This paper proposes the study to investigate the importance of Information Systems to the financial industry, especially retail banks. It talks about the specific issues that it will covered, which specifically all about the perception of the retail bank representatives about how important the upgrade and update of information system is to them. With this in mind, the study will be basically approached descriptively, as it aims to present descriptive and sound evidences of opinions of retail bank representatives and how such data relate with the problems and objectives of the study. This study will be limited only to quantitative research, which specifically would be the survey method. The reasons for this will explained further as the paper progresses, along with the list and explanations of the study's problems and objectives, the hypotheses, and other details about the methods it will use. But first and foremost, it briefly presents and discusses the background of the study, which is focused on several keywords such as Information Systems and retail banking. The aim of this study is to be able to determine the importance of Information System integration and upgrades to retail bank companies and what significant relationship do they have with the improvement of the companies' data management and customer service.
BACKGROUND OF THE STUDY
What is Information Systems?
Information systems of a company can be said to play a critical role in supporting the activities of the company. But what exactly is an information system?
According to Land (2004), Information Systems "are systems whose ultimate purpose is to store and manage information". In other definitions, they are basic infrastructures of the modern business organization; they co-ordinate the resources and activities of the input, process and output subsystems of the organization, thus monitoring and ensuring internal efficiency (Yaslin and Quigly, 1994). Furthermore, they can be used to scan the external environment and internal operations continuously to ensure that organizational effectiveness is achieved (Yaslin and Quigly, 1994). Simply, the information system gathers and stores all the information needed by the organization. After all, to plan effectively an organization needs to know its present position, its strengths and weaknesses, those of its competitors, market trends, etc (Williams, 1997). These can all be organized with the used of an information system.
Leek (1997) stated that there are four categories of information system projects. They are: strategic (projects providing a distinct strategic advantage); operational (projects for day-to-day operations with IS spin-offs); high potential (projects investigating new technologies and approaches); and support (projects providing underlying support to many activities).
Remenyi (1990) stated that for an information system to be strategic, it has to directly support and shape the competitive strategy of an organization. Furthermore, it may function as a management information system or a management support system (Remenyi, 1990). The CCO and MCO of Cisco is good example of strategic computer-based information system as it strengthens the competitive position of the company by providing quality service to consumers and suppliers. Those moves can be considered strategies because they were made to improve the performance of the company.
On the other hand, an Operational Information System is a large-scale, distributed system that provides continuous support for a company or organization's daily operations (Gavrilovska, Schwan and Oleson, 2002). One example of this is the OIS run by Delta Air Lines, which provides the company with up-to-date information about all of its operations, including flights, crews, passenger, and baggage (Gavrilovska, Schwan and Oleson, 2002). The tasks of the company's OIS is to integrate such data events, by applying to them relevant 'business logic'. Another important task is to make the 'business events' produced by such logic available to a potentially large number of remote subscribers, such as airport flight displays and gate agents (Gavrilovska, Schwan and Oleson, 2002). Another example of OIS is Cisco's Employee Connection or CEC as it addresses the unique needs of every Cisco employee by providing them intranet-based information about the different operations of the company including schedules, meetings, etc.
High potential information systems, on the other hand, are systems that investigate new technologies and approaches. One example of this is the collaboration between Aplana Software Services and General Electric Medical Systems for outsourcing development and maintenance of corporate and commercial applications (Aplana Software, 2004).
Finally, support computer-based information systems help the company perform several activities faster and more convenient and effective. Simple examples can be basically given in this category. For instance, the use of software technologies such as word sheets, accounting sheets, and other computer tools support the company in performing daily business tasks. Word sheets help the company write important letters and paper works, while accounting sheets help them in creating financial statements.
Is Information System Necessary for Banks?
Before answering that question, we must first determine how important technology is to banks. According to Frey, Hunter and Harker (2001), technology now plays a key role in the performance of banks. They explained that technological innovation in the retail banking industry has been spurred on by the forces described by Kotler, particularly in terms of new distribution channel systems, such as PC banking. As the industry has provided more ways for consumers to access their accounts, they have added significant costs to each institution. A need to combat these costs resulted in a major cost savings period, which includes back office automation (Frey, Hunter and Harker, 2001). Automation may mean the integration of an Information System that employees can check regularly. Information systems, which is a form of back office automation, can be helpful in teaching employee to have a single view on customers (Frey, Hunter and Harker, 2001).
Seifert and Wimmer (2001) stated some impact of functional economics to retail banks. One is the increased need for banks to improve their monitoring functions, mainly because of fulfilling the task of assessing and controlling risks, mainly arising from lending relationships. IT may support both the ex ante screening and the ex interim/ex post controlling of these relationships. Ex ante screening and ex interim/ex post controlling of risks involves an in depth risk assessment that can be supported by scoring systems and analytical tools (Seifert and Wimmer, 2001). This can either be high potential or support-computer based since the integration of system rooted out from the need to manage an emerging management strategy, and at the same time, to make that specific work easier. Zimmermann (2004) also stressed several reasons on why ICT and IS are relevant or important to banking companies, whether they are retail, mobile or online banking companies. They are the utilization of the Internet and the need to create web-based strategy to reach clients globally. That is, electronic commerce, perceived as the utilization of the 'Net' and its services for additional communication, marketing, and sales channels, based on only very moderately changed business models, indicates an evolutionary path of development (Zimmermann, 2004)
Aside from the challenges brought by ecommerce, there are also the challenges of storing information of customers to databases. That is, most of a bank's financial information is held in the form of reports. BMC Software (2001) reported that the difficulty lies in the fact that some reports are produced on outdated computer systems using archaic technology, whereas others are produced on state-of-the-art machines.
On the other hand, in a study conducted by SAP, it was found that customer information systems are becoming more and more important for retail banks. Several concerns they found include: Whereas easy access to data on customer transactions, satisfaction and attitudes is a reality for only 23 percent of EMEA banks today, 88 percent of the banks intend to reach that level of data quality by 2009; One-third of EMEA banks analyze customer data on an ad-hoc basis; Only 11 percent have a regular and consistent data mining process; Eighty-nine percent intend to gather data by customer segment that covers either all customer-relevant data or only some key parts such as complaints, sales visits and invoicing (SAP Global, 2000).
OBJECTIVES OF THE STUDY
The main objective of the study is to investigate the purpose of Information Systems to retail bank companies in the
Ø To determine which type of information system approaches or which of the following retail banks see as important – strategic, operational, high potential or support (these have been explained in the 'Background' section).
Ø To determine if retail banks have serious concerns over how they should perform with their Information System.
Ø To be able to provide a sound conclusion regarding the importance of Information System for retail banks.
Ø Do retail banks give importance to strategic information systems?
Ø Apart from strategic, which other types of information system do banks prefer: operational, high potential or support?
Ø Is improving the Information Systems a priority to retail banks?
Ø What specifically is the attitude of retail banks on the integration and implementation of Information System? Do they see it as something 'they cannot exist without'?
SIGNIFICANCE OF THE STUDY
The study can be significant to the Financial Industry community as can help them, in an informative way, to see through a statistical assessment, the importance of Information Systems on retail banks. Since the study will be descriptively, it may generate phrases or words that may describe how retail banks see IS and how much time or attention they give to its integration or implementation.
Determining the importance of Information Systems may generate many advantages. First, it can push the requirement to develop a more comprehensive IS for banks, since the study may reveal certain weaknesses of the current IS they currently implement. Second, through the descriptive presentation of relevant information data, it may generate new topics or issues that future research can explore. It can also be used by financial management students as a useful reference if they wish to learn about the relationship between retail banks and Information System.
The study approach will be descriptive. By that, it means that it intends to present facts concerning the nature and status of a situation, as it exists at the time of the study (Creswell, 1994). It is also concerned with relationships and practices that exist, beliefs and processes that are ongoing, effects that are being felt, or trends that are developing. (Best, 1970) In addition, such approach tries to describe present conditions, events or systems based on the impressions or reactions of the respondents of the research (Creswell, 1994).
Survey will be used to collect data from the respondents. Quantitative research is chosen for this study to make results descriptive. It also follows resolutely the original set of research goals, arriving at more objective conclusions, testing hypothesis, determining the issues of causality and eliminates or minimises subjectivity of judgment (Kealey & Protheroe, 1996). It provides achieving high levels of reliability of gathered data due to i.e. controlled observations, laboratory experiments, mass surveys, or other form of research manipulations (Balsley, 1970). This study should be based on surveys and statistical treatments, so basically the quantitative approach fits well with it. Surveys are the most common form of research method for collection of primary data (
In this study, 50 bank managers will be surveyed. It will look upon their understanding about IS and how it is relevant to their respective companies. Structured questionnaires will be distributed to respondents through email.
Meanwhile, to interpret the quantitative data gathered, the researcher will use the following statistical formulae:
1. Percentage – to determine the magnitude of the responses to the questionnaire.
% = -------- x 100 ; n – number of responses
N N – total number of respondents
2. Weighted Mean
f1x1 + f2x2 + f3x3 + f4x4 + f5x5
x = --------------------------------------------- ;
where: f – weight given to each response
x – number of responses
xt – total number of responses
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