Bank Automation Advantages and Disadvantages 1

Bank Automation Advantages and Disadvantages

LaRon Walker

Master of Information Technology and Internet Security

October, 2009

Automation can be a very powerful tool in any industry. The banking industry is no exception,

no matter if the bank is small or large. By using an automated information system, businesses can

greatly reduce the risks of human error, along the overall operation costs of the business. In mid-to-

large size banks, automation could help processes become more efficient, as well as help customers

become self sufficient in processing their own transactions, with minimal human interaction. This could

help reduce costs in the areas of HR (hiring), employee training, purchasing (office equipment), and

physical office overhead.

In a mid-to-large banking environment, an automated business strategy would help streamline

processes, which could in turn increase productivity of each employee. However, when implementing

any new system, the return is not necessarily immediate. There are investment costs involved that must

be considered. These costs include, but are not limited to time, training, equipment (hardware and

software), and initial implementation funding.

Per Jankowski (2006), electronic payments now dominate non-cash payments in the United

States. This is highly due to automation systems, and the innovation of strong payment infrastructures

enabled by the ever-evolving E-commerce and the creation information systems. The banking industry

is in the center of this digital realm, and transactions between B2C, B2B and C2C businesses increase

daily. Without a solid automation process, banks would be forced to constantly invest funds in hiring

and training personnel, to keep up with this demand. Also, without automation, banks would be forced
Bank Automation Advantages and Disadvantages 2

to constantly invest in Fraud and Risk Management departments, to investigate issues and balance the

risk of human theft or mistakes. Overall, without some type of automation process in place to help with

the overall volume, the amount of transactions that are processed in today’s digital world would not

exist.

Switching to an automated system is a double-edged sword. Advantages include more

efficiency, less opportunity for human mistakes, and overall lower operation costs. The disadvantages

are not so apparent. For instance, an automated process is generally put in place to make processes

faster, which reduces the cost per transaction. But what most fail to realize is, the more we rely on

computers and these systems, the less the need for humans to perform these tasks. This takes away

jobs, which adds to the failing economy. Also, as we shift to more self-serving virtual environments, the

more secluded consumers may feel, and may eventually lose sight or the necessity for human

interaction. This is not saying that banks would lose the total need for humans, but this is clearly a

strategy that could help future decisions pertaining to budget cuts and restructuring.

References

Jankowski, C. (2006, September 23). Investing in payment innovations: Risks and rewards. Chicago Fed

Letter; Sep2006 Supplement, 230b(1-4), 4. Retrieved October 25, 2009, from EBSCOHOST

MasterFile Premier database.

Laudon, K., Laudon, P. (2010). Management Information Systems Managing the Digital Firm (11th ed.).

Upper Saddle River, NJ: Prentice Hall.