Analyzing Banking Technology: Benefits, Ethics, Crime & Fraud

This report analyzes the impact of technology on banking, focusing on USA and Australian financial institutions. It discusses interest and non-interest income and expenses, highlighting the benefits of technology, ethical considerations, and the impact on crime and fraud risks. The report emphasizes the rapid technological improvements in commercial banking and how these changes affect operational efficiency and customer experience. It also addresses the challenges banks face in adopting new technologies and the need for innovation to remain competitive, with a conclusion that stresses the importance of adapting to fintech trends for future success. Desklib provides a platform to access similar solved assignments and past papers for students.

Running head: BANKING TECHNOLOGY
Banking Technology
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
USA financial institutions............................................................................................................2
Australian financial institution....................................................................................................3
Interest income involved..............................................................................................................3
Interest expense involved............................................................................................................4
Noninterest income involved.......................................................................................................4
Noninterest expense involved......................................................................................................4
Benefits of the technology...........................................................................................................4
Ethical issues involved................................................................................................................5
Rapid Technological improvements............................................................................................5
Impact on crime and fraud risk....................................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................7

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Introduction
Corporate needs are ever demanding, poor technology infrastructure, inefficient
processes, unrelated systems with fewer business characteristics and functionalities, absence of
flawless incorporation, need for services digitization, and ever-evolving regulatory compliance
pressure are some of the key challenges faced by Commercial Banks. With a sound perceptive of
the challenges and concerns mentioned above (Buchak et al. 2017). The new technologies in
commercial banking has involved knowing about the latest trends in the market and insights.
The commercial banking technology offers disruptive and new services and solutions across the
entire range of Commercial Banking that includes lending and structured finance, trade Finance
& Supply Chain Finance, Payments & Cash Management in-turn helping banks to meet their
strategic business and IT objectives. This also helps in better management of risk and thereby
minimizes the volatility in the level of income. The commercial banking technology also
enhances Customer experience & loyalty through effective operational services.
Discussion
USA financial institutions
So far, the banks are not making much money from their efforts, especially compared to
what they have had to spend on technology in recent years. Between upgrades of hardware and
software, creating new apps and bolstering cyber security defenses, tech is fast becoming one of
the industry’s largest expenses (Gelis 2016).
The U.S. banks collectively spent $62.2 billion on technology last year, according to
research firm Celent. Selling technology externally recoups only a tiny fraction of that amount.

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However, moving tech from the expense line to the revenue line is an important shift for big
banks, which are desperately hunting for new areas of growth as regulations have hemmed in
traditional profit engines like trading.
The various banks of USA including Goldman Sachs Group Inc, Morgan Stanley and
JPMorgan Chase & Co are spinning out or selling a range of tools that pertain to data security,
mobile applications and “systems integration,” the process of flattening layers of aging
technology (Bunea, Kogan and Stolin 2016).
Australian financial institution
Fin tech is the fastest-growing sectors in the global financial services industry, with total
investment rising from US$100 million in 2008 to more than US$31 billion in 2016. In
Australia, the banks has been innovating their service collaborating with the of fin tech startups.
The emergence of fin techs banks that are seeks to directly compete with incumbent
banks(Bunea, Kogan and Stolin 2016). The ‘Big Four’ banks namely the ANZ, CBA, NAB and
Westpac is on the rise in Australia. With the slogan as “Innovate or die”, they grew 190% from
2004 to 2012 to $3.7 trillion in 2016. These banking industries are more competitive, more
efficient and provide more customer choice (Lunn 2016). Banks will come under increasing
competitive pressure unless they can leverage technology to cut costs and provide more interest.
Interest income involved
The interest income is the difference between the generated revenue from the bank’s assets and
the associated expenses after meeting the liabilities. The fintech reduces the labor charges as no
manual operations a takes place, it is done online through technology.

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Interest expense involved
An interest expense is the cost incurred by any business for funds that are borrowed.
Interest expense is the expense that is non-operating that is shown on the income statement. It
represents interest payable on any borrowings like bonds, loans, debt or lines of credit. Interest
expense on the income statement represents interest accrued during the period covered by the
financial statements, and not the amount of interest paid over that period (Bofondi and Gobbi
2017).
Noninterest income involved
The non-interest income refers to the income obtained from the deposits and transaction
fees, annual find fees, insufficient fund fees and so on. This ensures the liquidity in the
operations of the bank and increases efficiency. The commercial banking technology enhances
the income as new innovative technology is utilized that increases the efficiency.
Noninterest expense involved
A noninterest expense is the operating expense of a bank that are associated with
employee salaries and benefits, information technology, rent, telecommunication services, taxes,
professional services, marketing, amortization of intangibles and other general operating
expenses (Schulte and Liu 2017). The commercial banking technology has reduced the
noninterest expenses with its new trends of online banking system.
Benefits of the technology
Firstly, the concept minimizes costs and risks whether device failure, application error,
network connectivity issues or operating system errors, the commercial banking technology

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detects and diagnoses the protocol and finds out the exact issue and automatically taking actions
to fix the issue.
It minimizes the needless replacement of parts and expensive technician visits (Santu,
Mawanza and Muredzi 2017). If components need to be replaced, the technology automatically
dispatches a technician with the right parts and tools to ensure the problem is quickly fixed after
the initial call.
Ethical issues involved
The past 30 years has witnessed a development of the information technology. The world
of banking has been revolutionized by the ability to utilize technology in banking. The financial
and non-financial banking transactions may also be conducted online or through technology.
However, there are several problems that the fin-tech banks have to face that includes ethical
issues (Bunea, Kogan and Stolin 2016). All international banking institutions now aware of
problems caused by hackers, in this process the hacker attacks the computer; they can take any
information of the bank by using key logger technology. In the USA, government built a special
secret program to handle online banking transactions of terrorists or others like hackers
(Kimando and Kimeu 2016). Still there is no any specific laws or ethics for online banking and
because of that client happen to face some ethical issues, when they using their online banking
facilities. Therefore, clients have to think twice about their privacy issues.
Rapid Technological improvements
Until recently, when compared with retail banking the commercial banking appeared
relatively less prone to disturbance. Many innovations are being made since then; there is a
drastic increase in the hope from corporate customers and the rise of next-gen technology. The

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industry regulations are encouraging innovation in banking and giving opportunities to the new
market entrants such as online marketplace lenders. Banks are overhauling their back-end
processes through digitization and are leveraging data analytics and automation to streamline
operations. Application Programming Interfaces are being used to connect with third parties such
as FinTechs to collaborate and resolve long-standing customer pain points, including slow
payments and settlement cycles as well as complex and paper-based trade finance processes.
Commercial banking is expected quickly evolve faster in the coming months and years (Bunea,
Kogan and Stolin 2016). This report shares trends likely to affect commercial banking ecosystem
dynamics in 2018.
Impact on crime and fraud risk
The impact of the online fraud in the commercial banking technology is undeniable. The
primary impact is the direct financial loss (Du, Worthington and Zelenyuk 2016). The rise in the
in fintech banks and innovation in the operations with the technology has increased the rate of
risk of fraud and crime to a great extent. The various impacts that crime and frauds have on the
banks are as follows:
Loss in reputation: The security problems directly affect the reputation of the company. It
affects the relationship between the partners and the investors and the loss of the new clients.
Loss in trust: The online fraud, hacking, and breach of the financial information of the bank are
the major risks. The third party involved in it has to face a loss in the goodwill and the trust of
the individual for the banking company is lost (Karim and Chowdhury 2014).
Loss of income: All of the former, indirectly or directly, leads to income loss, somehow
impacting theorganizations profit or loss. The online fraud has an effect on the financial sector

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far beyond immediate income loss, since the lower income, effects due to reputation loss and
trust manifest themselves in the short, medium, and long term starting from when the incident of
fraud occurs (Bunea, Kogan and Stolin 2016).
Conclusion
Fin techs are a new trend in the commercial banks that innovates in the banking industry
and sharpens their focus on customer satisfaction. Banks face a number of challenges and for the
smooth functioning of the operations new trends of banking has evolved. The collaboration with
the technology has created a new platform for smooth function of the banking. The banks have
to make sure what fin techs are doing and respond accordingly. The banks constantly innovative
the operations and become less competitive and more symbiotic, or pursue a mix of these
strategies that fit their unique capabilities and market positions.

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References
Bofondi, M. and Gobbi, G., 2017. The Big Promise of Fintech. European Economy, (2), pp.107-
119.
Buchak, G., Matvos, G., Piskorski, T. and Seru, A., 2017. Fintech, regulatory arbitrage, and the
rise of shadow banks(No. w23288). National Bureau of Economic Research.
Bunea, S., Kogan, B. and Stolin, D., 2016. Banks Versus FinTech: At Last, it's Official. Journal
of Financial Transformation, 44, pp.122-131.
Dietrich, A. and Wanzenried, G., 2014. The determinants of commercial banking profitability in
low-, middle-, and high-income countries. The Quarterly Review of Economics and
Finance, 54(3), pp.337-354.
Du, K., Worthington, A.C. and Zelenyuk, V., 2016. Asset Diversification and Efficiency:
Evidence from the Chinese Banking Sector.
Gelis, P., 2016. Why FinTech Banks will rule the world. The FinTech Book: The Financial
Technology Handbook for Investors, Entrepreneurs and Visionaries, pp.235-237.
Karim, R. and Chowdhury, T., 2014. Customer satisfaction on service quality in private
commercial banking sector in Bangladesh. British Journal of Marketing Studies, 2(2), pp.1-11
Kimando, L.N. and Kimeu, M., 2016. Factors influencing the adoption of mobile banking
technology by bank customers in Machakos town.

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Lunn, B., 2016. Banks Partnering with FinTech Start‐ups to Create an Integrated Customer
Experience. The FinTech Book: The Financial Technology Handbook for Investors,
Entrepreneurs and Visionaries, pp.241-244.
Santu, T.V.C., Mawanza, W. and Muredzi, V., 2017. An Evaluation of the Agency Banking
Model Adopted by Zimbabwean Commercial Banks. Journal of Finance, 5(2), pp.58-66.
Schulte, P. and Liu, G., 2017. FinTech Is Merging with IoT and AI to Challenge Banks: How
Entrenched Interests Can Prepare. The Journal of Alternative Investments, 20(3), pp.41-57.
Wang, K., Huang, W., Wu, J. and Liu, Y.N., 2014. Efficiency measures of the Chinese
commercial banking system using an additive two-stage DEA. Omega, 44, pp.5-20.