Article Analysis
The main aim of the article named “Electronic finance – recent developments” by Krishnan Dandapani is to analyse and evaluate the effect of Digital Age on e-finance in five key areas; they are systems of payment, financial services related cloud computing, multisided platforms related valuation metrics, quantum trading and cyber security (Dandapani, 2017). This report undertakes a comprehensive analysis as well as review of the key technical development and corporate practices in various aspects of electronic finance. This study undertakes a critical analysis of this particular article through considering all the necessary aspects.
In the recent years, e-finance is considered as a major aspect for the success of business organizations. E-finance is considered as a vital part of the e-business which is involved in providing financial services with the help of internet. The present business organizations are running in the fourth industrial revolution encouraged by advanced technology. The presence of major companies can be seen involved in providing internet-related financial activities after the first introduction of Internet Bank of Indiana in 1995. IN the recent years, major improvement can be seen in the use of internet and majority portion of the internet accessories are connected with the help of mobile network and these developments have major positive impact on the aspects of electronic finance (Dandapani, 2017). The following discussion shows the key impacts of digital age on the above-mentioned five areas of e-finance.
This article shows the impact of digital age on the online payment system through the use of digital currencies due to the presence of massive demand of an alternative payment system from the investors (Dandapani, 2017). As an advantage, the use of digital currencies provides major motivation since e-commerce productivity is increased through this. It has led to the inception of two types of digital currencies that are cryptocurrencies and non-cryptocurrencies; and the most popular cryptocurrencies used all over the world are Bitcoin, Lite Coin, Zerocoin and Peercoin. While these cryptocurrencies have become massively popular, lack of popular acceptance has led to the less popularity of non-cryptocurrencies. According to the provided article, Bitcoin is considered as an electronic cash system which is fully based on peer-to-peer in the absence of any trusted third party; and Litecoin is considered as a peer-to-peer currency that provided the opportunity to make zero cost payment to anyone. One major reason for the increasing popularity of these crypocurrencies is the motive to remove third part from the online transactions (Narayanan et al., 2016). However, transactions through these cryptocurrencies are not free of risk since the presence of six major risks can be seen in their transactions which are security, fraud, exchangeability, lack of safety, theft and irreversibility. In addition, digital currencies are tough to centralize by the monetary authorities and thus, governments of many countries have banned the use of these cryptocurrencies.
The article shows that cloud computing is another major area of e-finance that has been majorly affected by digital age (Dandapani, 2017). Cloud computing refers to an internet-based mechanism which helps in storing data virtually in the absence of any physical data driver which facilitates in easy sharing as well as accessing information from various sources. Both the users and service providers can save cost and get flexibility from cloud computing because of usage-based billing system (Rittinghouse & Ransome, 2017). This system also facilitates effective protection of data and back-up which is advantageous for the service-providers. Users can store every bit of data through the use of cloud computing. However, this article pints towards certain factors that work as risk in the process of cloud computing; and these can be regarded as the disadvantages of this system. Some of them are privacy and security, service quality, increase in vulnerability and cost effectiveness (Dandapani, 2017). For example, there can be a loss of a minimum of $750,000 to a bank due to the failure of cloud computing. Another major concern in the use of cloud computing is the security of information along with the privacy risk. In case of the banks, the use of cloud computing enables them in serving their clients in faster manner. In addition, the introduction of internet and mobile devices has led to the increased adoption of cloud computing (Garg, Versteeg & Buyya, 2013).
Valuation metrics for multisided platforms (MSPs) are considered as another major area of business due to the increased popularity as well as growth of internet in transactions. As per this article, MSP can be regarded as a business model that assists in binging two or more group of customers together. According to a major feature of MSP, it leads to the increase in value of customers with the increase in number of participants due to the effect of cross-side network effect (Hagiu & Wright, 2015). This article states that adoption of MSP needs huge amount of investment from the companies which works an entry of barrier. At the same time, the presence of certain new valuation metrics can be seen for some of the unicorn companies. As per this article, the power law model is considered as the most popular model for the valuation of the stocks of e-businesses. It is important to mention the fact that the business model of the MSP determines the evolution of the valuation metrics. However, long-term sustainability is considered as a problem even in case the working of the new market can be seen in short-term (Yaraghi et al., 2014).
This article has also discussed about the aspect of quantum trading which can be considered as the process of computerized trading of the securities. As per this article, the base of quantum computing is the theoretical computation mechanisms which is involved in the use of events of quantum mechanism like entanglement as well as superposition for performing different operations (Dandapani, 2017). The use of quantum bits can be seen in quantum computing while data is needed for the operation of digital computers. For this reason, quantum computing leads to the increase in the capacities of the computers. This article has also indicated towards the fact that the quantum computers are in the developing phase and involvement of many companies can be seen in the development of quantum computers (Hirvensalo, 2013). It needs to be mentioned that the introduction as well as implementation of trading with the help of quantum computing will lead to the increase in computational power and it will also lead to the change in information analysis process along with the processes of distribution and regulation. The development of quantum computing will take long time for the banks and financial institutes to adopt. However, there are certain negative impacts of the adoption of quantum computing; some of them are the change in structure of labour in the financial sector, increase in cost, issues relate to security and privacy, regulation related issues and market inequalities (Preskill, 2018).
According to this article, cyber security is a major area that have been impacted by the digital age along with the evaluation of internet (Dandapani, 2017). In the recent years, major surge in cyber-attacks can be seen due to the increased use of internal in e-finance. The traditional controls have not been effective in eradicating the threats of these cybercrimes. The evolution of cybercrimes can be seen from stealing passwords from developing new mechanism such as water holing, phishing, scanning, ransomware and others. Both random as well as targeted attacks can be seen in cyber-attacks (Von Solms & Van Niekerk, 2013). This leads to the increase in spending of the banks and financial institutes for the purpose of cyber securities. According to this article, it is needed for the companies to stay updated with the threats of cybercrime so that they can be fought back in effective manner. Corporations can only make mechanism to counter these cyber threats only when they are well aware of the risks. For these reason, cyber threats can be considered as the risks and threats arise from the companies’ online activities such as trading through internet, use of credit cards, debit cards and others. There are many companies that are using cyber insurance as a measure to fight the cybercrimes since these are developed for eliminating the losses occurred from cybercrimes (Wang & Lu, 2013).
It can be seen from the above discussion that the use of internet has majorly evolved different areas of e-finance over the past years. These developments have majorly contributed towards the development of different financial operations of the banks and other financial institutes. These developments have played crucial roles in the overall development of the businesses so that the customers can be provided with speedy services and solutions of their problems. At the same time, some of the developments like the introduction of cryptocurrencies and cloud computing have eased the processes of online trading. However, these developments are not free from threats since the banks and other financial corporations have to face the negative side of these developments. For example, lack of regulatory controls in cryptocurrencies increases the risks of theft, fraud, lack of safety and others. After that, corporations have to face the disadvantages of cloud computing while dealing with it such as increase in vulnerability, privacy and security issues and others.
References
Dandapani, K. (2017). Electronic finance–recent developments. Managerial Finance, 43(5), 614-626.
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