In the past decade, computers have entered into almost every field and finance sector is not an exception. Most importantly, the recent growth in information technology has been a major hindrance to financial companies. The IT field has developed various software solutions that negate the need for financial advice from financial institutions.
Due to the growth in World Wide Web and its use in trading, there have been a lot of transactions taking place within a short amount of time which is difficult for a financial institution to handle. A few years ago, it was thought that trading through financial institution was far more secured than trading online but now due to the growth in information security, people think that online trading is better due to its speed and security.
Initially, banks used to store sensitive information in large main frame systems and allow only privileged member access. But, nowadays due to the advancements in information security, there is no need for a mainframe. Sensitive information can be monitored from less powerful desktops.
The increasing popularity of online market has also been beneficial to financial service providers. The internet is a highly decentralized trading platform and it doesn’t have any organization governing the trading activities. This has opened a lot of potential for financial service providers.
In banks, information technology has also led to customer dissatisfaction. Due to the thirst for security, banks started demanding ways to improve their security. This led to the use of encryption in banks. Though, this increases the security of data, it brings down the performance of the system. Also, there is the risk of glitches in the encryption algorithm. So, thinking of increasing the security, all that banks have managed to do is to degrade their performance.
Computers have known to do whatever is instructed to them. Many financial institutions have automated their system of functioning and thus financial professionals are required to have knowledge about computers. Whenever a sophisticated service is provided by a new application, the amount of risk involved also increases. If a financial professional is not able to understand the proper way to use this new service, a heavy loss will be incurred.
Although, the involvement of information technology in finance has increased the risk factor to a great extent, this can be compromised by the fact that it has opened greater money making opportunities by providing a large decentralized market.