The Impact of Information Systems on the Efficiency of Banks

Financial institutions, and banks, in particular, are one of the largest investors in information systems (IS) and information technologies (IT) and there are indications that this trend is likely to continue. However, there is growing concern that IS investments are not yielding the anticipated results, an issue that is of grave concern to many CEOs and top managers. One way to address this concern is to analyse the relationship, if any, between investments in IS and an organization’s efficiency measures. Reports the results of an empirical study that assesses the role and contribution of IS to a bank’s efficiency, based on a study of nationalized banks in the state of Florida. More specifically, reports on the role of IS in achieving business goals, improving productivity, and enhancing customer service in banks.

Introduction
Financial institutions are one of the largest investors in information systems (IS), and according to a survey by Ernst and Young and the American Banker, the industry’s information technology (IT) spending is expected to reach unprecedented heights in the late 1990s. It is estimated that in 1994 alone, banks invested close to $20 billion in information systems and technologies in an effort to improve efficiency and enhance customer service. Many successful financial institutions have clearly demonstrated that information systems and technologies can be a powerful competitive weapon that can be used to capture market share, improve customer service, reduce operating costs, and create new products and services (Lederer and Mendelow, 1988). Chief executive officers (CEO) and top managers often have an intuitive understanding of the power and potential of IS, thus propelling many companies and institutions to invest large sums of money in IS and IT. However, decision makers often struggle with how to assess the returns from these investments because of the many intangible benefits associated with IS and IT. The primary question of “What is the...