Technovation 21 (2001) 775–782 www.elsevier.com/locate/technovation Operations strategies of banks — using new technologies for competitive advantage Mahesh C. Gupta a,* , Anthony Czernik a , Ramji D. Sharma b a Department of Management, College of Business and Public Administration, University of Louisville, Louisville KY 40292, USA b Department of Commerce, University of Jammu, Jammu, India Received 16 December 1999; accepted 7 February 2001 Abstract This paper discusses how new technologies are being employed by various banks to streamline their operations and creating sustainable competitive advantage. We use a conceptual operations strategy framework consisting of four elements: mission, distinc- tive competence, objective and policies to discuss the managerial implications of new technologies employed by various banks. It is concluded that operations must be recognized as a strategic function in banking institutions and investment in new technologies should be strategically directed to strengthen various operations decisions such as quality, process, capacity and facility.  2001 Elsevier Science Ltd. All rights reserved. Keywords: Operations strategies; Competitive advantage; Banking operations; New technologies 1. Introduction The information revolution in computers and telecom- munications technology has had and will continue to have a major impact on the financial services industry. Banks have been the most important users of US infor- mation technology. As far back as 1971 the financial service sector absorbed most of the R&D outlays of the computer industry. Banks have also had the biggest appetite for new technology and by all appearances this trend has continued (Pennings and Harianto, 1992). Technological advances have helped banks but at the same time increased non-bank competition. This increased competition has lead to fierce battles for profitable customers and products, consolidations, and the elimination of traditional geographic market fran- chises. Banks now have to compete with brokerage firms, investment companies, and insurance companies for transaction balances and cash management services. Large companies do not have to use banks exclusively as middlemen. * Corresponding author. Tel.: +1-502-852-4783; fax: +1-502-852- 7557. E-mail address: mcgupt01@gwise.louisville.edu (M.C. Gupta). 0166-4972/01/$ - see front matter  2001 Elsevier Science Ltd. All rights reserved. PII:S0166-4972(01)00017-7 Computers enable these companies access to so much information that they can accomplish financing by bor- rowing directly from the money markets at lower expenses than if they went through a bank. An example of this type of financing is commercial paper. Commer- cial paper handles the short-term needs of companies for cash. The maturities are flexible from 2 up to 270 days, and brokers can issue the paper at rates below what banks would charge. This has eroded the banks tra- ditional commercial customer base and has required banks to find other sources of revenue. There is a struggle between banks and non-bank play- ers for the elusive and discriminating customer. The battle for market share is being fought with technology as the competitive weapon of choice. A fundamental change is underway in the financial services arena. Has the banking industry been wasting money on tech- nology? 2. Banking operations strategy model In this paper, we purpose that the implementation of new technologies has brought the operations function to the spotlight. For some banks operations are spotlighted not by choice but by market forces, and others have