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Why do banks use computers?

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Quick Answer

Banks use computers because computers are highly effective data input and tracking devices that permit rapid sharing of information across whole networks. According to About.com, the first use of electronic computers in banking came in the 1950s, with the testing of ERMA, or Electronic Recording Method of Accounting, which was pioneered by Stanford University and Bank of America.

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Full Answer

ERMA was first shown to the public in 1955 and began testing in the field about a year later, as related by About.com. The system was sophisticated for its time and had the ability to receive magnetic inputs, read the numbers printed across the bottom of a check and dramatically improve the flow of information across Bank of America's divisions. The system was still in use into the 1970s, when it was replaced by more up-to-date equipment.

Banks' use of computers isn't limited to the machines used in branches or at the home office. One of the more dramatic expansions in computerized banking has been in the rise of electronic funds transfer (EFT) services. The public most commonly encounters these services via ATMs and point-of-sale computers, according to the Federal Trade Commission. These convenient interfaces greatly increase the speed and efficiency of the services banks can offer customers.

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