The rapid advancement in Information Technology has had profound impact on the banking industry and the wider financial sector over the last two decades and it has now become a tool that facilitates banks’ organizational structures, business strategies, customer services and other related functions. The recent “IT revolution” has exerted far-reaching impacts on economies, in general, and the financial services industry, in particular.

Within the financial services industry, the banking sector was one of the first to embrace rapid globalization and benefit significantly from IT development. The technological revolution in banking started in the 1950s, with the installation of the first automated bookkeeping machines at banks. This was well before the other industries became IT savvy. Automation in banking became widespread over the next few decades as bankers quickly realized that much of their labour-intensive information-handling processes could be automated with the use of computers. Overall, technological innovation has brought about the speedy processing and transmission of information, easy marketing of banking products, enhancement of customer access and awareness, wider networking and, regional and global links on an unprecedented scale. IT development has thus changed the product range, product development, service channels and type of banking services, as well as the packaging of such services, with significant efficiencies not only in the banks, but also the ancillary and feeder services to banks. The financial services industry has thus become virtually dependent on IT development.

 Federal reserve US 2006,three decades of financial sector risk.[online] Available at: www.newyorkfed.org/research/staff_reports/sr248.pdf [Accessed at 12/03/2013]  Reynolds, G.W., 2010. ETHICS IN INFORMATION TECHNOLOGY. 3RD edition.

 Schwalbe, K., 2011. MANAGING OF IT PROJECTS. 6th edition

 The past three decades have witnessed enormous reductions in the cost of information technology. Between 1986 and 1995, the computing power of the average PC increased eleven fold while the price declined. At the same time, a revolution in telecommunications reduced the cost of transmitting data by 90 per cent since 1980. Such cost reductions have made it ever less expensive to acquire, store, transmit, and transform data into information. They have also created enormous changes in data-intensive industries such as financial services — which are, after all, fundamentally about processing information.  For commercial banking firms, these advances in IT have resulted in dramatic productivity gains. One early example was the introduction of the automatic teller machine (ATM), which first appeared in the United States in 1968. Most certainly, the introduction of ATMs made the distribution of some banking services more “efficient.” Before ATMs, withdrawing funds, account inquiries, and transferring funds between accounts all required face-to-face interaction between the customer and a bank teller. The bank’s costs for these transactions included wages of tellers and back-office personnel, the cost of maintaining the premises, and other related expenses. ATMs automated this process and, to the extent that they were simply substituting a machine for a bank teller, costs per transaction fell significantly. In the case of ATMs, as customers became comfortable with the new technology, they began demanding greater convenience and higher-quality products. But the costs of providing these new services were not necessarily below the costs of traditional bank accounts. Customers began making more frequent withdrawals which, in turn, forced banks to process an increasing number of transactions — potentially at significant cost. Soon customers decided that access to a single ATM at the bank branch was not enough; they wanted broader ATM accessibility. Banks responded either by investing in expensive ATM networks or by allowing their customers to have access to accounts via networks built by others.  The impact of IT on revenues is similarly complicated. With better-quality products and services, banks should be able to charge more, all else equal. In the case of ATMs, the improved features and increased usage meant that banks might expect to receive increased fee revenue for processing customer transactions. But the proliferation of ATM networks also allowed banks to reach customers outside the geographic markets served by their branches. This created the opportunity for greater price competition, as

consumers could choose the lowest-cost provider rather than a neighbourhood bank.  With the success of ATMs, banks had an incentive to develop new delivery channels, such as home banking via telephones and PCs. Debit cards, electronic check clearing, cash management, derivative securities, risk management, stored-value cards, and electronic forms of currency are also examples of products that are new or newly reinvented, because of IT.  Banks that do not make investments that take advantage of new technology may find that they are losing customers to the better-quality or lower-cost products of firms that do. But using IT as a strategic weapon can be quite tricky, entailing high costs and an uncertain payoff. Finally, information technology will likely continue to transform some banks into new types of financial institutions whose business bears little resemblance to that of a traditional bank. For example, State Street Bank in Boston is no longer a bank in the conventional sense; last October, it sold off its last bit of business taking deposits and making loans. State Street now relies on a very profitable IT-driven business, focusing on complex accounting and recordkeeping activities for institutional investors, such as mutual funds. Other banks have taken on firms such as Amazon.com, using technological expertise to help smaller businesses build and manage online stores. For a fee, these banks will track inventory, generate shipping information, authorize customer payments, and even build the Web site. Although closely related to financial services, these activities are hardly traditional bank lines of business. As we look ahead to the next generation of information technology, it is doubtful that the current landscape — which types of firms offer which products, the degree to which physical proximity to the customer matters, the best size for firms — will remain unchanged. More likely, the types of products delivered and how they are delivered will continue to evolve. In a sea of change, it is also reasonable to expect some real surprises. From one point of view, IT can be said to have created havoc in the banking industry and to have placed in jeopardy huge investments in human and physical capital. Careers have been disrupted or abbreviated, and venerable institutions have been dismantled. Yet, because each problem also represents an opportunity, IT has provided benefits for those who are able to successfully adapt.

This report shows the effect of IT on banking sector that how the technology changed the way of banking over last two decades. By making this report, lots of knowledge comes out about the banking sector and its use of technology. In this report, there are some examples about the changes which occur due to the change of technology in banking sector and these examples shows the growth of productivity, profit, etc. in banking area . As this report showing that how computer technology did lots of changes in banking sector which are also very useful for coming generation and make it so efficient and fast.