If you’re a banker or work for a financial institution, you’ve likely heard some of these banking buzzwords, but what do they really mean? We’re here to break down some common financial buzzwords you need to know.
Banking can be an alphabet soup of regulations (HMDA, UDAAP, TILA, etc.) and financial buzzwords (AI, BI, BaaS, etc.)
In this post, we’ll give you the meaning of the most common – as well as the not-so-common – banking buzzwords so you can impress your colleagues with your cutting-edge financial expertise.
Banking intelligence (or BI for short) refers to the business-related data you gather and analyze to gain a competitive edge. Most of what counts as BI in today’s digital world is the quantitative and qualitative data your financial institution can leverage to make smarter strategic decisions and mitigate risk.
If you want to make full use of BI as a financial institution, you need a cloud-based platform that manages strategic risk and compliance, developed by leading experts in the field.
Your business intelligence software should include the following:
A Current and Evolving Database: The data you use in BI analysis to make smarter decisions consists of private and public information. You need a repository for all the data you collect as a financial institution. Additionally, you want an updated catalog that pulls data from public sources such as the Census Bureau and the annual HDMA-LAR.
An Intuitive Portal: Business intelligence only works when you can access it easily. You need a portal that enables users and administrators to access BI data for strategic decision-making.
Dashboards and Reports: Tables, charts, maps, and reports help you understand the story your data tells. Most financial institutions want more than a book report and prefer an interactive and dynamic experience with adaptable reporting dashboards that highlight their strategic risk advantages.
Financial institutions may use the phrase “data discovery” in connection with banking intelligence, which refers to analyzing data from multiple sources and angles to make sophisticated insights and judgments.
Ncontracts Insight: In combining public and proprietary data, Ncontracts gives its customers the best-in-class banking intelligence solution. For instance, our Fair Lending platform helps you navigate the ever-changing regulatory landscape to make intelligent and strategic decisions for your financial institution.
Related: Unlock the Potential of Banking Intelligence with Comprehensive Compliance Reporting
Many financial institutions, including community banks and credit unions, enter relationships with tech companies to offer consumers a wider array of products and services.
Partnering with a BaaS platform or fintech gives traditional banks and credit unions access to several innovative products and solutions from digital wallets (bank accounts), virtual credit cards (VCCs) that replace physical cards with an account number, enhanced payment methods (ACH, wires, etc.), and online lending and financing options.
With millennials set to overtake past generations in wealth in the coming years, community banks and credit unions are changing how they operate. It’s no longer the case that banks and credit unions can rely on customers coming into a branch to conduct their business. What worked for generations in the past no longer satisfies the desires of modern banking consumers.
BaaS allows community banks and credit unions to remain current and viable. At the same time, partnerships with technology service providers (TSPs) and fintechs increase the risk for financial organizations. Relationships with fintechs introduce risks that must be managed with a robust vendor management solution. This shift necessitates a comprehensive upgrade in compliance skillsets. Outdated systems, processes and manual workflows are no longer adequate to meet these new demands for managing risk.
Related: 3 Ways BaaS Platforms Help Fintechs Work with Financial Institutions
Artificial intelligence may be the buzziest of all banking buzzwords floating around the industry today. Depending on whom you listen to, AI will simply increase worker productivity, or we’ll all shortly be bending to the will of our robot overlords.
From a practical perspective, AI can help financial institutions in many ways. FIs can use AI to:
As a leader in Knowledge-as-a-Service (KaaS), Ncontracts has been a pioneer in adopting AI into our software platforms. We continue to improve our products with the latest technology, and AI is no exception. We also understand that with great power comes great responsibility, and managing the risks associated with the adoption of AI will be no small task.
Related: Check Out Our Upcoming Webinar, Managing AI Risk: A Primer for Financial Institutions
Neobanks operate exclusively online or through mobile apps without physical branches. They might be viewed as “challenger” banks to their traditional counterparts. Neobanks tend to appeal to younger consumers, freelancers, and the underbanked. Because they don’t have the overhead of conventional banks and credit unions, neobanks can sometimes offer better interest rates to consumers.
While neobanks are not regulated in the same way as traditional financial institutions, they need a bank to sponsor them. For instance, the largest neobank in the United States, Chime, is sponsored by Bancorp Bank and Stride Bank, which the FDIC regulates. Famously, Chime does not charge overdraft fees, making it an appealing option for many of its Millennial and Gen Z consumers. Yet few consumers realize that in the event a neobank like Chime fails, the customer may have trouble getting their money. The FDIC guarantee is only applicable to the failure of the FDIC insured institution.
RegTech, which is short for “Regulatory Technology,” focuses on leveraging technology to assist financial institutions in complying with regulations and managing risk.
Ncontracts has a special relationship with this financial buzzword. Our company and regulatory technology emerged as the solution following the 2008 financial crisis when a raft of new regulatory and compliance requirements appeared in legislation – most notably Dodd-Frank.
Financial institutions that avail themselves of RegTech solutions benefit from significant cost reductions and efficiencies, enhanced accuracy in risk management, less time-consuming change management processes, more thorough findings resolutions, reduced third-party vendor risk, greater business resiliency, and many more strategic advantages.
Related: How to Write a Comment Letter on a Regulatory Proposal
Green finance or sustainable finance are financial activities that support the transition to a low-carbon sustainable economy, addressing the global risks of climate change. Companies across the board are making sustainability commitments, and financial institutions are leading in devising and executing sustainability metrics.
Socially responsible investors use ESG criteria and the typical investment standards in their financial decisions. Funding sustainability fits well within the structure of banks’ existing key performance indicators (KPIs).
Podcast: Are you Thinking of Banking Cannabis?
For some financial institutions, embedded finance might seem like a four-letter word rather than a banking buzzword. Many nonfinancial businesses have recognized the benefits of giving customers a seamless buying experience by incorporating digital financial products into their value chain.
From buy now, pay later (BNPL) offers to one-click financing on e-commerce sites, businesses have recognized the value of platforms that do away with the need for traditional banking services. Embedded finance is a kindred cousin of BaaS, and financial institutions should expect more API-platform and modular banking solutions in the future.
At the same time, traditional financial institutions need to recognize and leverage their core strengths. When it comes to assessing risk and complying with regulations, banks and credit unions deliver a value proposition to fintechs and digital banking service providers that is difficult to deny.
Related: 4 Key Risks Facing the Banking Industry, According to the OCC
Thinking about partnering with a fintech? Learn how to evaluate partners and manage risk in our on-demand webinar "Fintechs & Financial Institutions: How to Safely (and Profitably) Work Together."