The banking industry, like many others, is undergoing a transformation driven by technology. This glossary aims to define and explain some of the most commonly used technological terms in the context of banking. Understanding these terms can help both professionals and customers navigate the rapidly changing landscape of financial services.
Glossary of Key Terms of Technology in Banking
1. Application Programming Interface (API):
An API allows different software applications to communicate with each other. In banking, APIs enable third-party developers to build applications and services around the financial institution, leading to functionalities like mobile banking apps, payment gateways, and more.
2. Artificial Intelligence (AI):
AI involves creating algorithms that allow computers to perform tasks that typically require human intelligence. In banking, AI can be used for fraud detection, customer service (via chatbots), and investment advisory (robo-advisors).
3. Automated Teller Machine (ATM):
An electronic banking outlet that allows customers to complete basic transactions without a branch representative or teller.
4. Blockchain:
A distributed ledger technology where data is stored across a network of computers. It’s the technology behind cryptocurrencies like Bitcoin and offers the banking industry secure and transparent transactions.
5. Chatbots:
Automated software agents that can converse with users in a natural language like English. In banking, chatbots can help answer customer queries, facilitate transactions, or provide account updates.
6. Cloud Computing:
The delivery of computing services, including storage and software, over the internet (“the cloud”). Many banks are moving to the cloud to reduce infrastructure costs and improve scalability.
7. Cryptocurrency:
A type of digital or virtual currency that uses cryptography for security. Bitcoin and Ethereum are popular examples.
8. Data Analytics:
The process of examining data sets to draw conclusions about the information they contain. Banks use data analytics for risk assessment, fraud detection, and to derive customer insights.
9. Digital Wallet (or E-Wallet):
A virtual wallet that allows users to store funds, credit card details, and other financial information to make electronic transactions easier and faster.
10. Encryption:
The process of converting information or data into a code to prevent unauthorized access. It’s crucial in banking to protect sensitive financial information.
11. FinTech:
A portmanteau of “financial technology.” Refers to tech-driven startups and companies offering innovative financial services, often in competition with traditional banks.
12. Internet of Things (IoT):
The network of physical devices, vehicles, appliances, and other items embedded with electronics and software that enable them to connect and exchange data. In banking, IoT can be leveraged for personalized customer experiences or enhanced security measures.
13. Machine Learning (ML):
A subset of AI where computers are trained to improve their performance on a task through experience or the ingestion of data.
14. Mobile Banking:
A service that allows customers to conduct various banking activities (like checking account balances or making transfers) using a mobile device.
15. Near Field Communication (NFC):
A technology that enables two devices to communicate wirelessly when they are close together. Used in contactless payment systems.
16. Open Banking:
A system where banks provide access (via APIs) to third-party providers to use customer data and initiate transactions, fostering competition and innovation.
17. Peer-to-Peer (P2P) Payments:
A network or system that allows users to transfer funds directly to one another, usually via a mobile or web application, without needing a bank or other intermediary.
18. Robo-Advisors:
Digital platforms that offer automated financial planning services with little to no human intervention, usually based on algorithms.
19. Smart Contracts:
Self-executing contracts with the terms of the agreement directly written into code. Often associated with blockchain technology.
20. Tokenization:
The process of turning sensitive data into nonsensitive symbols or tokens. In banking, it’s often used to protect data by replacing card numbers with tokens.
21. Two-Factor Authentication (2FA):
An additional layer of security where users must provide two different types of identification to access their accounts.
22. Virtual Reality (VR) & Augmented Reality (AR):
VR immerses users in a digital environment, while AR overlays digital content on the real world. In banking, these can be used for virtual customer service or enhancing customer banking experiences.
23. Voice Banking:
Enables users to conduct banking transactions using voice commands through devices like smartphones or voice assistants.
24. Zero-Knowledge Proof:
A cryptographic method where one party can prove to another party that a statement is true without revealing any specific information about the statement. It has potential banking applications in enhancing security and privacy.
25. Big Data:
Refers to extremely large datasets that can be analyzed to reveal patterns, trends, and associations. In banking, it can help in enhancing customer experiences, tailoring products, and fraud detection.
26. Digital Identity Verification: The use of technology to prove the identity of a person. This includes biometrics, digital ID apps, and other tech-driven methods that banks use to verify the identity of their customers, especially for digital accounts.
27. RegTech: A portmanteau of “regulatory technology.” Refers to the use of technology to help financial institutions comply with regulations efficiently and at a lower cost.
28. Cybersecurity: The practice of protecting systems, networks, and data from digital attacks. It’s critical in banking to ensure customer data remains confidential and secure.
29. Digital Onboarding: The process of using digital channels to add new customers, allowing them to complete all registration steps without visiting a physical branch.
30. Biometrics: Authentication methods that recognize individuals based on physical or behavioral attributes, such as fingerprints, facial recognition, and voice patterns.
31. Quantum Computing: A type of computation that harnesses the collective properties of quantum states, like superposition and entanglement, to compute information. Its potential in banking could revolutionize encryption, risk analysis, and complex system modeling.
32. Distributed Ledger: A consensus of replicated, shared, and synchronized digital data spread across multiple sites. Blockchain is a type of distributed ledger.
33. Neural Networks: Algorithms designed to recognize patterns, interpret sensory data, and more. In banking, they can be applied in credit scoring, fraud detection, and market forecasting.
34. Omnichannel Banking: An integrated approach to banking where the customer experience is seamless whether interacting with a bank through mobile apps, websites, social media, or even in-branch.
35. Sandbox Environment: Refers to a testing environment where banks and Fintechs can experiment without impacting the actual banking operations.
36. InsurTech: A portmanteau of “insurance technology.” Refers to the use of technology innovations to squeeze out savings and efficiency in the insurance model. Some banks collaborate with InsurTech companies to provide complementary services.
37. Challenger Banks: Digital-only banks or neo-banks that challenge traditional banks, usually by offering simplified, customer-centric services with lower fees.
38. KYC (Know Your Customer): Regulatory and banking requirements to verify the identity of their clients. With technology, KYC processes can be streamlined using AI, biometrics, and digital document verification.
39. Algorithmic Trading: The use of advanced mathematical models and algorithms to make high-speed trading decisions. Many investment banks and hedge funds use this technology to get an edge in the market.
40. Digital Asset: Any text or media formatted into a binary source. In banking, this often refers to blockchain-based assets like cryptocurrencies, but can also mean other forms of digital value.
41. Digital Certificate: An electronic “passport” that allows a person, computer, or organization to exchange information securely over the internet using the public key infrastructure (PKI). In banking, it’s commonly used to authenticate the identity of individuals and institutions online.
42. Hybrid Banking: A banking model that integrates both digital and traditional services, providing customers with a seamless transition between online banking and physical branch experiences.
43. Decentralized Finance (DeFi): Financial systems and applications built on blockchain technology without intermediaries. DeFi platforms can offer services like lending, borrowing, and trading.
44. Predictive Analytics: Using statistical algorithms and machine learning techniques to identify the likelihood of future outcomes based on historical data. In banking, this can be utilized for loan approvals, financial advisory, and fraud alerts.
45. Contactless Payment: A secure payment method using a debit or credit card, smart card, or another payment device by simply tapping it on a point-of-sale (POS) terminal.
46. Optical Character Recognition (OCR): Technology that identifies letters and numbers in digital images, commonly used in banking for scanning checks or reading documents during the digital onboarding process.
47. RiskTech: Refers to technologies designed to help financial institutions manage risks better, including credit risk, operational risk, and market risk.
48. Real-Time Payments (RTP): Instantaneous payment and settlement services that operate 24/7.
49. Identity as a Service (IDaaS): A cloud-based service that manages electronic identities. In banking, it can be used to provide single sign-on capabilities for various types of users.
50. Banking as a Service (BaaS): An end-to-end process ensuring the seamless integration of fintech and banks, allowing third parties to access core banking systems through APIs.
51. Core Banking System: A back-end system that processes daily banking transactions and posts updates to accounts like loans, deposits, and other transactions.
52. Customer Relationship Management (CRM) Systems: Technology used by banks to manage and analyze customer interactions throughout the customer lifecycle, aiming to improve relationships and streamline processes.
53. Blockchain Interoperability: The ability for different blockchain systems to communicate, exchange data, and recognize each other’s transactions. This has implications for the banking sector in ensuring a seamless global financial ecosystem.
54. Digital Signature: A mathematical algorithm used to validate the authenticity and integrity of a digital message or document.
55. Elastic Cloud Computing: A form of cloud computing that provides dynamic scalability. For banks, this means they can easily scale up their IT resources during high transaction periods and scale down during low activity.
56. Internet Banking (or E-banking): Allows customers of a financial institution to conduct financial transactions on a secure website operated by the institution.
57. Loyalty Tech: Technologies designed to enhance loyalty programs. Banks use this to offer rewards, cashbacks, and other incentives to customers.
58. Microservices Architecture: A method of developing software systems that are split into multiple component services, each of which is highly maintainable and testable. Many modern banking applications use this for flexibility and scalability.
59. Natural Language Processing (NLP): A branch of AI that helps computers understand and respond to voice or text inputs in natural human language. Often used in chatbots and voice banking services.
60. Secure Socket Layer (SSL): A standard security technology used to establish an encrypted link between a server and a client, ensuring that all data passed between them remains private.
As we plunge deeper into the digital age, banking and technology will increasingly become intertwined. Emerging technologies will introduce new terms, while existing terms will evolve in meaning. For stakeholders in the banking sector and even for the average customer, understanding this evolving vocabulary will be crucial. Not only does it enable clearer communication, but it also helps in making informed decisions in a world where technology and finance are indelibly linked. Whether you’re exploring investment opportunities, considering emerging financial services, or just navigating your personal banking, a grasp on the technological terms shaping the industry will undoubtedly prove invaluable.
See more:
- GOLN Technology in Banking Book: Table of Contents
- GOLN Risk Management In Banking Book: Table of Contents
- GOLN Mobile Banking Book : Table of Contents
- GOLN Cyber Security in Banking Book : Table of Contents
- GOLN Banking & Financial Services Compliance Management Book : Table of Contents
- Preparing for the Future of Banking