Assessing the Business Value of Information Technology in Global Wholesale Banking: The Case of Trade Services

The investment in information technologies (IT) in the financial services sector has proliferated in the last decade. Yet there is very little research examining the impact of IT in the financial services sector. In this article, we focus on the trade services application in global wholesale banking. We use the production function approach to estimate the impact of IT in this application. Our estimate of the output elasticity of IT is positive and statistically significant. In addition, we find that the return on investment of IT (increase in dollar revenue per dollar spent in IT) is about 100% per year, holding labor input constant. Our study provides one instance of direct evidence that IT has a favorable impact on productivity in the financial services sector.

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