Banking Domain Knowledge
Banking is an industry that handles financial transactions such as loan, deposit etc.
Here we discuss banking domain knowledge required for information technology & business analysis professionals.
Below is the important list of Banking software Applications. These systems may vary from bank to bank. Some banks may not use all these applications. Different systems have different purpose in banking environment. Some of these applications are used by bank customers and some are only for internal use.
- Asset and Liability Management System
- ATM Banking System
- Card Management System
- Core banking System
- ERP System
- Foreign exchange management System
- Internet Banking System
- Mobile Banking System
- Treasury Management System
Asset and Liability Management System
This application is generally available for the internal use of the bank only and not available for the customers. Asset Liability management is a practice of managing risks that arise due to mismatches between the assets and liabilities (loans and advances) of the bank. Asset Liability management (ALM) system is a tool to manage risk faced by various banks, other financial services companies.
ATM Banking System
An automated teller machine (ATM) is an electronic telecommunications device that enables the clients of a bank to perform financial transactions without the need for a cashier or human clerk or bank teller.
An ATM has two input devices: Card reader - The card reader captures the account information stored on the magnetic stripe on the back of an ATM/debit or credit card. The host processor uses this information to route the transaction to the cardholder's bank.
Card Management System
This application is generally available for the internal use of the bank only and not available for the customers.
Card Management System supports issuing Visa, MasterCard etc that conform to international standards. Card Management System has the ability to establish fast, reliable and uninterrupted link with all banking systems. The system supports the latest technologies including the EMV chip debit card and EVM credit card providing the customer with maximum benefit and security. These features help to enhance the customer satisfaction.
Core banking System
This application is generally available for the internal use of the bank only and not available for the customers.
A core banking system is the software used to support a bank's most common transactions. Elements of core banking include: Opening new accounts, processing cash deposit, processing cash withdrawals, loans, mortgages and payments. Core banking is a banking service provided by a group of networked bank branches where customers may access their bank account and perform basic transactions from any of the member branch offices. Core banking is often associated with retail banking and many banks treat the retail customers as their core banking customers. Businesses are usually managed via the Corporate banking division of the institution. Core banking covers basic depositing and lending of money. Banking software and network technology allow a bank to centralize its record keeping and allow access from any location.
Examples of core banking products include Infosys’ Finacle, Nucleus FinnOne and Oracle's Flexcube application.
ERP System
This application is generally available for the internal use of the bank only and not available for the customers.
Enterprise resource planning (ERP) is process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources. An ERP management information system integrates areas such as planning, purchasing, inventory, sales, marketing, finance and human resources.
ERP software typically integrates all facets of an operation including product planning, development, manufacturing, sales and marketing in a single database, application and user interface. There are multiple ERP softwares available in the market.
Foreign exchange management System
Foreign exchange is the exchange of one currency for another or the conversion of one currency into another currency. Foreign exchange also refers to the global market where currencies are traded virtually around the clock. The term foreign exchange sometimes called as “forex” of just “fx”.
Internet/Online Banking System
This application is available for end users.
Online banking, also known as internet banking, e-banking or virtual banking, is an electronic payment system that enables customers of a bank to conduct a range of financial transactions through the Bank’s website. The online banking system will typically connect to or be part of the core banking system operated by a bank and is in contrast to branch banking which was the traditional way customers accessed banking services.
Mobile Banking System
This application is available for end users.
Mobile banking refers to the use of a Smartphone or other cellular device to perform online banking tasks while away from your home computer, such as monitoring account balances, transferring funds between accounts, bill payment and locating an ATM. Most of the banks have mobile applications for phones with android operations system, mac operating system and windows operation system to cater to different mobile device users. It is popularly called as mobile banking apps.
Treasury Management System
This application is generally available for the internal use of the bank only and not available for the customers.
A Treasury Management System (TMS) is software which can be used to automate record and control many core treasury functions. . They are usually automated systems or software packages that allow companies and their treasury departments to communicate and interface with banking partners, vendors and customers in real time.
Treasury management (or treasury operations) includes management of an enterprise's holdings, with the ultimate goal of managing the firm's liquidity and mitigating its operational, financial and reputational risk. Treasury Management includes a firm's collections, disbursements, concentration, investment and funding activities. In larger firms, it may also include trading in bonds, currencies, financial derivatives and the associated financial risk management.
Terminologies Used in Banking Industry
Account Holder
Account holder is person who has the account in his/her name and legally responsible for that account.
Accrued Interest
Interest that has been earned but not yet paid or credited to account.
Automated Clearing House (ACH)
A computerized facility used by member depository institutions to electronically combine, sort, and distribute inter-bank credits and debits.
Automated Teller Machine (ATM)
A machine, activated by a magnetically encoded card or other medium that can process a variety of banking transactions. These transactions include accepting deposits and loan payments, providing withdrawals, and transferring funds between accounts.
Available Balance
The balance of an account less any hold, uncollected funds, and restrictions on the account.
Available Credit
The difference between the credit limit assigned to a cardholder account and the present balance of the account.
Balance Transfer
The process of moving an outstanding balance from one credit card to another credit card.
Account Statement
Periodically the bank provides a statement of a customer's deposit account. It shows all deposits made, all cheques paid, and other debits posted during the period, as well as the current balance.
Beneficiary:
A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract.
Billing Cycle
The time interval between the dates on which regular periodic statements are issued.
Billing Date
The month, date, and year when a periodic or monthly statement is generated. Calculations have been performed for appropriate finance charges, minimum payment due, and new balance.
Canceled Cheque
A cheque that a bank has paid, charged to the account holder's account, and then endorsed. Once canceled, a cheque is no longer negotiable.
Certificate of Deposit
A negotiable instrument issued by a bank in exchange for funds, usually bearing interest, deposited with the bank.
Certificate of Release
A certificate signed by a lender indicating that a mortgage has been fully paid and all debts cleared, also known as release of lien.
Collateral
Assets that are offered to secure a loan. For example, if you get a real estate mortgage, the bank's collateral is typically your house. Collateral becomes subject to seizure on default.
Collected Funds
Cash deposits or cheques that have been presented for payment and for which payment has been received.
Credit Application
A form to be completed by an applicant for a credit account, giving sufficient details (residence, employment, income, and existing debt) to allow the seller to establish the applicant's creditworthiness. Sometimes, an application fee is charged to cover the cost of loan processing.
Credit Bureau
An agency that collects individual credit information and sells it for a fee to creditors so they can make a decision on granting loans. Typical clients include banks, mortgage lenders, credit card companies, and other financing companies. Also commonly referred to as a consumer reporting agency or a credit reporting agency.
Credit Limit
The maximum amount of credit that is available on a credit card or other line of credit account.
Credit Report
A detailed report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.
Debit
A debit may be an account entry representing money you owe a lender or money that has been taken from your deposit account.
Debit Card
A debit card allows the account owner to access their funds electronically. Debit cards may be used to obtain cash from automated teller machines or purchase goods or services using point-of-sale systems. The use of a debit card involves immediate debiting and crediting of consumers' accounts
Debtor
Someone who owes monies to another party.
Decedent
A deceased person, ordinarily used with respect to one who has died recently.
Deferred Payment
A payment postponed until a future date.
Demand Deposit
A deposit of funds that can be withdrawn without any advance notice.
Deposit Slip
An itemized memorandum of the cash and other funds that a customer presents to the bank for credit to his or her account.
Direct Deposit
A payment that is electronically deposited into an individual's account at a depository institution.
Drawee
The person (or bank) who is expected to pay a cheque or draft when it is presented for payment.
Drawee bank
The bank upon which a cheque is drawn.
Drawer
The person who writes a cheque or draft instructing the drawee to pay someone else.
Electronic Banking
A service that allows an account holder to obtain account information and manage certain banking transactions through a personal computer via the financial institution's Web site on the Internet. (This is also known as Internet or online banking.)
Electronic Funds Transfer (EFT)
The transfer of money between accounts by consumer electronic systems-such as automated teller machines (ATMs) and electronic payment of bills-rather than by cheque or cash. (Wire transfers, cheques, drafts, and paper instruments do not fall into this category.)
Fixed Rate Loan
The interest rate and the payment remain the same over the life of the loan. The consumer makes equal monthly payments of principal and interest until the debt is paid in full.
Fixed Rate Mortgage
A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Foreclosure
A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default.
Foreign Transaction Fees
A fee assessed by your bank for making a transaction at another bank's ATM.
Frozen Account
An account on which funds may not be withdrawn until a lien is satisfied and a court order or other legal process makes the account available for withdrawal (e.g., the account of a deceased person is frozen pending a court order distributing the funds to the new lawful owners). An account may also be frozen when there is a dispute regarding the true ownership of an account. The bank will freeze the account to preserve the existing funds until legal action can determine the lawful owner.
Guarantor
A party who agrees to be responsible for the payment of another party's debts should that party default.
Inactive Account
An account that has little or no activity; neither deposits nor withdrawals having been posted to the account for a significant period of time.
Individual Account
An account in the name of one individual.
Insufficient Funds
When a depositor's chequeing account balance is inadequate to pay a cheque presented for payment.
Interest
The term interest is used to describe the cost of using money, a right, share, or title in property.
Interest Rate
The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures.
Joint Account
An account owned by two or more persons. Either party can conduct transactions separately or together as set forth in the deposit account contract.
Loan Contract
The written agreement between a borrower and a lender in which the terms and conditions of the loan are set.
Loan Fee
A fee charged by a lender to make a loan (in addition to the interest charged to the borrower).
Local Cheque
A cheque payable by, at, or through a bank in the same cheque processing region as the location of the branch of the depository bank.
Maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
Minimum Balance
The amount of money required to be on deposit in an account to qualify the depositor for special services or to waive a service charge.
Minimum Payment
The minimum dollar amount that must be paid each month on a loan, line of credit, or other debt.
Mortgage
A debt instrument used in a real estate transaction where the property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to pay off the loan.
Mortgage Loan
A loan made by a lender to a borrower for the financing of real property.
Mortgagee
The lender in a mortgage loan relationship.
Mortgagor
The borrower in a mortgage loan relationship. (Property is used as collateral to make payment.)
Online Banking
A service that allows an account holder to obtain account information and manage certain banking transactions through a personal computer via the financial institution's web site on the Internet. (This is also known as Internet or electronic banking.)
Overdraft
When the amount of money withdrawn from a bank account is greater than the amount actually available in the account, the excess is known as an overdraft, and the account is said to be overdrawn.
Overdraw
To write a cheque for an amount that exceeds the amount on deposit in the account.
Overlimit
An open-end credit account in which the assigned dollar limit has been exceeded.
Passbook
A book in ledger form in which are recorded all deposits, withdrawals, and earnings of a customer's savings account.
Payee
The person or organization to whom a cheque, draft, or note is made payable.
Paying (Payor) Bank
A bank upon which a cheque is drawn and that pays a cheque or other draft.
Payment Due Date
The date on which a loan or installment payment is due. It is set by a financial institution. Any payment received after this date is considered late; fees and penalties can be assessed.
Payoff
The complete repayment of a loan, including principal, interest, and any other amounts due. Payoff occurs either over the full term of the loan or through prepayments.
Payor
The person or organization who pays.
Personal Identification Number (PIN)
Generally a four-character number or word, the PIN is the secret code given to credit or debit cardholders enabling them to access their accounts. The code is either randomly assigned by the bank or selected by the customer. It is intended to prevent unauthorized use of the card while accessing a financial service terminal.
Prepayment
The payment of a debt before it actually becomes due.
Prepayment Penalty
A penalty imposed on a borrower for repaying the loan before its due date. (In the case of a mortgage, this applies when there is not a prepayment clause in the mortgage note to offset the penalty).
Previous Balance
The cardholder's account balance as of the previous billing statement.
Principal Balance
The outstanding balance on a loan, excluding interest and fees.
Refund
An amount paid back because of an overpayment or because of the return of an item previously sold.
Release of Lien
To free a piece of real estate from a mortgage.
Renewal
A form of extending an unpaid loan in which the borrower's remaining unpaid loan balance is carried over (renewed) into a new loan at the beginning of the next financing period.
Residual Interest
Interest that continues to accrue on your credit card balance from the statement cycle date until the bank receives your payment. For example, if your statement cycle date was January 10 and the bank received your payment on January 20, there were ten days for which interest accrued. This amount will be posted on your next statement.
Safe (or Safety) Deposit Box
A type of safe usually located in groups inside a bank vault and rented to customers for their use in storing valuable items.
Safekeeping
A service provided by banks where securities and valuables are protected in the vaults of the bank for customers.
Service Charge
A charge assessed by a depository institution for processing transactions and maintaining accounts.
Statement
A summary of all transactions that occurred over the preceding month and could be associated with a deposit account or a credit card account.
Stop Payment
An order not to pay a cheque that has been issued but not yet cashed. If requested soon enough, the cheque will not be debited from the payer's account. Most banks charge a fee for this service.
Substitute Cheque
A substitute cheque is a paper copy of the front and back of the original cheque. A substitute cheque is slightly larger than a standard personal cheque so that it can contain a picture of your original cheque. A substitute cheque is legally the same as the original cheque if it accurately represents the information on the original cheque and includes the following statement: "This is a legal copy of your cheque. You can use it the same way you would use the original cheque
Terms
The period of time and the interest rate arranged between creditor and debtor to repay a loan. Time Certificate of Deposit:A time deposit evidenced by a negotiable or nonnegotiable instrument specifying an amount and maturity.
Variable Rate
Any interest rate or dividend that changes on a periodic basis.
Wire Transfer
A transfer of funds from one point to another by wire or network such the Federal Reserve Wire Network (also known as FedWire).
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