The developments in information collection, storage, processing and transmission and
distribution technology have influenced all aspects of banking activity. And was regard as
the main driving forces for the changes in banking industry. In my opinion, the technology
influences the banking industry, mainly in the following six aspects:
1. Technology is influencing competition and the degree of contestability in banking.
Due to the development of technology, banks superiority in information is deteriorated.
Entry barrier have been declining, new competitor have emerged. Some financial products
and services have become more transparent and commodities, customer show willing to
unbundled the demand for financial products and services, all these lead to a more
competitive market environment. Due to lowered entry and exist and deconstruction, for
some sub-financial markets, contestability in banking is also raised.
2. Technology influence Economy of scale:
Competitive pressure force banks to lower their cost. Bank seeks to get economy of scale
in bank procession instead of being a big bank. Bank seeks to secure the optimal business
structure, and secure the competitive imperative of economy of scale. There are other
options to get economy of scale, including joint venture and confederation of financial
firms. Small firms also can get economy of scale by outsourcing, i.e. buy in economy of
scale.
3. Technology influence the economics of delivery
Technology has a major impact on the way banking and financial services are delivered. A
wide range of alternative delivery mechanism becomes available, Internet, ATM. these
Reduces the dependence on the branch network as a core delivery mechanism. With the
