Financial Instruments and Institutions: A Discussion on Australian and USA Financial Institutions

This article discusses the various financial instruments and institutions used in the banking industry, with a focus on Australian and USA financial institutions. It covers topics such as in-bank FinTech innovations, neo-banking, non-banking FinTech companies, and the use of technology in the banking industry.

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FINANCIAL INSTRUMENTS &
INSTITUTIONS
1

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Introduction
Most of the huge banking systems have adopted the various types of banking systems but the
most commonly used banking system is the cloud computing system. This technology helps
the banking institutions to cut the expenses short, scale online systems and procure mobile
banking capabilities for the consumers. Also, some institutions have adopted methods to
improve the analytics and elements of big data are by automating the process and making it
robotic. There are also many other technologies like distributed ledger which are in the initial
stages to be commercialized by the institutions (Kearney, 2017). These technologies provide
various types of facilities to the banking institutions like better risk management and
improved customer service, increased approach and Speed of transactions, strengthening the
operations and strategies, transformation of the cost structures which may help the firms to
have the better financial approach to the stability of growth and economic growth (Pwc,
2017).
Discussion on Australian Financial Institution
Banking Innovation can be thought of as a field where everybody has a chance to develop
themselves globally as it has lots of opportunities. The three types of banking innovation are
as follows:
• In-bank FinTech innovations, which is also called as FinServ innovations.
• Neo – in which the banks are a part of the FinTech hamlet.
• Non-banking FinTech companies.
It was seen that the FinTech investments reach a tremendous mark of USD 10 billion in the
year 2014. This highly increased the expectations in the year 2015 and it was calculated and
estimated to reach USD 19.7 billion. It was also calculated that 10 years from the year
following 2015 it will be seen that the FinTech investments grasp 20 percent of annual
compound growth rate easily (Kearney, 2017). Major and top priority valued stuff with a
number of accumulations of differences have been recorded and shown in this report which
has been taken across five continents (Bindi, 2017). A rival competition is continuing
between London and New York for the position of a global leader and on the other hand,
Australia is delivering commendable and extraordinary work.

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Global Capital of In‐Bank Innovation: Global capital of the In-bank innovation is no-doubt
Australia. It is commonly seen that the banks that who have their name established or their
lifespan has been quite a long now are considered to be most innovation, as in Australia and
many other places. Three of Australia’s four largest banks make it to the top 50 list in
consideration to innovative ideas across continents. The Commonwealth Bank of Australia is
considered to be the second most innovative company in Australia (Bindi, 2017). Westpac
also makes it to the first ten, while National Australia Bank is 14th, and ANZ bank is just
slightly off the list of the top 50.27 What is also very significant about this is that all four
gained their great positions in the last 10 years.
‘Innovation‐Tours’: The innovative nature of Australian banks is so appreciated that
international consulting companies are organizing ‘Innovation‐Tours’ for foreign experts to
visit them.
Competition Drives Innovation: As seen in the above data, Australian banking is very
competitive and works its things out intelligently. Reasons prevail which make the Australian
banking sector to be such innovative.
FinTech and In‐Bank Coexist: It is quite obvious that a deep study is required in the in-bank
Australian innovations but the banking sector always tells that though a highly-competitive
marketing environment prevails there is still some space for the FinTech to get expanded
(Bindi, 2017).
Discussion on the USA financial institution
The United States banking industry have become more dependent on the modern technology
in order to maintain its system of working. It has invested more than $30 billion for
improving its technology of the banking system. In the recent years it was noticed that the
concerns of technological improvements have been inculcated in industry. The new era of
banking began with a number of combinations and additions of the interstate banking and
branches which was previously restricted. It was very hard for the business-persons to adopt
this new method for banking. There were a lot of experiences which helped the institutions to
procurement of the new technology. During this phase of adaption, the technological world
was still gaining new advancements using internet. The firm started to increase their approach
of sales by adding new methods of market capitalization using the internet related services.
Banking institution also invested big amounts in the internet services. In recent studies the

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banks have shifted their technological focus to preservation of cost, strengthening and
defence. Some of the large banking institutions of United States are still trying and learning
to adopt new technological advancements like the Basel II and Check 21. The banking
services will also be improved by the introduction of new and improved web services,
imaging, internet approach, wireless networking, etc. The big institution focus more on the
improvement security concerns whereas the small commercial banks tend to use the tested
technology and make advancements in it. The small commercial banks thus use the tested
technology and give the customers almost the same facility as the high status banks. The use
of such technologies made it easier for the commercial banks to have a well maintained and
sophisticated financing system which it can provide to its customers and also make new and
satisfied customers. It is clear that the large banks will not stop the advancements of their
banking technology (Laux, 2014). And if they continue to grow, then there may be a chance
of an increase in the disputes and managerial diseconomies, also some corporate governance
cases may arise thus leading to potential problems. The huge systems and the complexity of
the new and improved banking systems place a really very heavy load on the financial and
operational management of the systems. Some of the issues like the exposure of single
permitted institutions are being reorganized and also other exposures are being tracked so that
they can also be treated. The implementation of Basel II and also the introduction of
improved risk management systems are taken into force.
Banks should always have a clean and successful past record of the safety and technological
advancements it provides. However, their nature of control and the technological
advancements can be hampered by the regulatory control and nature of requirements and
supervision. Previously it was noticed that the regulators have allowed the banks to improvise
and adopt new methods of technologies which helps the bank in capitalization and
operational innovation (Deegan, 2011).
Ethical issues and common good analysis
The online banking facilities facilitate the customers of the bank to visit a web page and carry
out their banking transactions and any other service with maximum security. The facilities
like making online payments, bill payments, bank transfers, applying for a loan, checking the
balance and also asking queries are provided to the customers of the bank. Also, the system
of mobile banking has come into force. In this type of banking system the bank can send
messages to the customers regarding their account details like the balance available, a total

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number of transactions and their details (Barney & Ray, 2015). Also, the banks have started
to make two-factor verification for online transactions in which it sends the customer a one
time password for improving the security systems.
The ethical perspective of the online banking facilities and the electronic cards can be
categorized into the following fields:
Privacy: The banks should create separate databases in which the account details and the
transactions of the customers are carefully stored. The banks should keep the data of the
customers in an encrypted form so that there may not be any fraudulent activity which may
be used by blackhead hackers to exploit the customer’s bank account (Bodie et. al, 2014).
Hence it is the responsibility of the customers to maintain and provide maximum security to
the account holders.
Ownership: The bank should ensure that no one else is using the particular account holder’s
account in order to do any type of banking services. The bank should ensure that the
information of the customer is used by him in making the transaction. The bank should check
the IP address and the security password before allowing any transaction (Chugh & Gandhi
2013).
Ethical social issues
We know that the advancements of the technology and the improvement of the online
banking systems have helped the public in many successful ways, but still, there are various
factors which are prevailing as a threat to these secured services. There is no server that is
secure and hence the banking servers are also not fully secured. This may because the
securities issued in the customer's mind (Broeders & Khanna, 2015).
The issues can be of both legal and moral factors and hence may cause great danger to the
society. There are many ways which are used by the banks to improve their technology.
Some of them are online banking services, mobile baking, issuing of credit or debit cards, etc.
They have not only helped to improve the approach of the customers but they have also made
it easier for the customers to maintain their accounts (Choi & Meek, 2011). With the
increased comforts, the banks are also needed to improve their technological advancements in
the field of security and thus save the data of its customer from exposure to the world. Banks

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must be sure that the transactions are secured but this still leaves some instances that are not
in the hands of banking institutions.
Conclusion
All the above factors are related to the information technology systems of the banks. Legal,
social and ethical means should be focused by the banks in order to work systematically. It is
clear that the change in era has also brought change in the technological advancements. With
those advancements came new methods of exploitation. So in order for the institutions to give
their customers best service, they should try and remove the any vulnerability present in their
system. Also there should be a declaration which states that the bank will clearly see that the
information of the customer should not be leaked to anyone else, not even the government
(Douma & Hein, 2013). The bank should give a legal requirement that there will be full
security of the customer’s data and his money. Also it should make the rules of refund if any
fraudulent activity takes place in the banks. The new era is the technological era and thus the
customers have shifted from their normal routine of going to the bank physically and making
transactions with the help of an agent to the new routine of sitting at home and making
transactions online. Thus it is the sole duty of the bank and the government to look into the
matter of security of the customer’s data, thus letting him have his legal aspects protected.

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References
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competitive advantage in customer service. Planning for Information Systems. [online]. 3(2),
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Bindi, T. (2017) Australian banks and fintechs weigh in on open banking regime [online].
Available from: https://www.zdnet.com/article/australian-banks-and-fintechs-weigh-in-
on-open-banking-regime/ [Accessed 13 April 2018]
Bodie, Z., Kane, A. and Marcus, A. J. (2014) Investments. McGraw Hill
Broeders, H. and Khanna, S. (2015) Strategic choices for banks in the digital age [online].
Available from: https://www.mckinsey.com/industries/financial-services/our-insights/
strategic-choices-for-banks-in-the-digital-age [Accessed 13 April 2018]
Choi, R.D. and Meek, G.K. (2011) International accounting. Pearson .
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Intelligence tools and integrating BI governance with corporate governance. International
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[Accessed 12 April 2018]
Deegan, C. M. (2011) In Financial accounting theory. North Ryde, N.S.W: McGraw-Hill
Douma, S., and Hein, S. (2013) Economic Approaches to Organizations. London
Kearney, A.T. (2017) Banking on Our Future: Framing a Vision for the Australian Banking
[online]. Available from: https://www.atkearney.com/financial-services/article?/a/banking-
on-our-future-framing-a-vision-for-the-australian-banking-industry [Accessed 13 April 2018]
Laux, B. (2014) Discussion of The role of revenue recognition in performance reporting.
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April 2018]

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