Legacy and De Novo Banking Systems Flashcards

Comprehensive vocabulary flashcards covering legacy vs. de novo banking, AI terminology, core banking functions, fintech innovators, and consumer response models.

Legacy systems

Decades-old mainframe accounting systems that are mission-critical to the day-to-day functioning of banks but are difficult to update.

De novo systems

Novel web-based technologies used by financial technology (fintech) companies to deliver services and compete with established banks.

Retail banks

Banking institutions that take deposits from businesses and households and lend that money back out to those same groups.

Building societies

Institutions owned by their customers that focus on home finance and theory offer higher interest rates to depositors and lower rates to borrowers.

Investment banks

Also known as wholesale banks, these institutions help large businesses or wealthy individuals access financial markets by issuing and selling securities.

Financial intermediation

The process where banks accept deposits from savers and lend them to borrowers.

Interest margin

The difference between the interest rate paid to savers and the interest rate charged to borrowers.

Maturity transformation

The foundation of banking where short-term deposits are turned into longer-term loans by diversifying loan books across different time periods.

Liquidity risk

The risk that too many depositors will attempt to withdraw their funds at the same time.

Credit risk

The risk of default, where a borrower does not repay the full amount of a loan.

Asset managers

Subsidiary companies of banks that help customers invest in non-cash assets like stocks and bonds via brokerage accounts and investment funds.

Depositaries

Banks that keep ownership records for financial assets, such as stocks and bonds, which are traded digitally on financial markets.

White labelling

When products supplied by an insurance subsidiary or third party are sold under the brand of the bank.

Private banking

A suite of services for wealthier customers including specialist investment advice, estate planning, and tax management services.

Algorithm

A decision-making process or set of tasks performed by a computer conditional on certain inputs or conditions being met.

Big data

Quantitative decision-making using extremely large datasets containing text, audio, video, or images that require complex infrastructure to maintain.

Machine learning

Algorithms that derive decision-making rules by detecting patterns in large datasets to make predictive decisions.

Turing Test

A baseline definition of AI where a machine performs a task and the result is at least as good as when performed by a human.

Neural networks

Machine learning algorithms with layers of nodes that function as data filters and mimic the way human brain cells send signals.

Deep learning

A neural network with multiple layers of nodes between the input and decision-making layer, allowing for more fine data filtering.

Natural language processing (NLP)

Algorithms that interpret user input in text or audio and match it to known words and sentence structures on a probabilistic basis.

Robotic process automation (RPA)

Simple computer programs that perform routine computerized tasks otherwise done by humans, such as copying data or opening files.

Cloud computing

The remote access of computing power and hardware on a pay-as-you-go basis from third-party providers like Microsoft, Google, or Amazon.

Application Programming Interface (API)

A computer program that governs and standardizes interactions and data-sharing between separate computer systems.

Challenger banks

Younger banking institutions that operate under novel brands with smaller branch networks and often less burden from legacy infrastructure.

Neo-banks

Technology-led institutions that offer services primarily through mobile apps or online portals without maintaining physical branches.

Peer-to-peer (P2P) lender

A non-bank institution, sometimes called a shadow bank, that brings savers and borrowers together through online platforms without assuming credit risk.

Robo-advisers

Non-bank companies that use apps or websites to provide automated, personalized investment guidance based on user data points.

Digital wallets

Mobile applications that store bank and payment card details digitally to allow for contactless payments.

Omnichannel

A strategic solution where multiple banking channels work in parallel to allow customers to switch smoothly between different user interfaces.

Mental transaction costs

Terms coined by Szabo (1999) referring to the time, mental effort, or uncertainty that detracts from a user's experience.

Technology acceptance model (TAM)

A model pioneered by Fred Davis in 1989 suggesting factors like personal attitude, task relevance, and perceived ease of use affect technology adoption.

Digital natives

Consumers who have spent their formative years with access to the internet.

Embedded finance

The placement of a financial service, such as a loan or buy-now-pay-later solution, into a non-financial product or service interface.

Augmented reality

A digital representation of an environment that already exists.

SCAMPER

A tool for technology-led innovation representing Substitute, Combine, Adapt, Modify, Put to another use, Eliminate, and Reverse or re-organise.