ATMs technology Essay Example

their family members' participation in the survey. Most responses from this group were received on paper, while five were submitted via email.

In India, I utilized a technique in which the questionnaire was sent via both email and fax. The faxes were directed to employees within four prominent companies in India who then gathered responses from individuals of different ages, genders, and professions. These collected responses were subsequently sent back to me through fax. Moreover, I also distributed some questionnaires among my personal friends; some responded while others did not. To conduct more comprehensive interviews, I visited two banks in Leeds - Barclays bank and HSBC bank - as well as an HSBC bank in India. During these visits, I interviewed the most knowledgeable ATM-specialist available at each respective bank.

While conducting a phone interview with HSBC Bank in India, I had the opportunity to speak with a general manager from the branch who is also a friend of mine. He offered valuable insights into the ongoing changes taking place within the bank. Throughout history, technology has played a vital role in advancing humanity (Coombs et al, 1989, p. 3). In recent years, technological advancements have frequently been essential in stimulating economic growth by introducing innovative products and services.

Adam Smith, in his book The Wealth of Nations (1776), emphasized the importance of technological advancements, specifically new machines, as a primary factor that contributes to income growth. Solow's production function (1957) and Sahal's theories of economic growth (1983) also recognized the crucial role played by technical change. In 1867, Marx argued that the utilization of machines greatly increased productivity and therefore strengthened the capitalist system. This essay investigates

significant technical and technological changes, focusing particularly on the spread of information technology within the banking industry.

In the past 50 years, there has been a notable rise in the services sector. Contrary to common belief, technological advancements have occurred within this industry. In fact, the last three decades have witnessed several technological changes that have brought about challenges and opportunities for further advancement, especially in the service sector (Elfring, 1988, p. 151). The increasing use of information technology significantly impacts the potential for job growth in services.

Based on Baumol's (1967) research, technological change primarily targets the goods producing sector. Baumol's model indicates that this unequal distribution of technological advancement results in slower productivity growth and a greater share of employment in the services sector. However, there has been a recent trend where specific service industries such as banking have begun incorporating computer and information technology. This integration has led to enhanced productivity within the service sector.

According to Schumpeter (1943, p. 73), innovation is the main driving force behind the historical development of capitalism and technological advancements. The OECD defines technological innovations as including new products, processes, and significant changes in technology related to products and processes. An innovation is considered implemented when it is introduced into the market (product innovation) or used within a production process (process innovation). Innovations consist of various activities such as scientific, technological, organizational, financial, and commercial endeavors (OECD, 1994, p. 4).

The banking sector features diverse technological innovations, encompassing both product and process advancements. This article examines significant innovations in payment methods and banking services, emphasizing the distinctions between them. Freeman and Perez (1988, p. 45) categorize innovation into four types:

incremental innovations occurring across industries or service activities at varying rates, demonstrated by consistent productivity growth.

The text discusses three types of technological changes: radical innovations, changes of "technology system," and changes in the "techno-economic paradigm" (technological revolutions).

The economic impact of different types of innovations varies. Incremental innovations have the lowest overall economic effects, while techno-economic paradigms have the highest (Diederen et al, 1990). Over the past forty years, the banking sector has seen various innovations that have had significant impacts on the way work is done. To comprehend the innovation process, Sahal highlights the significance of the interconnectedness between a technology's functional performance, size, and structure (Sahal, 1983, p.63).

Sahal has classified innovations into three primary categories: structural innovations, material innovations, and systems innovations. Structural innovations relate to the growth process and design of products. Material innovations encompass modifications in construction materials. Systems innovations occur when multiple technologies are combined to streamline the overall structure. These types of innovations are also common in the banking industry.

In the banking industry, various material innovations have significantly contributed to its continuous growth. These include the integration of magnetic stripes into payment cards, touch panels in ATMs, and micro-chips in electronic payment cards. Since the 1970s, the incorporation of computer and communication technologies has greatly benefited the financial sector, making it a leading branch of economic activity (Diederen et al., 1990, p. 120). This merging of computer and (tele-) communication technology is known as information technology (IT) and is considered a new techno-economic paradigm.

The implementation of the new IT-paradigm necessitates investments in IT equipment and changes in institutional structure. The distinctive feature of the new IT-paradigm lies in its

profound impact on the services sector (p. 121). Diederen et al also demonstrate that sectors such as banking, insurance, and business services in the Netherlands extensively employ information technologies. However, what accounts for this high rate of IT utilization in the banking sector? Diederen et al have identified four reasons that significantly contribute to this phenomenon (p. 121-).

First of all, the use of IT is particularly advantageous for banks due to their production process which involves storing and processing data related to payment transfers, withdrawals, and deposits.

Secondly, banks stand out from other sectors, both in services and manufacturing, because they operate on a national level with a widespread network of branches.

Lastly, thanks to their substantial available funds and involvement in a thriving and lucrative market, banks have the opportunity to invest in cutting-edge technologies such as software specialists, programmers, and educational programs.

The advancement of micro and personal computers, influenced by technological advancements, made them ideal for local branch use. In their book from 1987, Lewis and Davis discuss the limited changes in the banking industry over recent years. Despite progress, a substantial portion of global transactions are still carried out using cash, making up more than three quarters. Cheques remain the primary method for the remaining payments.

Despite previous predictions of a cashless society, there has been no transition from traditional payment methods to electronic ones. Nevertheless, the banking sector has experienced significant transformations in the last twenty years. These alterations comprise the rise of wholesale banking, multinational banking, Euro-banking, international banking facilities, multiple currency loans, collateralised mortgages, as well as interest rate and currency options and swaps, in addition to financial futures.

From

the 1960s onwards, the banking sector has undergone significant changes that have greatly impacted both the industry and financial markets. These transformations include the introduction of credit cards, debit cards, ATMs, cash management accounts, electronic fund transfers, and point of sale terminals. Lewis and Davis argue that these advancements are a direct response to shifts in the "real" economy which require innovative financial services.

Technological advancements have been instrumental in driving change, particularly in the banking sector. The computer revolution has paved the way for electronic funds transfer systems and plastic card-based devices, which can now be produced at a more affordable price. These technological advances have not only made these assets feasible but also opened up new opportunities in markets. It is evident that computer technology has effectively met the demands of an expanding banking sector by enabling faster, more convenient, and cost-effective payment processing (Howells, 1996, p462).

Despite the challenges that came with the initial widespread use of computers, such as the overwhelming volume of information generated and resulting management issues (p. 153), computerization also had a negative impact on employee engagement. Jobs became more mundane and less engaging, leading to monotonous work compared to before (Gothoskar, 1995, p. 159). The banking sector is particularly interesting for studying the diffusion of information technology due to its early adoption of micro-computers.

Diederen et al(1990) propose that innovation diffusion is a form of economic dynamics, representing how the economy adapts to new technological opportunities. They view it as the transmission of an innovation over time through specific communication channels within a social system (p. 123). The authors identify four key components in this diffusion process. The first element

is the innovation itself, encompassing various forms such as processes, products, technical or organizational changes, as well as incremental improvements or radical breakthroughs.

The text discusses various aspects of innovation diffusion. It highlights the significance of communication channels, including market and non-market channels. Additionally, it mentions the social system, which encompasses the social and economic context such as the market environment and institutional environment. Lastly, it emphasizes the importance of time in innovation diffusion.

Diederen et al have developed a model that underscores the value of gathering information and providing opportunities for learning during the introduction of new technology. They also recognize the role played by the social and economic environment in adopting novel technologies.

Hence, it should be noted that while a more lucrative technique may be available, immediate implementation is not guaranteed. Different techniques are used at different times to produce specific products (p. 138). Additionally, the authors highlight four important factors for firms to consider when evaluating new techniques: the risk of adoption, current usage compared to potential usage (competitive force), efficiency benefits, and technical barriers during adoption (p. 131).

When considering the future direction of their technological advancements, banks must take into account various factors. As previously stated, the banking sector heavily relies on information technology. However, the implementation of this new technology in the banking industry has followed two distinct phases, as observed in a case study conducted by Baba and Takai in Japan. In the initial phase, which occurred in the mid-1960s, the introduction of technology was somewhat fragmented. It was limited to specific operations within the accounting system and only applied within a network of individual banks.

During the mid-1970s, the second

phase of online banking began, allowing banks to systematize each unit of their accounting systems. The range of networking also expanded to include inter-bank transactions (Baba ; Takai, 1990, p. 143). Alongside this, new services like the automatic teller machine were introduced. The banks were able to enhance their specific business operations by implementing user-friendly software through gradual modifications. In general, the computerized routines of the banks were primarily developed according to each bank's specific needs.

The argument is made that technological progress is characterized by specific obstacles and advancements, resulting in the emergence of new technological possibilities (Ayres, 1988). Ayres emphasizes the significance of natural laws in this progress (p.1). Furthermore, he states that the technological life cycle refers to the time between a significant breakthrough that enables exploration of a new domain and the subsequent major obstacle.

Progress in various fields has been constrained in recent years due to insufficient computational power or information processing capability. However, advancements in microelectronics have successfully resolved these issues, including those in the banking sector. Ayres suggests that technological breakthroughs in one domain often pave the way for new possibilities and innovations. Additionally, Ayres has identified captivating insights concerning the life cycle of technology. He asserts that a dynamic interplay exists between push and pull forces throughout this cycle.

The text emphasizes the importance of technology push at the beginning, but also suggests instances where supply creates its own demand, such as Say's law. As time progresses, pull becomes more significant and entrepreneurs must find a balance in the markets (p.108). Eventually, the influence of pull diminishes, which is frequently observed in the banking sector. High-technology firms continuously provide new

techniques and technologies. In Finland during the mid-1980s, EFTPOS machines were introduced as a notable example.

According to interviews, banks embraced the potential of this new technique and adopted a "pull" approach, which signaled the start of a new era in banking services. However, prior to its widespread implementation, careful consideration and design are crucial. Howells (1996) investigated the development of the European Payments System and argues that a substantial part of the design process is undertaken by a bank working group or steering committee responsible for ensuring seamless systems or products.

According to Rosenberg (1994, p. 3), governing bodies often find that they can reconfigure commercial relationships among themselves and between banks, customers, and detailers through various design options (456). Successful product design is influenced by factors such as the scarcity of resources, complementary technologies, past events, and the preferences of firms and customers.

Rosenberg emphasizes that the design process requires extensive testing, redesigning, modifying, and re-testing. These activities are costly and time-consuming but essential for understanding the performance characteristics and reliabilities of new products (p. 13). Additionally, this paper focuses on notable advancements in the banking industry. The central idea is that innovation results from the development of dynamic competencies over time.

The process of innovation requires investment in skills, educated employees, and research and development (R&D), which leads to faster technological change and the accumulation of internal capabilities (Leiponen, 1996, pp. 9-11). According to Rothwell (1977) and Rothwell and Walsh (1979), understanding the needs of users and effective communication and collaboration are crucial factors in the innovation process.

By understanding these factors, the door to the success of an innovation is open. According to Kline and Rosenberg

(1986), both supply and demand are important factors in this process. They suggest that considering the coupling of technology and market is crucial for the success of an innovation. Similarly, Coombs et al (1989, p.102) conclude that innovation is a complex process and it is difficult to single out one specific factor as more important than others in this process.

In his book, Rosenberg discusses the discussion surrounding the role and impact of new innovations. He argues that the strength of these innovations is determined by their backward and forward linkages (p. 76). Backward linkages pertain to expenses for buildings, machinery, equipment, and raw materials that heavily influence decision making in the production of goods sector.

There are various forward linkages that can be achieved through innovation, such as reducing product prices, enlarging markets, increasing capital accumulation and output growth. These linkages can lead to the development of new products and processes in other sectors. According to Rosenberg, even if an external innovation does not lower product prices, it still enables the creation of completely new or improved products and processes.

The banking industry in different countries, such as the U.K and India, displays notable differences. The variations between these nations are more extensive than expected. Over time, each country has developed banking services tailored to its specific requirements. Rosenberg recognized these disparities when examining the diverse roles that "needs" play in different countries (p. 111). The availability of resources and demand conditions within an economy determine the most profitable innovations to develop and capitalize on.

Each country has its own perspectives on what is significant and deserving of advancement within its borders. According to Rosenberg, inventions that align

with a country's requirements are more likely to succeed. Different innovations may vary in terms of difficulty and there can be notable disparities between countries. Technical expertise and economic factors play significant roles in propelling economies in distinct trajectories.