Question

each answer 500 words

The financial institutions have been taking advantage of the new technologies, including artificial intelligence (AI) to improve their services and reduce costs. In recent years, globalization has given the financial institutions the opportunity to build global networks providing financial services worldwide. The new age, driven by digitaltechnologies, is expected to revolutionize the way the financial institutions operate and conduct business as financial service providers. Not only will the new technologies will have a substantial impact on bank operations and profitability, but also on customers and investors.

Students are requested to read the information below and answer the following questions. Students are expected to search for information to support their answers. You can use internet or any other relevant sources to support your answer. Be sure to make reference to the material you copy from these sources.

A. What impact the digital technology will have on the performance of the banking system? Explain.

B. How AI helps the banking system to compete and increase their shares in the marketplace?

C. AS a customer, how do you explain the impact of the new technology adopted by the financial institutions? What are the challenges and opportunities that you have to encounter using the new technologies?

Answer 1

Answer A-

1) The impact of artificial intelligence on economic growth: Artificial intelligence is mainly embodying in the automated processing of “programmable” work, thereby by reducing labor costs and improving production efficiency in the production process, it brings the profits. However, it will lead to cost increase in non-automated sector, which will reduce the share of capital return in the economy.

2) The impact of artificial intelligence on industrial organization: The first channel is the direct impact of technology, and second channel is the change of enterprise structure caused by technology. With the development of artificial intelligence, the trend of mergers and acquisitions of downstream enterprises by the large platform enterprises will become more obvious. Large-scale platform enterprises are not competing for direct market profits and shares, but the data resources of entire industry chain, so as to better develop artificial intelligence.

3) The impact of artificial intelligence on trade: Since artificial intelligence has significant impact on factor returns, and changes the relative returns between different elements, so that the dynamic advantages of countries change. High-tech, high-knowledge talents are vital factors in the development of artificial intelligence, therefore, talents will become important targets of trade.

4) The impact of artificial intelligence on GDP: Artificial intelligence can play an important role in e-commerce recommendation system, which could change people’s consumption habit and promoting consumption. It can satisfy the requirement of stimulating domestic demand and become a new carriage that drives consumption

Innovation was primarily discussed by Joseph Schumpeter (1883-1950) between 1920s and 1940s. According to Schumpeter’s theory, innovation is an evolving cycle that begins with entrepreneurs who attract new entrants due to high profit opportunities, and thus a wave of investments occur which will reduce total profits.

Moreover, Schumpeter differentiated between entrepreneurs who create innovations and bankers who finance these innovations. Banks were characterized as “the monetary complement of innovations” which emphasis their role in credit-creation . They should have the ability to evaluate whether a project will succeed or fail. Accordingly, they should deny credit for failing projects and finance those that are more likely to succeed. Schumpeter stressed the importance of bankers’ role in financing innovative ideas. However, the role of banks in this century is not only to provide credit for entrepreneurs but also to innovate by using new technologies to survive and stay competitive in a changing, complex and competitive environment. The financial activities in modern world cannot be executed without an advanced information system and updated technology because they are at the heart of the global change curve.

The use of information and communication technology in the banking sector could lead to deliver high quality services with less effort, and enhance banking performance in consequence. Coraş, et al. have indicated that the changing needs of customers, the progress of technology and the pressure of competition force banks to look for new sources of competitive advantage, shifting their focus toward innovation .

Martim de Condo, et al. Indicate that technological progress and innovation have contributed to the development of the economy and businesses over the last decade. For Ionescu and Dumitru technological innovation is the leading force of competitiveness and durable growth. The author’s further state that innovation refers to the implementation of new technology, new working methods and new business models for the company.

Brem, et al. revealed the importance of technological innovation as a source for competitive advantage. They also showed that technological innovation is becoming the main factor of increasing the performance level

Saeidizadeh, et al. revealed that the issuing of innovative methods in providing banking services is an essential factor in improving performance, attracting new customers and satisfying them . The authors showed the importance of information and communication innovations as a key to success in a bank’s development. Hobe and Alas confirmed the importance of technological innovation as a determinant factor in the competitive advantage in banking sector . However, they also stated that the success of innovation is becoming very complicated to measure in the service sector because it occurs throughout the organizational process.

For Abualloush, et al. innovation in information systems is vital for the banking sector. Accordingly, the investment in technological innovation creates a new working environment and increases the bank’s performance.

A real competitive advantage for banks is the ability to serve customers with a quick process that involves access to banking services with high security level and without any problem of customer defection. The mission of innovation is to attract new customers and satisfy the existing ones. Nowadays, the using of competitive intelligence and management of technology by the banking sector appears as important tools for success.

Kołodziej has proved that the implementation of augmented and virtual reality platforms in the banking sector generates competitive advantage and improves the effectiveness of banking activity [21]. This interactive model is currently used and tested by BNP Paribas and Citibank to meet the requirements of their customers and facilitate their decision-making process by creating images or events clarifying the different choices.

As a result, it appears that technological innovation is largely used by the banking sector to create competitive intelligence and competitive advantage because it helps banks to improve their services and their cost efficiency since fewer employees and less traditional branches are needed. It also decreases transaction costs by providing customers the needed capacity to execute their operations anywhere and anytime.

The Empirical Studies of Technological Innovation: Evidence from the Banking Sector

During the present period of globalization and technological progress, the banking sector has to upgrade its management system by using updated information and communication tools. Moreover, banks have to use technological innovation to improve their performance level by attracting new customers and satisfying them.

Many researchers have examined the impact of innovation on bank performance. The most used variables to measure performance level were the return on assets (ROA) and the return on equity (ROE). Technological innovation was measured by different variables such as investment in information services, existence of mobile services and internet services, investment in hardware and software, presence of cyber branches and number of ATMs.

The results of the different studies revealed a positive impact of some innovation dimensions on the performance of the banking sector. For example, Onay, et al. found a positive impact of internet banking on the performance of banks in Turkey between 1996 and 2005 . The results of Alber showed a positive impact of phone banking on the performance of six banks in Saudi Arabia between 1998 and 2007

However, some researchers revealed a negative impact of investment in technology on the profitability level of banks. For example, Beccalli found a negative impact of investment in hardware and software on both ROA and ROE. Jalal-karim and Hamdan revealed a negative impact of ATM numbers on banks performance .

Finally, some researchers were unable to find any significant impact of technological innovation on the performance of banks due to statistical constraints like the multicollinearity problem.

Table for more clarification.

Study	Variables	Results
Dependent	Independent
Beccalli (2007)	-ROA	-IT to equity	-IT to equity:
(5 European countries, 1993-2000, 737 banks)	-ROE	-Computer hardware and software	Significant negative impact on short term ROA and ROE
	-Cost efficiency	-Investments in	Significant positive impact on efficiency
	-Profit efficiency	IT services (consulting, training, implementation and support)	-Computer hardware and software investments:
			Negative impact on ROA, ROE and profit efficiency
			-IT services:
			Positive impact on ROA, ROE and profit efficiency
Onay et al. (2008)	-ROA	-Presence of internet banking	-Internet banking:
(Turkey, 1996-2005, 14 banks)	-ROE	-Deposits to total assets	Positive impact on performance.
	-Return on financial intermediation margin	-Percentage change in GDP per capita	-Deposits to total assets and percentage change in GDP per capita:
		-Loans to total assets	Positive impact on all performance measures
		-Bank crisis	-Loans to total assets and bank crisis:
		-Lending rate	Negative impact on performance
			-Lending rate:
			Negative impact on ROA
			Positive impact on ROE and return on the financial intermediation margin
Jalal-karim and Hamdan (2010)	-ROE	-Investment in software	-ROE model:
(Jordan, 2003-2007,15 banks)	-ROA	-Investment in hardware	Insignificant
	-Earnings Per Share (EPS)	-Presence of phone banking	-EPS, MVA, ROA and NPM models:
	-Market Value Added (MVA)	-Presence of internet banking	Highly significant
	-Net Profit –Margin (NPV)	-Presence of SMS banking
		-Presence of cyber branches
		-Number of ATMs
Alber (2011)	-Actual ROA over best ROA ratio	-Number of branches	-Number of branches:
(Saudi Arabia, 1998-2007, 6 banks)	-Actual ROE over best ROE ratio	- Number of ATMs	Negative impact on ROE ratio
	-Actual Return-On-Capital (ROC) over best ROC ratio	-Number of POS machines	Insignificant with the other two ratios
		-Presence of phone banking	-Number of ATMs:
		-Presence of computer banking	Negative impact on all measures
		-Presence of mobile banking	-Phone banking:
			Positive impact on all measures
			-Number of POS, the presence of both computer and mobile banking:
			Insignificant impact on all measures

Answer B-

In recent years, due to the rapid development of artificial intelligence (AI) and machine learning, its application has been widely used in many aspects of financial area, as well as significantly impacts financial market, institutions and regulation. The artificial intelligence technology brings enormous change to the entire financial industry, which creates a series of innovative financial services such as intelligent consultant, intelligent lending, monitoring and warning, and intelligent customer service as times required. In this paper, it aims to summarize the development and application of artificial intelligence and machine learning in financial system, as well as its impacts on macroeconomics and microeconomics. In the meantime, it is realised that a series of problems and risks were conducted by artificial intelligence during its use. Lastly, some suggestions and strategies are provided for reasonable usage of artificial intelligence in financial risk management, based on the financial risk management raised by artificial intelligence.

With the rapid development of artificial intelligence technology, AI is widely popularized in financial field. Factors that accelerate the Fintech development, promote the development of artificial intelligence and machine learning in financial field, and drive financial institution to reduce cost, management risk, improve quality of service and increase profit by using AI and machine learning. In early 1960s, one of the algorithms in machine learning-Bayesian Statistics become famous, it has been widely used in financial area until now. Moreover, the reason that Bayesian Theory become popular in financial area, is its application in auditing area. In the auditing field, judgement made by auditor, used to rely on professional knowledge and experience, but different cases have different situations. Various uncertain factors need to be considered in the decision-making of auditing. Therefore, Bayesian model provides objective and rational probability to auditor and help them to make more accurate assessment, as well as reducing the misjudgement caused by auditor’s personal emotion.

Answer C-

1. Avoiding Technology for Technology’s Sake

The wow-factor of cool tools won’t last long, so how can you be sure you’re left with something useful? Ask yourself questions like, “What problem(s) does this solve for my school?” And, “Does this have added value compared to a low-tech alternative?”

2. Creating a Vision

Why do schools with the same technology experience drastically different results? Planning. Who will use the technology? How will they use it? What’s the goal? How will you measure progress? Start with a small, focused implementation instead of trying to use one tool to solve every problem for everyone.

3. Money, Money, Money

Be creative with funding sources. Will the new tech benefit SPED students? ELL? Intervention? Can you use it for your after-school program, too? Always check the guidelines for the specific funding source, but it’s often possible to meet several needs with one implementation.

4. Professional Development

Good professional development will provide you with more than how-tos and button-clicking. Look for PD that will inspire teachers, share best practices, and guide your implementation to success. Don’t forget to provide on-going professional development to address challenges later in the implementation.

5. Get Everyone Onboard

Every implementation seems to have a couple naysayers who try to bring down the rest of the group (and sometimes succeed). Help prevent this by including teachers early on in the selection and planning process. Provide an opportunity for teachers to express concerns in a productive way, offer individual coaching, and set clear expectations for usage.

6. Scheduling for Success

Allocating technology resources is easily one of the biggest challenges of any implementation. There’s no one-size-fits-all solution, so be creative. And consider: Will the technology always be scheduled, or is it also available for impromptu use? Will students go to the tech, or will it come to their classrooms? Does every student need access, or just certain groups? Make the most of every minute by scheduling use before and after school.

7. Systems and Procedures

How will devices be charged? What happens if something isn’t working or breaks? Will students be allowed to print or access other hardware? Organization is key to success, so ensure that all teachers understand the ground rules. Label EVERYTHING, post reminders on tech carts or around the lab, and schedule someone to routinely maintain equipment.

8. Unlocking Student Motivation

When the shiny has worn off, and technology has become the norm for students, how will you keep them motivated? Will students receive a grade for their work? Can you sponsor a contest between classes for the highest usage or most growth? Perhaps if students meet their goals they can participate in a special activity. Consider what your students value most, and use it to your advantage. Older students often crave social time, so find a way for them to earn breaks. Younger students might be motivated by competition, Tootsie Pops, or extra recess.

9. Data and Progress Monitoring

Remember the vision you created for your implementation? Don’t forget to follow-up on your goals. Regular progress monitoring is one of the biggest keys to a successful technology program. Are teachers meeting expectations? Are students demonstrating success and making progress toward their goals? Is usage what you expected? Why or why not? Routinely monitor program data and communicate successes and areas for improvement with your teachers.

10. Happily Ever After: Maintaining the Enthusiasm

Most schools have new programs and initiatives every year, but don’t lose sight of your existing goals. If you had a successful first year, plan to expand and improve in year two. If you didn’t meet your goals, what needs to change? Communicate goals and expectations to teachers and provide on-going professional development to move beyond the basics.