How Information Technology is Modernizing

Introduction
The technological landscape of the banking industry has been ever changing over the past two and a half decades. Banks have transformed from institutions that used computers for mere efficiency and convenience into corporate conglomerates that are totally dependant upon computers and banking software. Banks around the world are dependent upon banking software at all levels of business; from the highest level of management right down to meeting consumer needs.
There is no question that information technology and the consistent creation of better, more efficient software has played a key role in the explosive growth of the banking industry worldwide. Electronic banking allows member to do their banking transactions without visiting a branch. Banks, credit unions, and investment centers have all introduced their own e-banking system in order to stay competitive. The convenience that electronic banking presents is appealing to customers and strengthens the relationships to the company providing the service.

E-Banking can provide many risks as well as benefits to the banker. The risks associated with e-banking can destroy the reputation of a bank, thus leading to the loss of business. Do these risks outweigh the benefits? Or is the opposite true? E-banking can save an enormous amount of money and encourage a customer to "stick" with the bank. A bank must weigh these options before deciding what is right for the institution. Banking Information Technology poses both benefits and risks for consumers. Customers have the option to pick, choose and refuse the many financial institutions that are out here today. Customers hold privacy with great value and convenience with high standards.

Banking Software IT
Banking software and information technology are some of the core components of the modern day banking industry. The use of online banking has transformed the landscape of the banking industry so much that there are basically three types of banking institutions recognized in the industry today, and each bank will generally fall into one of these categories.
The first type of bank that a customer can go to is a traditional "brick and mortar" institution has a building and personal service representatives, but doesn't offer Internet banking services. These are usually smaller, community institutions; located in rural areas, which have a loyal, community customer base that does not depend upon online banking to fulfill their banking needs.

The second type of banking institute available is a "brick and click" financial institution that has a physical structure, and also offers Internet banking services, which is the most common type of bank found today. Finally, the consumer may choose a "virtual" bank or financial institution that has no public building and is only accessible online (Federal Reserve Bank, 2006).

There are many things that banks must consider when choosing the software that will ultimately become the institution's core infrastructure. The bank not only has to consider customer needs and desires, but it must also assess its own IT needs, and employee needs, as well as security and privacy issues. As many options as there are available in banking software today, banks can customize their banking software to fit their IT needs regardless of how great or small.

According to Grant Bowman, Branch Manager and Assistant-Vice President of Retail Banking for Chase Bank, one of the top three banks in the nation, everything that the bank does short of direct customer contact is dependant upon its banking software (Bowman, 2006). The banking software that Chase Bank uses for its IT infrastructure has many capabilities. The software offers bank management on-hand human resource databases, time management capabilities, and network email/inner office communications that are necessary for interaction with other branches, and upper management. The software offers personal bankers sales opportunities through customer databases and cross-referenced account and product information that allow the personal bankers to quickly gauge a customers lending, investment, or account needs. This software also provides management and personal bankers with external links to outside financial institutions that allow them to assess CD, bond, and interest rates for competitive pricing.

Finally, the banking software used by Chase Bank allows its tellers to work quickly and efficiently to serve customers in a timely manner. Customer accounts are quickly accessible with minimal customer information input, and the use of scanners for all checks and deposits offer quick problem resolution for the tellers and customers (Bowman, 2006).
The turnaround time for information availability, combined with the banking options that an institution's banking software will allow its customers, can either help or encumber the bank's service relationship with its customers. With the current "real-time" mindset of American consumers, there are certain options that most customers are seeking from their banking institution's banking software, as well as their online software. Mr. Bowman stated that most of the customers in his market are looking for Chase Banks software to provide them with access to instant "real-time" account transactions either through tellers or online; 24-hour instant access to their money through ATMs; and capabilities to transfer funds from account to account, or from their account to a vendor through Online Billpay at anytime.

Customer's also want to know that personal bankers are aware of their financial needs in order to assess whether or not they are currently in the account, loan, or investment that is going to be the most beneficial for them. Finally, and probably most importantly, customers want to know that their financial information, whether in-house or online, is private and secure at all times (Bowman, 2006).

When taking the privacy and security issues of banking software into consideration, one does not have to look far to find evidence that this is a major concern to banking customers, managers, and even federal banking regulators. In 2004, research found that nearly two million Americans had their checking accounts raided by criminals in a 12 month period. Consumers reported an average loss per incident of $1,200, pushing total losses higher than $2 billion for the year (Sullivan, 2004). The vulnerable combination of internet banking, networks used by banks to communicate within their organization, and the lure of untold millions available for pilfering to extremely intelligent and persistent high-tech thieves has left banks worldwide with a feeling of being under constant siege. Although banks are very tight-lipped regarding their security issues, reports show that even the largest banks are constant targets.

In May of 2004, Citibank reportedly overtook eBay as the most common target for phishing attacks. Phishing is an e-mail, which attempts to steal consumers' user names and passwords by imitating e-mails from legitimate financial institutions. Citibank faced an average of 16 attacks per day, and 475 separate phishing attacks during April, an increase of nearly 400 percent from March (Sullivan, 2004). Citibank has even gone so far as to post the following ten "Phishing Protection Tips" in order to educate their customers (Phishing Fraud Alert, 2004):
• Never click on Hyperlinks within emails, instead, copy and paste them into your browser
• Use SPAM Filter Software
• Use Anti-Virus Software
• Use a Personal Firewall
• Keep Software Updated (operating systems and web browsers)
• Always look for "https://" and padlock on web sites that require personal information
• Keep your computer clean from Spyware
• Educate Yourself of fraudulent activity on the Internet
• Check & monitor your credit report
• Seek Advice - if you are unsure, ask: scams@fraudwatchinternational.com

According to the Federal Deposit Insurance Corporation, financial modernization and the growth of electronic commerce continues to heighten public interest in maintaining the privacy of consumer personal information in both the physical and virtual environments. Because the business of banking relies upon customers' willingness to disclose confidential personal information, the FDIC encourages every financial institution to establish and follow a privacy policy that addresses what are generally referred to as fair information practice principles, which have been articulated by a variety of governmental and intergovernmental entities (FDIC, 1999).

Five core principles advocated by the Federal Trade Commission (FTC) are: notice to consumers about information practices; choice for consumers about how personal information may be used; access for consumers to personal information and the ability to correct errors; security and integrity of consumer data; and enforcement and consumer redress (FDIC, 1999). The endless information that is available on this topic is a clear indicator of the impact that IT and banking software capabilities have on individual and commercial consumers alike. As technology continues to advance, it is imperative that the banking institutions that will handle money and financial data for today's consumers have the most advanced, innovative software that will not only provide customer convenience and market competitiveness, but will also provide cutting-edge security for those that it serves.

E-banking
"Electronic banking, also known as e-banking, is an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brick-and-mortar institution."(Insley, 2003). Electronic banking is often called e-banking, and is used interchangeably with PC banking, internet banking, and home banking. Companies will often utilize their own term for the same concept. For instance, Chartway Federal Credit Union utilizes the term "ebranch" to describe their electronic banking tool. Electronic services are becoming an essential tool for financial institutions from banks, to investment centers.

E-banking allows customers to perform many different transactions without entering a branch. According to Chartway's home page, customers are able to view current and available account balances, and account transactions. Customers may also transfer between accounts, set up recurring and future dated transfers. Recently Chartway added the ability to view Chartway credit card transactions, and customers may transfer funds to pay their credit card. Customers may also request new sub accounts or open up whole new accounts. Chartway has also introduced a new feature which allows customers to apply for loans online, which will be reviewed by loan processors and credit officers. Often, loan decision may be given to the customer on the same day. This is very convenient for those customers who are just unable to bank during banking hours. Statements may be viewed online and customers have the option to only receive their statements electronically. Chartway calls this feature "e-statements."

Accessing Chartway's e-banking tool is free to all of its customers. The company's major electronic banking feature is their Bill Payer program, which allows customers to set up electronic payments to different companies. Bill Payer is free to customers if they pay three bills or more a month, and enroll into their estatement program. If they do not meet those two features, there is a $4.95 a month service charge. Bank of America has the same online bill paying services, and does not charge a fee, but other fees for services may apply. As many banking customers discover all of the features that online banking offers, Chartway may have to consider making this feature free in order to stay competitive.

"The bank branch remains the most important channel in terms of revenue generation" (US Banking, 2005). Many customers prefer making major financial decisions with bank associates. Call centers, and automated teller machines are also being utilized for banking transactions. However, electronic banking is viewed as a sophisticated tool for customers, and a must have commodity for banks. As dotcom hustle dissipates, the Internet is re-emerging as the priority channel for technology investments and banks are entering an e-banking technology renewal cycle, which includes functionality and usability of websites and enhancing integration with other channels (Spotlight Returns, 2005).

E-banking may present banks with the opportunity to strengthen their relationships with customers. As more and more customers enroll in online banking services, banks are presented with the opportunity to cross-sell and up-sell to further increase fee revenue (Danglemaieur, 2005). Electronic banking may improve new account growth, revenue growth and customer retention. E-banking is considered to be the technology solution for some of the top business challenges including those previously discussed, and expanding up/down the market, and cost reduction (Danglemaieur, 2005).

Many customers enjoy online banking for its convenience. Customers can enjoy the convenience of e-banking anytime and anywhere. With direct deposit and bank-to-bank electronic funds transfers, e-banking may be the only tool that customers need to do their transactions. As technological advances increase, the banking industries and other financial industries may continue to make strides to improve the services that are provided to customers.

Bank's Benefits and Risks
As online banking can be risky for the customer to use, is it just as risky for the banker. As mentioned earlier in the paper, phishing is one of the newest forms of Internet fraud and has become very sophisticated in the past few years. Many of these phishing scams involve emails being sent to victims containing link to their bank's "website". The website is usually very well designed and is easily mistaken for the real thing. Unfortunately, even if the victim does not give out the personal information being requested, these websites often contain a type of virus known as a Trojan horse virus.

The Trojan horse virus collects your personal information while you access other websites requesting passwords and then records those pins and passwords. Joe Lopez, a Miami business man, is actually suing Bank of America because this type of virus allowed a criminal to wire over $90,000 from his account to a bank in Riga, Latvia. The bank contends that it was his personal computer that became infected with a Trojan virus but Lopez states that he should have been notified that such a large transaction was being made, especially since that is a country that has a high rate of cyber crime (Accountingweb.com, 2005).

It is important to discuss these types of activities because they can be detrimental to the reputation of a bank. Some of the ways in which e-banking can influence an institution's reputation include:
• Loss of trust due to unauthorized activity on customer accounts,
• Disclosure or theft of confidential customer information to unauthorized parties (e.g., hackers),
• Failure to deliver on marketing claims,
• Failure to provide reliable service due to the frequency or duration of service disruptions,
• Customer complaints about the difficulty in using e-banking services and the inability of the institution's help desk to resolve problems,
• Confusion between services provided by the financial institution and services provided by other businesses linked from the website (FFIEC, 2003).

Online banking saves the institution a significant amount of money "studies have shown that online banking customers are more profitable than offline customers-they make fewer customer service calls and are less likely to switch banks" (Winstead, 2005). Winstead (2005) also tells us that "if you're a bank, you don't make money on customers who just check their account balance online; the big bucks come from other services." It is also important to note that "as Internet users gain more experience online, they are more likely to perform activities that involve money, such as paying bills, making online purchases and travel reservations, and participating in online auctions (Winstead, 2005). Most of these services contain fees that the bank would not normally see from a customer who does all of their banking in person.

With emerging scams, the fear of security risks grows. Although online banking could be coined as the fasting growing type of online activity, there is still room for growth, which, as described above, is a revenue generator.
There is a clear distinction between the age groups of those doing their banking online. A study done by Yahoo found a "substantial difference in Internet usage patterns between users under 40 years old and those over 40. 72 percent of the younger group checked their balances online versus only 37 percent of the older consumers" (Kelley, 2005). The older generation seems to be more leery of doing transactions online for fear of security risks.

There are some other risks that the bank may incur as well. The Federal Financial Institutions Examination Council (2003) gives some examples:

Transaction/Operations risk - Wireless services create a heightened level of potential operations risk due to limitations in wireless technology. Security solutions that work in wired networks must be modified for application in a wireless environment. The transfer of information from a wired to a wireless environment can create additional risks to the integrity and confidentiality of the information exchanged.

Strategic risk - Financial institutions considering wireless services should carefully evaluate the significant strategic risks posed by this service delivery channel. Standards for wireless communication are still evolving, creating considerable uncertainty regarding the scalability of existing wireless products. Financial institutions should exercise extra diligence in preparing and evaluating the cost-effectiveness of investments in wireless technology or in decisions committing the institution to a particular wireless solution, vendor or third-party service provider (FFIEC, 2003).

For the time being, banks are not responsible for the loss incurred because of a customer's PC. This is probably one of the reasons customers are reluctant to use online banking services. Avivah Litan, a member of the Gartner research team does provide some recommendations for those involved in online banking:

• Banks: Strengthen access controls (beyond just using passwords) and distribute third party "anti-malware" protection for user desktops to help keep online-banking sessions as safe as possible. Clearly warn customers that, in some cases, they are liable for online-banking losses resulting from the theft of passwords or other credentials.

• Regulators: Develop new laws to better protect small-business and other banking customers against theft resulting from criminals hijacking credentials from PCs or online communications (Litan, 2005).

Consumer's Benefits & Risks
According to the Organization for Consumer Privacy (2001) "The Graham-Leach-Bliley Act regulates the sharing of personal information about individuals who obtain financial products or services from financial institutions. It attempts to inform individuals about the privacy policies and practices of financial institutions, so that consumers can use that information to make choices about financial institutions with whom they wish to do business. The law gives consumers limited control - via opt-out - over how financial institutions use and share the consumers personal information" (Consumer Privacy Guide, 1). Under this act, consumers' information is federal regulated to keep financial institutions from marketing and selling sensitive information to third parties. This is important because it ensures that privacy provisions won't be violated from the consumer's point of view. Anacomp, a multi-vendor who specializes in services and support, gives a few examples of how they protect their consumers from leaking out sensitive information. Anacomp (2006) states the following examples by "using a companies' existing level of automation together with Internet or intranet retrieval:

• E-mails are captured and stored in an unalterable version to meet compliance regulations.
• Access to sensitive corporate e-mail is restricted to small sets of highly secure users.
Leveraging the header information, a relational index capability is created, allowing research folders to be formed.
• Anacomp uses industry-standard Internet protocols, allowing e-mail attachments to be displayed in primary applications (such as Microsoft Word or Excel).
• E-mail documents are saved in a secure environment with redundant backup and disaster recovery options.
• E-mail archive will be available to authorized users via standard Web browsers" (Anacomp, 2006).

When it comes to online banking, having financial information readily available at a consumer's fingertips, 24 hours a day, 7 days a week, is very convenient. According to Kim Komando with Microsoft Small Business Center, "online banking has been one of the brightest online inventions. With a few clicks, people can pay their bills, check their balances and see what has cleared" (Komando, 1). Larry Freed (2006) agrees with Komando and states that "customers are increasingly satisfied with online banking, which is good news for banks seeking increased loyalty and share of wallet. Findings of the second Forbes.com/ ForeSee Results online banking study include:

Satisfaction with online banking is 5.5% higher than it was last year, surpassing satisfaction with the overall banking experience, as recently reported by the American Customer Satisfaction Index

Online bankers who are highly satisfied are nearly 40% more likely to purchase additional products and services from their bank (Freed, pp. 2-4).

Converting online bankers to online bill payers is a huge opportunity, as customers who pay bills online are 17% more likely to purchase products and services from their bank and 34% more likely to recommend their bank's website
Credit unions outperform large banks and community banks when it comes to satisfying online bankers. (Freed, pp. 2-4)
The automated teller machine, or also known as the ATM, is "a machine at the bank branch or other location which enables a customer to perform basic banking activities even when the bank is closed" (Investor Words, 1). According to Citibank, "It's been 25 years since ATMs were introduced, and consumers have embraced the concept of 'remote access' to their accounts for deposits and cash withdrawals, and the convenience it affords. The electronic banking center represents the next technological wave in which far more products and services are available..." (Citibank, 1).

The advanced ATM's will be incorporated with the web browsers that are known today as Microsoft Internet Explorer or Netscape Navigator. Michael North and Paul Kennedy of Banking Information Technology Secretariat states that "the advanced ATM will also be a multimedia ATM, using beautiful, natural motion video and stereo sound in multiple languages, smooth dimensional animation. It will be capable of live video teleconferencing with a remote teller at a video call center, using eyes and ears in a video camera. It will be able to scan, compress and transmit signed documents, printing MICR-encoded checks, send and receive email, read barcodes and smartcards, capture biometrics such as fingerprints and iris images, and print exact, full-size copies of any document. All of these features are available now on commercially-available products" (North & Kennedy, 1).

The new features of the advanced ATM will allow customers not only to make monetary deposits into their accounts, but customers will also learn about different kinds of IRA's, the best suitable savings plan and other e-commerce solutions that banks have to offer. People use ATM's for economics, flexibility, convenience and acceptance. Wells Fargo explains that "this is a whole new approach to ATM software architecture...a greater ability to accommodate new technologies. And because software applications are independent of the delivery channel, they can be leveraged across multiple channels, including information kiosks, telephone banking, personal computer banking and web sites" (Wells Fargo, 1).

Ethics in Banking IT
Information has no ethics and does not care how it is used (Haag, 2006, p. 236). This premise makes many banking customers cautious about e-banking, and as a result the banking industry has gone to great lengths developing ethical e-banking practices. "Electronic banking (e-banking) is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels. E-banking includes the systems that enable customers, individuals or businesses, to access accounts, transact business, or obtain information on products and services through a public or private network, including the Internet" (Bahamas, 2005). In this section we will explore the ethical responsibilities of financial institutions that provide e-banking services to customers.

Before thoroughly analyzing the ethical responsibilities of e-bankers it is important to identify the associated IT risks to the customer and the bank. Transaction, compliance, and information security risks are the three major risks of online banking. Transaction risks are those risks resulting from fraud, processing errors, negligence, or the inability to maintain expected level of service. These sorts of risks are higher for new online services or when new systems must become interoperable with legacy systems (Ramakrishnan, 2001).

Risks associated with banking policies and transactions that are not compliant with laws, regulations, and ethical standards are considered compliance risks. One of the most recent Acts requiring all financial institutions to be compliant is the earlier mentioned Gramm-Leach Bliley Act. This Act requires the safeguarding of customer information, and those institutions who fail to be in compliance after July 2001 face hefty fines (Secure Computing, n.d.). Other recent regulations include the Electronic Funds Transfer Act and the Truth-in-Lending Act.

Another risk important to customers and bankers are information risks. These risks result from inadequate security processes (Bahamas, 2005). Online banking services that are vulnerable to hackers, viruses, or data theft and they put customers and the financial institution at great risk. This risk can be the most damaging to customers and banks. Viruses may disable online services or internal electronic banking transactions affecting many simultaneously. Hackers and data theft normally seek customer's personal information to commit fraud and potentially ruin the financial standing of many.
After identifying many of the risks associated with e-banking it is obvious that the financial institutions carry the ethical burden of ensuring that strategies are developed which outline the policies, practices, and procedures that address these risks. Most institutions publish ethical computer use standards and information privacy policies to educate employees and inform customers (Haag, 2006, p. 238). Due to the unique risks of online banking many banks require senior management input when developing ethical standards and practices for this form of banking (Ramakrishnan, 2001). This involvement more closely aligns strategic objectives, ethical standards, and IT operations. Bank websites have become an effective means of communicating the policies and procedures to customers.

The final piece to understanding ethics in e-banking is identifying what type of security measures can be implemented to actively mitigate the risks. In order to maintain the trust of customers most financial institutions mitigate transaction risk by preparing contingency arrangements and aggressive training programs to maintain skilled staff. These practices ensure customers will continue to receive expected services in spite of system failures, processing mistakes, or isolated cases of fraud (Bahamas, 2005).

Periodic legal audits of published standards and practices reinforce proper activities and reduce compliance risk. Financial institutions publish disclosure statements and transaction practices for customers review and to demonstrate an effort to maintain compliance with required laws and regulations (Chicago, 2006). Banks commit a large amount of resources to reduce the risk of unauthorized access to information. Online banking requires customers to provide usernames and passwords before access is granted to services or account information. In fact, most require bank employees to also provide authentication before gaining access to the bank's IT network. Authentication is a simple yet effective means of protecting sensitive bank and customer information. Data encryptions during electronic banking transactions also protect customers and banks from hackers and data theft. Separation of bank employee duties is another technique used to prevent fraud and protect information (Bahamas, 2005).

Banks and other financial institutions are built on trust and as a result customers have always expected the highest ethical standards from these organizations. With this trust comes much responsibility. Banks handle and execute sensitive customer information and activities everyday and must maintain high standards of conduct to remain successful. To maintain such standards banks and customers must realize the risks associated with online banking and methods to reduce such risk.

Managing Information Technology
Managing information technology in banking is a subdivision of management information systems and computer science. Many banks and financial institutions are incorporating information technology into routine bank transactions. Banking customers have been inundated with on-line banking, telephone banking, and Automated Teller Machines (ATMs). The importance of security with monetary information is a significant part of the managing of information technology in banking.
Direct deposit was the initial entrance of electronic banking into the banking community. In the past the main problem in banking was the amount of paper and cash which was clogging up the economy. This was caused by employees being paid in cash or by check. All this moving of money and checks was proving to be extremely expensive as well as a security risk. BACS (Bankers Automated Clearing System) has proved to be very successful in all business sectors. After implementation all wages could be paid directly into the workers bank accounts on time and be ready to withdraw as cash straight away. This reduced the amount of paper work and transfers needed (Information technology and banking, p. 10).

Customers can easily access their direct deposits. The US government has also used this electronic banking feature to eliminate a significant amount of paperwork with welfare and social security payments.

"A main benefit has been the increased accessibility to branches," (Information technology and banking, p. 5). A convenience for the customer is the selling point of information technology for the banking community. E-Banking, bill paying, credit card payments, telegraphic transfers, and the easy access to check your account balances or checks that have cleared are all important faucets of online banking. The twenty-four hour banking concept was introduced with the Automatic Teller Machine (ATM). Gone are days where you have to take time off of work to get your banking done efficiently.

"The challenge is managing the information we have and reducing the necessity of entering the same information numerous times and running the risk of making a mistake," (Petty, 2001, p. 1). Accurate information at the fingertips of the bank's employees can make a significant change in routine transactions. Many banks and financial institutions have interactive Web sites with posted rates. "It's absolutely critical that the information available to our members (customers) is accurate and consistent," (Petty, 2001, p. 1). Investments are the money making backbone of the banking system. It is important that the information technology be both efficient and accurate.

"IT has increased the financial control and has made collation of information much easier," (Information technology and banking, p. 3). Banks can now use programs specifically designed to meet their financial reporting needs. "Banks are linked via a wide area network (WAN) and the files are sent down the lines as text files," (Information technology and banking, p. 3). Reports are required in all levels of banking information technology. Software adapted to meeting the needs of the intricate details required to meet each level of managements needs in producing the required reports. Spreadsheets, control analysis, and customer relationship management are just a few of the controls provided by information technology.

Banking management has also benefited from information technology in many ways. Another advantage is the amount of information that these systems have made available to management. Management can now see which branches are sending money, which are making errors and the amount of money each branch is making. The computerized systems enable the managers to identify large bodies of transactions coming from branches and locate the selling opportunities for different products. They are looking for marketing opportunities in order to increase profits and publicity (Information technology and banking, p. 7).

Management teams have many detailed reports and responsibilities for keeping the profits up to justify keeping their branch open.