The Impact of Information

Technology on Finance

Dr. Eskandar Tooma

Knowledge Based Economy

Advancement in IT has contributed to the global integration and mass market reach creating what we now call a “knowledge Based Economy”

1. Databases

2. More efficient and symmetric information

Potential Difficulties of a Knowledge based Economy

Income disparity within a country between dissimilar social groups both by earning and by education level.

Costs of building the physical information infrastructure can be extremely high for developing countries.

Costs for setting the national platform for human software development can be colossal.

Security is a major issue difficulties to manage access control and other

security policies when tens of thousands of users may be permitted to log in to a computer system .

Areas of Finance affected by Technology

Investments

Corporate

Banking

InvestmentsIT provided a more efficient market structure and better decisions

Streamline data Modern clearing and settlement systems using the latest computer and

telecommunications technology. Online stock trading through discount brokerage firms Computer Software Using simulations packages: Neural Network Artificial Stock Markets Reallocation of risk.

In summary

IT has made possible the creation, valuation, and exchange of the complex financial products on a global basis.

CorporateIT proved to be very helpful in Mergers & Acquisitions and Capital Budgeting

Expansion of knowledge and reduction in uncertainty. Information has become vastly more available in real time Better

decisions. Development of Financial markets and expansion trading activities

Information from Paper to Electronic form large amounts of financial information as well as value could be processed and transferred across markets.

Global Market linking local markets through networks

In summary

Empower the firm’s decision making by increasing access to information, capacity to process that information capacity to reach out directly to other stakeholders without restraint

BankingIT contributed to banking systems in general as well as banking products

Real Time Gross Settlement (RTGS) inter-bank payment systems as

the cornerstone of a modern electronic financial system

Monetary Network-a "system of systems" that links market participants

internationally

Internet-based banking

Smart Cards

Online Credit Check

Concluding Remarks

Investments: arabfinance.com Automation of floor trading

• CASE faster clearing and settlement dates

Corporate: British Petroleum (formerly AMOCO) Real options.

Banking: AAIB smart cards