Strategies, Networks and Integration
Electronic bill payment programs might cause credit risk if the third party fails to pay its obligations. Any bank that purchases electronic money in order to resell it might also find itself the victim of credit risk if the issuer does not stick to their obligations. Liquidity risk occurs if the bank is unable to pay its obligations on time. In terms of Virtual money ATM cards, liquidity risk can occur if the banks do not have funds to cover redemption and settlement demands for any time. Also failure to pay on time might result in legal action against the bank.
This might damage its reputation and see a loss of customers. Adverse movements in interest rates might decrease the value of assets for electronic money liabilities. This would cause interest rate risk for banks specializing in Virtual money ATM cards. Outside service providers implement, operate and support electronic banking activities for banks that accept foreign currencies as payment. However this reliance by banks carries a risk. The strategy, reputation and transaction of these banks are at risk. Virtual money ATM cards are a new innovation in the information age.
They carry several benefits like allowing people to use them without carrying cash. They do not require any bank accounts. They are ideal for people who wish to travel without carrying cash, teenagers and young people. However there are also many risks associated with this type of electronic cash. Information technology is an ideal vehicle for banks and financial institutions to grow and expand. The major technologies which are used nowadays include Internet banking, mobile banking, telephone banking, smart cards, credit cards, and automated teller machines (ATM’s).
These methods allow customers to carry out many routine transactions without going into a branch. The benefits of technology also bring the finance industry to many risks and threats. Disgruntled employees, saboteurs, hackers and intruders pose the most serious security risks for electronic banking applications and systems. Hackers are increasingly using sophisticated techniques and tools to steal information and cause serious losses for banks. That is why banks should not only invest in providing new I. T.
based services but they should also invest in a good security system to protect themselves and their customers against viruses, spy ware, keystroke loggers and eavesdropping programs. Information technology does not always mean fewer costs for banks to operate, but it has become a necessity in today’s competitive market.
References: Bloomfield, B. P. , (2005) Information Technology and Organizations: Strategies, Networks, and Integration, Oxford University press Burton, D. , (2004) Online Financial Services and the Consumer, London, Routledge