerns about data accuracy, privacy, property, accessibility and occupation health, and safety (Zhang, 2011). Privacy is essential since banking deals with sensitive personal data. The bank must protect customer data at all costs and must maintain confidentiality in communication. It is unethical for banks to breach data privacy guidelines, especially clients' information. However, banking institutions break privacy measures with regards to their staff. There are systems installed in banks to monitor employees during the course of the work such as through telephone records, internet records, and emails. Such measures are a violation of the privacy rights of the employees.

The accuracy, accessibility, and ownership of information, as well as the occupation health of employees, are very important ethically in banking. The information system is tasked with maintaining real-time accurate data. In the case of a security breach, customers should be notified and updated on the impact and the contingency measures to solve the problem. On the other hand, the quality of life of the employees can affect the security and reliability of the system. According to Zhang (2011), some information technology staff interfered with the system in the quest for higher salaries, an action that led to their arrest.

Automation and the use of advanced computer systems also raise ethical concerns because human labor is being replaced by machines. Information systems technology in banking has been a key driver for automated systems. The use of automated voice calls invalidates the need for receptions and customer care representatives in banking. The human touch in customer care services is important. However, banks are on the pursuit of cost minimization measures at the extent of human labor leading to ethical concerns about lost jobs (Wilson & Goddard, 2016).

References

Aljawarneh, S. (2016). Online Banking Security Measures and Data Protection. Hershey, PA:

IGI Global.Baltzan, P. (2012). Business driven information