SPECIAL ISSUES: TECHNOLOGY AND INTERNATIONAL BANKING :
Technological revolution has changed the style of functioning of many economies. New developments in communications technology are playing a key role in the international banking. Innovations in electronic equipment permitted the processing and transmission of information, the confirmation of transactions, and transfer of funds, in quick turnaround time. These innovations have assisted international banks to expand their operations and also offer value added services to their clients. In short, the technological revolutions have integrated the banks across the borders.
Financial institutions, and many international commercial banks, have been able to take advantage of the changed environment. These institutions and banks equipped with the latest technology have taken the lead to exploit the enhanced opportunities. They are quick in accessing higher-quality information about foreign financial systems. They are better placed to introduce new communications technologies, thereby reducing their costs of crossborder financial transactions.
Some of the technology support that has contributed significantly the growth of international banking are:
1. Clearing House Interbank Payment System (CHIPS): Introduction of CHIPS (Same Day Settlement by the has changed dramatically the clearing and settlement system in USA. Eventually international banking system started to make use of the technological development to introduce similar systems such as CHAPS,CHATS, RTGS,NEFT not only for quicker clearing of cheques but also for instant funds transfers. The revolution in communications technology that was taking place at the same time, enabled US banks to manage their liquidity position comfortably.
2. Technological innovations helped banks to setup effective clearing house interbank payment system wherein the Central Bank could play the role of an exchange to absorb credit risks. This assisted banks to mitigate credit risks subject to certain terms and conditions in interbank payment system on account of international payments arising out of Forex and Money Market operations.
3. SWIFT: Two networks collectively owned by the banks that use them dominate international payments. The Society for Worldwide Inter-bank Financial Telecom m unications (SW IFT) provides the international lines used for such interbank advice, while the Clearing House Interbank Payment System (CHIPS) is the system in operation in New York. They are connected by a system called “Gateway”. SW IFT a co-operative for a standardized automated international funds transfer information system between banks.