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What if you were an accountant who was made to continuously input and calculate data on different balance sheets or income statements? How about, I tell you that you have to do this using pen and paper for straight eight hours. Will you not find the work to be quite exhausting and time consuming, not to mention boring? Well, how about I make your life easier and give you a computer where all you have to do is add the numbers on designated places and the calculation will be done automatically.
The development of technology since the beginning of time has helped businesses to be more efficient and effective. Like most of the other sectors, technology plays an important role in the growth opportunity of financial industries as IT keeps on improving. Financial activities deal with exchange of information in order for transactions to take place, information to be shared and people to be updated with the latest activities and news going on throughout the globe. Since information technology deals with the development of electronic networks for the exchange of information, the advancement in technology is making digital finance more attractive.
Handling a vast amount of data and number manually is very time consuming as well as tiring. In 1960, New York Stock exchange shortened their trading days as the volume of trades was too big to be operating manually. For financial activities to take place effectively information must flow at a fast rate and this is where IT comes in to provide a solution. One of the key functions of information technology is faster flow of information. For example, technology allows companies to link up their various departments under a centralized database. Once an information is uploaded by any departments it gets shared throughout the company. Unlike before when checks and checking accounts were used, information technology is speeding up transactions. Debit card and credit cards are allowing instant purchase without the need of banks to interfere.
Along with financial activities, technology is increasing the customer base of financial companies. IT has made personal finance easier since banks these days provide information on savings and deposit accounts as well as online withdrawals. Starting from customers to banks, everyone can store their own transaction record in their accounting system. Social media plays a major role in providing financial industries with information regarding what their customers need and want. Companies in the financial industries associate their products in the online communities to receive feedback, encourage brand loyalty and to attract the young generation who are the future customers. Information technology has introduced various new financial products among which the most successful one is mobile banking. Out of the 6.9 billion people on earth, only 30% use have bank accounts while 75% carry a mobile phone. Mobile banking has increased the financial activities by a great number. One prime example is Bkash and Ucash of Bangladesh. The impact of technology is so great that within the next decade, there is a possibility of a substitute of traditional banking which is known as peer to peer finance. What peer to peer finance does is it allows customers to borrow or lend money from unknown individuals. This is done based on the credit rating that will be given to them.
The major impact that technology has is that it is helping the finance sector to globalize. Technology is helping to create various global financial services due to the high speed and reliability of information. The internet is one of the main contributors. By1998 it was working with $50 billion worth of transaction. It provides credit ratings and credit scores to lenders and companies. Without the internet companies cannot acquire information at the same pace as their competitors around the world. Everything starting from financial news to prices of stock all over the world can be collected instantly with just a click.
Imagine financial activities to be the operations done on a computer and technology to be the motherboard and processor of the CPU. Performance increases as the power and speed of the CPU increases. Technology and financial activities are like complementary goods. As technology improves, it pulls the financial companies with it.
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