Financial Institutions as Information Processors

This chapter considers in more detail the defining characteristics of financial institutions based on low barriers to entry, low barriers to exit, and a long history of M&A activity and transformational reorganizations. It describes how the product & service mix of these institutions has become increasingly technology and information processing dependent over the past few decades, while observing that institutions' proficiency in information processing has failed to keep pace. This, it is argued, is one of the main reason for high historic failure rates in this sector and why existing firms remain at risk. It considers the relative proficiency in information processing associated with various products and functional areas, within the sector and within individual institutions and it traces out some of the key cultural and structural reasons why financial institutions do not, or cannot excel at information processing at the institutional level.