Policy Principles for Fintech: Productivity Potential

The financial services industry is considered to be more of an information industry. Here the real value of money is not really taken into account rather, it (money) is a nominal representation of the real value (which would be the goods and services provided). While a majority of industries which follow similar paths have sort of experienced disruptive gains. Contradictory to those, the financial services industry has been at the receiving end of incremental innovation. Today due to the influx of the development of technology, the financial services industry stands at a juncture, where expensive, single purposed networks are giving way to cheaper, and general purpose ones.

When we talk about this industry, we must bear in mind its long and historical tryst, with the IT sector. For instance, it was during the 1950s that the Diner’s Club and American Express, which happened to be a mail delivery firm, provided their customers with the first credit cards, in order to lessen their cash burden. Then came the next decade and banks began to offer self-service ATM’s, in a bid to improve the quality of their tellers. The decade after that saw the emergence of the great stock market. This stock market was instrumental in replacing the manually functioning floor trading, with electronic stock trading. This change was brought about for the sake of making trading faster and cheaper.

The 80’s brought about new avenues for experimentation and banks started with various new processes, in order to help their customers. This was the time when net-banking was introduced and this move was made so as to provide network services, which allowed to customers to conduct their banking business from anywhere. The later couple of decades saw banks becoming more tech-savvy and fully embracing the potential of internet banking. Today, almost all of the banks have adapted themselves to the world of mobile banking, most of which have their own mobile applications, which allow the customers to do everything at the click of a button.

As opposed to the belief during the olden days, the increasing rates of inclusion of the IT sector in banks have led to a greater increase in the labour productivity throughout the sector. Let’s take the example of all of the banks in the United States, in the field of commercial banking the labour productivity from the year 1987 to 2015, has increased by 153 per cent. This is about twice as more as the labour productivity increase of the whole economy. The introduction of Information Technology has gone on to ensure full automation of the tiniest of services, increasing efficiency. For instance, banks would automate all of their back-end processes, which would, in turn, save them hundreds of hours of monthly routine.

Today the technology has benefited the banks so much, as to the fact that it allows the banks to have fewer branches, yet have more efficiency and productivity. Self-service options like ATM’s, mobile banking and so on have helped in further reducing the costs of the banks’ services and improving their productivity. This is the reason why more and more candidates take up courses from Imarticus Learning in order to be a part of this field.

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