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Bank Accounting Information System and Electronic Banking

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Information technology has had as much impact on our society as the industrial revolution. In the information age, companies are finding that success or failure is increasingly dependent on their management and use of information. Therefore, companies need a good information system that enabled an efficient and effective use of information to give them more competitive advantage (Moscove, Simkin, & Bagranoff, 1999).

An information system is a set of interrelated subsystems that work together to collect, process, store, transform, and distribute information for planning, decisions making, and control. An information system need not be a computerized system, but the use of computer in information systems can improve the efficiency of information collection, processing, storing, transformation and distribution. An accounting information system (AIS) is the information subsystem within an organisation that accumulates information from the entity's various subsystems and communicates it to the organisation's information processing subsystem. The information processing subsystem is likely to be a separate department in the organisational entity that is responsible for computer hardware and software (Moscove, Simkin, & Bagranoff, 1999). The AIS has traditionally focused on collecting, processing, and communicating financial-oriented information to a company's external parties (such as investors, creditors, and tax agencies) and internal parties (principally management). Today, however, the AIS is concerned with non-financial as well as financial data and information.

In general, a bank's AIS has the same role as in other companies that is to provide financial and non-financial information to the company's external parties (such as investors, creditors, and tax agencies) and internal parties (principally management). However, due to the characteristics of banking business, banks' AIS have specific important features related to their liquidity management and the management of their customers' accounts information.

A bank has to manage its liquidity efficiently in order to maximize profit and to fulfil regulation requirements (minimum reserve requirement). To perform such duties, the treasury manager needs information of consolidated balance of customers' deposits, loans and other placements of bank funds. Those information are needed on a daily basis so that the treasury manager can determine how much reserve is needed and how much money should be placed in or borrowed from the money market to conform with the regulations and to maximize the usefulness of available funds. The use of computer network has made it possible for the treasury managers to get the information needed almost at anytime if all of the bank's branches are online. Therefore, the bank's liquidity management could be performed more timely and efficiently based on accurate information (Deakin, Goddard & Welch, 1999).

Among reasons why people use a bank's services are to obtain convenient access to cash and to obtain interest payments and other return on investment. The banks serve the needs of the customers by providing a system that enables the customers to check their account balance, to deposit and to withdraw cash, and to make payment in a convenient way. The system must also provide up to date and accurate information of customers' account. The introduction of information technology had improved the quality of banks services to the customers. Various new banks' services, which are made possible by the use of information technology in their AIS, are usually called electronic banking.

History of Electronic Banking

Banking technology appears to have been applied first at the centre of the United States banking system. One of the earliest uses of electronic technology was the Federal Reserve Communication System (Fed Wire), which recorded over 700,000 transfers in 1920. Fed wire is used to transfer reserve account balances from one institution to another, which makes it a very specialist electronic banking service. However it sits at the centre of US bank clearing systems. Electronic technology spreads from this central point through the whole process of bank funds transmissions, finally reaching outside the banks direct to retail customers and corporate treasuries.

Electronic banking started in the United States because the clearing arrangements between the large numbers of geographically dispersed US banks was extremely inefficient. Corporate customer pressure for improvements was becoming irresistible. In addition, the early availability of cheap computing power encouraged pioneering work in the United States to achieve savings from more efficient use of the banking system. The creative use of the emerging technology, which had been developed for other purposes, and paid for by other industries' research budgets, was fundamental to the progress of electronic banking and the significant savings achieved thereby. The American banks did not have it all their own way. The first ATMs in the world were introduced to the public in the United Kingdom by Barclays Bank in 1969. Once customers became familiar with them, they spread rapidly. By 1985, 160,000 units were run by banks worldwide, with about 9,000 in the United Kingdom (Deakin, Goddard & Welch, 1999).

By 1990, the pace of change had started to accelerate - electronic banking had become the norm in corporate treasuries with electronic links between balance reporting systems and second-generation treasury management system or spreadsheets and from treasury systems to payment systems. The banks had invested in improved security and extended services to corporate, at the same time as presenting a rapidly changing electronic face to retail customers. The move to telephone based everyday retail services, such as First Direct (from Midland) and NatWest's telephone payment system Action Line in the UK, meant that the use of technology in banking was now an accepted part of many people's experience.

In consequence, corporate treasuries' confidence in electronic systems increased rapidly. At the same time their requirements were becoming more sophisticated in line with the increasingly international nature of business. The 1990s' generation of electronic banking systems delivers an array of automated services including (Deakin, Goddard & Welch, 1999):

1. Cross border and cross currency bank accounts reporting and cash management.

2. On-line access to many banking services including payments, currency dealing, trade finance and account reconciliation.

Banking Services: Past and



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