B ANKING I NFORMATION S YSTEMS

1. BANKING INFORMATION SYSTEMS LECTURE 7

2. Problematic Issues in E-Banking Management 1. Technology related problems 2. Management problems

3. Management Problems 1. Regulatory issues 2. Informa>on management 3. Outsourcing problems 4. Security 5. Loss of personal rela>onship 6. Organizational structures and resistance 7. Trust issues 8. Adoption/acceptance issues 9. Clash with other services delivery channels 10. Change management issues 11. Ethical issues

4. 6. Organizational Structure and Resistance •  Confusions resulting from fast paced changes can also have negative effects on customers and suppliers. •  A major source of conflict is over the best ways in which to move into the future. Many people will have different views about future directions and may resist when their opinion is not valued. •  Organizational change is a dynamic process encompassing different but interrelated forms of diversity. This diversity might be related to several dimensions such as organizational structure and culture, or the interactions between different dimensions of an organization.

5. 6. Organizational Structure and Resistance Causes of failures can often be found in: 1. Inefficient interactions of technical and human activities, the organization with its environment, or organizational design and management style. 2. Lack of systematic change management methodologies or problems in their implementation.

6. 6. Organizational Structure and Resistance •  Most of the change management methodologies focus on four common dimensions of an organization: 1. Process 2. Design 3. Culture 4. Politics

7. Common dimensions of an organization 1. Process: may involve changing services development process (from market research to actual roll out) cash flow (from investments to profits), human resource input, and information flow. 2. Design: involves changes to organizational functions, their organization, co-ordination and control, such as changes in horizontal and vertical structures; in the decision systems or policy and resource allocation mechanisms; and in the processes used for recruitment, appraisal, compensation and career development. 3. Culture: Culture encompasses such issues as values, beliefs and human behavior in terms of mutual relationships and social norms. 4. Politics: may involve the power of change makers or those who resist it, which stakeholders will be effected and why etc.

8. Management of Change (MOC) •  The key idea of the MOC framework is to help manage the diversity and interactions in organizational change and the change management methods. •  The power of this approach lies in its ability to relate different change management methods to each other through a systemic framework.

9. Systematic Framework for the Management of Change

10. 7. Trust Issues 1. Trust and trustees: The two parties, truster and trustee, are vital for establishing a relationship. In an online environment, a website, or rather the trader behind it, is a trustee and a consumer is a truster. 2. Vulnerability: Offline traders usually have a physical presence which reduces the sense of vulnerability but the anonymity associated with the online world leaves consumers feeling more vulnerable. This is not just about vulnerability to fraud but also loss of privacy, because every move made by a consumer can be recorded and analyzed to assess their behavior. In some cases, this information is sold to other parties without consumers’ prior knowledge, further fueling online mistrust.

11. 7. Trust Issues 3. Produced actions: A consumer action may include just visiting a website for information or purchasing a product, often providing credit/debit card as well as other personal information such as home address. Both of these action benefit traders in terms of a potential sale or an actual sale. To provoke these actions, a trader must do a number of things to create trust in consumers’ mind. 4. Subjective matter: •  Trust is a subjective matter. Some people will trust easily whereas others will not trust no matter what. The majority of consumers, however fall, somewhere in between, and can be persuaded to trust even a virtual trader. •  Basically, trust is a psychological state of mind when the person is willing to accept the risks involved. When the perception of benefits outweigh the risks in the relationship, the person enters into a trusting relationship. Therefore the burden is on organizations to promote e-banking benefits and minimize the related risks (provision of institutional and structural safeguards) to facilitate trust.

12. Steps to Promote Trust in e-Banking •  Purchase of similar web domain names so it becomes difficult for fraudulent traders to set up similar websites. •  Being pro-active in combating online crimes and cooperating with other banks and other regulatory/ professional bodies to detect and prevent crimes. •  Taking proper care in protecting consumer’s information and taking particular care in using it for marketing purposes. •  Providing appropriate guarantees against consumer losses in the event of fraud.

13. 8. Adoption/ Acceptance Issues

14. 9. Clash With Other Services Delivery Channels •  Although e-banking promises to be more cost effective and efficient than other channels such as branch or phone banking, it may also cannibalize these other channels. •  In the short term a cheaper channel replacing an expensive one looks attractive, but in the long run it may cost banks an established and loyal customer base. For this reason many banks treat e-banking as only an extra channel, a factor which could mean that growth of e-banking is much slower than many expected. •  Many banks have invested huge resources in their branch networks and in many ways view it as one of their core competencies. New technologies can enhance these core competencies but at the same >me may destroy them. •  This could mean that entry barriers for new entrants keep coming down and increasing competition from new and lower cost rivals can erode profits. Banks need to be pro-ac>ve regarding new distribution channels, and should allocate resources in order to integrate them in the existing organization.

15. 10. Change Management Issues •  One of the main problems established organizations encounter when considering e-banking adoption is organizational change. •  Technology adoption is usually slow if too much attention is paid to technical aspects, rather than business processes and social issues. •  Some companies sell their e-commerce projects as ‘pilot’ or ‘learning’ vehicles and leave it’s development to the IT department and many senior executives equate ‘going online’ with a specific technology in mind rather than using digital technologies to implement their organization’s strategic objectives.

16. 10. Change Management Process •  Going online is about serving customers, creating innovative products/services, leveraging organizational talent, achieving significant improvements in productivity, and increasing revenues. •  High start up cost of e-banking also deters some banks to delay its implementation. •  Lack of a well defined e-banking strategy that is aligned with general business strategy is also one of the most common problem in e-banking adoption. • Adoption of e-banking initiatives can also be derailed by the absence of clearly defined performance measures. •  An e-banking initiative, just like any other business project should be undertaken within a strategic framework.

17. 10. Change Management Process

18. 11. Ethical Issues •  Consideration of the ethics of e-banking have mainly focused on areas relating to the use/abuse of information collected through analyzing online customer behavior. •  The main issues may include security/privacy of information about individuals, accuracy of information, ownership of information and intellectual property, accessibility of information held and what uses of this information are ethically acceptable. These relate to: freedom of choice; transparency; facilitating fraud (ethical/illegal activities of others). •  One of the main benefits of e-banking is that organizations can improve service and potentially generate more profits for shareholders and job security for employees.

19. 11. Ethical Issues •  Job losses are one of the methods of cutting costs and this has numerous negative implications for those effected. The displacement of job opportunities away from face-to- face and back-office service roles to information system professionals is a common feature of the electronic commerce revolution. How banks deal with this issue often raises ethical issues which may be mitigated by a careful and considerate approach to change management. •  Fraudulent activity by individuals and businesses is both illegal and unethical but what about thefacilitatingof fraudulent activity? How much responsibility do banks have to prevent their services being used to aid unethical or illegal activities such as money laundering or depositing money made through corruption?

20. 11. Ethical Issues •  Taking personal relationships out of responses to credit applications has the effect of dehumanizing the process. A client’s relationship with a bank or a manager may have developed over years of loyal customer commitment. •  Reducing this to boxes ticked and computer-generated numbers/models would, according to an ethic of care, result in the loss of the development of individual relationships, the human touch and the use of intuition. •  Such aspects may be viewed as necessary to the new electronic economy, but human networks are just as important a part of business practice as the efficiencies associated with e-banking.

21. 11. Ethical Issues •  Electronic commerce also allows for the concealment of the real identity of suppliers of a product or service. •  This white labeling (products sold without clearly labeling the source/supplier) may offer extraordinarily misleading information about the source. •  This and many other ethical issues remain to be address to date and progress seems to be slow. •  All these obstacles need to be identified, and then minimized through active learning and collaboration with customers, management, and people within organization as a whole.