Author(s)

J. W. Gabberty

Abstract

Financial service firms were among the earliest users of information and communications technology (ICT). As introduced in this study, investment in this technology in the banking sector of the industry, initiated in 1970, enabled automation of numerous functions, including loan payment scheduling and automated teller systems. Besides hastening the pace at which functions are performed in the sector, these time-saving improvements reduced the cost of labor, as banking tellers by the thousands were replaced by automated systems. These investments later resulted in fee revenue from customers of the teller systems. The replacement of traditional interest calculation tables, together with spreadsheet programs, resulted in the customization of interest-paying consumer loans. Transaction processing is indicated in this study to have satisfied increasingly larger databases that facilitated the explosion of consumer credit cards and further revenue for the banking sector. The frequent perception that investments in information and communications technology would continue to lower the cost of business while concomitantly and perpetually increasing revenue was the maxim in the sector in 1970–1990. Massive investment by the banking sector in 1990–2000 failed however to support this phenomenon. The failure of the industry to match increasing labor productivity rates was manifest in the sector, as the sector immediately curtailed spending on information and communications technology in 2000–2005. This study evaluates the new relationship of labor productivity and technology, and introduces steps for firms to mitigate the risks of overdependency on the technology. This study will benefit management practitioners and users researching information and communications technology in financial service firms. Keywords: ICT productivity, productivity paradox, United States banking productivity.

Keywords

ICT productivity, productivity paradox, United States banking productivity.