B ANKING I NFORMATION S YSTEMS

1. BANKING INFORMATION SYSTEMS LECTURE 1

2. What is a Bank? •  A bank is a financial institution and a financialintermediary that accepts deposits andchannels those deposits into lendingactivates, either directly or through capitalmarkets.

3. Bank Types 1. Retail Banks 2. Commercial Banks 3. Investment Banks

4. Early Banking History •  The first banks were the merchants of the ancientworld that made loans to farmers and traders thatcarried goods between cities. •  In ancient Greece and during the Roman Empire, lenders who were based in temples made loans andadded two important innovations: accepting depositsand changing money. During this period, there issimilar evidence of the independent development oflending of money in ancient China and India.

5. Banking History •  The Bardi and Peruzzi families dominatedbanking in 14th century Florence,establishing branches in many other parts ofEurope. •  The development of banking spread throughEurope in Amsterdam in the 16th centuryand in London in the 17th century.

6. Banking History •  Their services remained local due to the lack ofinformation and communication technologies. •  Local banks only offered: deposits, withdrawals,and basic loan services. •  To achieve consistency between branches banksstandardized their record keeping andaccounting practices

7. Banking History •  The typewrites invention helped standardizeinternal and external communication. •  The telegraph made the communication betweenbranches and headquarters easy and fast andbecame part of a daily routine. •  By the end of the 19th century banks were connecting their branches so they can operate in anintegrated manner.

8. Banking History •  Mid 1960s IBM invented the magnetic strip and the banks were the first to use it in their card system. •  This led to the cash machines now know as Automated Teller Machines (ATM). •  In the 1980s, automation of data processing and technology spread to branches. Banks benefited greatly from internal operations. •  Early 1990s, with computers banks used them as competitive advantages and introduced new products and services. •  Developments in telecommunications and computing resulting in major changes to the way banks operated and allowed them to dramaticallyincrease in size and geographic spread.

9. Saudi Banks •  1953 -­‐ AlAhli Commercial Bank •  1955 -­‐ Samba Bank •  1976 -­‐ Saudi Hollandi Bank - Saudi Fransi Bank - AlJazira Bank - Saudi Investment Bank •  1977 - Riyadh Bank •  1978 - Saudi BriBsh Bank - Arab National Bank •  1986 - AlRajhi Bank •  2004 - AlBilad Bank •  2006 - AlInma Bank

10. Factors Driving Changes in theBanking Industry 1. Social Changes § Customer awareness of financial products is increasing andthey are demanding more for less. § The number of young people entering the labor force continues to decline in most of the developed world, while anageing population continues to dominate. § The finance industries are responding to this change byoffering a number of pension related products.

11. Factors Driving Changes in theBanking Industry 2. Political Changes § The political environment is changing rapidly. § The formation and expansion of The European Union has hadsignificant effects on worldwide financial product offerings. § Environmental issues are becoming more prominent, withbusinesses under pressure to “go green”. § The rise of new economic and military powers such as China &India.

12. Factors Driving Changes in theBanking Industry 3. Deregulation § New sets of regulations from outside national boundariessuch as EU, and international regulations, are making itdifficult for some organizations to ensure compliance.

13. Factors Driving Changes in theBanking Industry 4. Changes in the Economic Climate § There have been a significant shifts in the significance of different sectors of the economy. § In most western countries, primary (such as mining, agricultural) and secondary (manufacturing) has been steadily declining, whilst the financial services sector is growing in importance. § This has increased the prominence of service sector organizations, resulting in more pressure on them to diversify their offerings and look beyond their immediate markets to create value.

14. Factors Driving Changes in theBanking Industry 5. More Demanding Customers § With an increased choice and easier access and switching, consumers are more demanding than ever. § This has also resulted in increased legal rights as well as the willingness of customers to challenge banks if something goes wrong. § Banks are under increasing pressure to deal with these issue in systematic ways .

15. Factors Driving Changes in theBanking Industry 6. Internal Pressures § Banks are faced with the challenge of achieving the right balance between staffing levels and customer service, right training for staff,investment in technology and what to do with branch networks. § Banks seek new ways to create value, different skills and aptitudes are demanded from their management and employees. § Increased pressure from new and often well resourced entrants such as supermarkets is driving down the profit margins from retail banking products.

16. Factors Driving Changes in theBanking Industry •  The driving forces and internal/external pressures have significant implications for the type of productsand services that banks provide and how they aredelivered. •  New organizational structures and management practices are emerging, whilst working patterns arechanging and flexible working is growing. •  New technologies will only speed up these changes.

17. Bank Information Systems Definition A Bank Information System (BIS) is an arrangement of information (data), processes,people, and information technology thatinteract to collect, process, store, and provideas output the information needed to supportthe bank management organization.

18. Technology Integration Benefits Clients Technology Bank Employees

19. Banks Benefits The major advantages for the bank to implement IT are: -  Availability of a wide range of inquiry facilities, assisting the bank in business development and follow-up. -  Immediate replies to customer queries without reference to ledger-­‐keeper as terminals are provided to Managers and Chief Managers. -  Automatic and prompt carrying out of standing instructions on due date and generation of reports. -  Generation of various MIS reports and periodical returns on due dates. -  Fast and up-to-date information transfer enabling speedier decisions, by interconnecting computerized branches and controlling offices.

20. Employees Benefits IT has increased their productivity: -  Accurate computing of time-­‐consuming jobs such as balancingand interest calculations on due dates. -  Automatic printing of covering schedules, deposit receipts,pass book / pass sheet, and enabling them to give moreattention to the needs of the customer. -  Signature retrieval facility, assisting in verification oftransactions, sitting at their own terminal. -  Avoidance of duplication of entries due to existence of single-­‐point data entry.

21. Clients Benefits IT has increased the level of competition and forced banks to integrate newtechnologies in order to satisfy their clients. They have already developedand implemented a certain number of solutions among them: -  Remote banking: access account and services anytime and anywhere through ATMs. - Telebanking. -  Electronic Banking. -  Faster service: Information is centralized and updates are available simultaneously at all places, single-­‐window service becomes possible,leading to effective reduction in waiting time.