Technology in Finance

Unit - II
Week 4

1.Tech in Banking Industry

These technological advancements have transformed the banking industry, making financial
services more accessible, secure, and efficient. However, it's crucial to prioritize cybersecurity
measures to protect sensitive customer information and maintain data privacy.

1. Online and Mobile Banking: Online and mobile banking have revolutionized the way we
manage our finances. With just a few taps on our smartphones or clicks on our computers, we
can access our accounts, transfer funds, pay bills, and even apply for loans. These digital
platforms provide convenience, accessibility, and real-time updates on our financial activities.

2. Biometric Authentication: Biometric authentication, such as fingerprint or facial recognition,

has become increasingly prevalent in banking. These technologies provide enhanced security by
using unique physical characteristics to verify the identity of individuals. Biometric
authentication adds an extra layer of protection against identity theft and unauthorized access
to accounts.

3. Contactless Payments: Contactless payment technologies, like Near Field Communication

(NFC) and QR codes, have gained popularity in recent years. With a simple tap or scan, we can
make secure and convenient payments using our smartphones or contactless cards. This
technology eliminates the need for physical cash or card swiping, making transactions faster and
more efficient.

4. Artificial Intelligence (AI) and Chatbots: AI-powered chatbots have become common in the
banking industry. These virtual assistants can handle customer inquiries, provide personalized
recommendations, and assist with basic banking tasks. AI algorithms analyze customer data to
offer tailored financial advice and support, improving customer service and reducing response
times.

5. Open Banking and APIs: Open banking initiatives aim to increase competition and innovation
in the banking industry. Through the use of Application Programming Interfaces (APIs),
customers can securely share their financial data with third-party providers. This allows for the
development of innovative financial apps and services, such as budgeting tools and personalized
financial management platforms.
2.CBS
These technological advancements in CBS have transformed the banking industry, making banking
operations more efficient, customer-centric, and responsive to market demands. Let's explore the
fascinating world of technology in Core Banking Systems (CBS). Here are five key technological
advancements in CBS, along with detailed explanations:

1. Real-time Processing: CBS enables real-time processing of financial transactions, allowing for
immediate updates to account balances and transaction records. This ensures that customers have
up-to-date information on their accounts and enables faster processing of transactions.

2. Automated Clearing House (ACH): ACH is a technology used in CBS that facilitates electronic
funds transfers between banks. It enables seamless and efficient processing of various transactions,
such as direct deposits, bill payments, and fund transfers, reducing the need for manual
intervention and paperwork.
3. Customer Relationship Management (CRM) Systems: CBS integrates CRM systems to enhance
customer service and relationship management. These systems store customer information,
transaction history, and preferences, enabling banks to provide personalized services and targeted
marketing campaigns.

4. Online and Mobile Banking Integration: CBS integrates online and mobile banking platforms,
allowing customers to access their accounts, perform transactions, and access banking services
through web and mobile applications. This integration provides convenience and accessibility for
customers, enabling them to manage their finances anytime, anywhere.

5. Data Analytics and Business Intelligence: CBS leverages data analytics and business intelligence
tools to gain insights from customer data, transaction patterns, and market trends. This helps banks
make informed decisions, develop targeted marketing strategies, and identify potential risks or
opportunities in the market.

2. Importance of technology in banking system

Technology plays a crucial role in the banking system for several reasons. Here are some of the key
needs for technology in banking:

1. Enhanced Convenience: Technology enables customers to access banking services anytime,

anywhere through digital platforms like mobile banking apps and online portals. This convenience
allows users to perform transactions, check account balances, and manage their finances with ease.

2. Improved Efficiency: Technology automates various banking processes, reducing manual effort
and increasing operational efficiency. Tasks like account opening, fund transfers, and loan
applications can be streamlined through digital systems, saving time for both customers and
banking staff.

3. Enhanced Security: Technology provides advanced security measures to protect customer data
and transactions. Features like encryption, multi-factor authentication, and real-time fraud
detection help safeguard against unauthorized access and fraudulent activities, ensuring a secure
banking experience.

4. Expanded Reach: Technology enables banks to reach customers beyond physical branch
locations. Online banking and mobile banking services allow individuals in remote areas or with
limited mobility to access banking services, promoting financial inclusion and expanding the reach
of banking services.

5. Innovation and Personalization: Technology empowers banks to offer innovative products and
personalized services to meet customer needs. With data analytics and artificial intelligence, banks
can analyze customer behavior, provide personalized recommendations, and develop tailored
financial solutions.

These are just a few of the reasons why technology is essential in the banking system. It enhances
convenience, improves efficiency, ensures security, expands reach, and fosters innovation.

3. P2P System
These aspects of P2P systems highlight their decentralized nature, file-sharing capabilities, resource
discovery mechanisms, scalability, fault tolerance, and security considerations. Let's dive into the
world of Peer-to-Peer (P2P) systems. Here are five key aspects of P2P systems, along with detailed
explanations:
1. Decentralized Architecture: P2P systems operate on a decentralized architecture, where there is
no central server or authority. Instead, individual nodes in the network connect directly with each
other, forming a distributed network. This allows for direct communication and resource sharing
between peers without relying on a central entity.

2. File Sharing: One of the most common applications of P2P systems is file sharing. Users can share
files directly with each other, bypassing the need for a central server. Each user acts as both a client
and a server, contributing to the availability and distribution of files across the network. Popular
examples of P2P file-sharing protocols include BitTorrent and eDonkey.

3. Resource Discovery: P2P systems employ various mechanisms for resource discovery. When a
user wants to find a specific file or resource, they can query the network, and the P2P system will
locate peers who have the desired resource available for sharing. This is typically done through
distributed hash tables (DHTs) or other indexing techniques.

4. Scalability and Fault Tolerance: P2P systems are designed to be highly scalable and fault-tolerant.
Since there is no central server, the network can grow organically as more peers join. Additionally, if
one peer goes offline or becomes unavailable, other peers can still access the shared resources
from different sources, ensuring fault tolerance.

5. Security and Privacy: P2P systems face unique security and privacy challenges. Since users
connect directly with each other, there is a need for robust security measures to protect against
malicious activities and unauthorized access. Encryption, authentication, and reputation systems
are often employed to ensure secure and private interactions within the P2P network.

4. Let's explore the world of payment banking systems. Here are some of the key aspects of
payment banking systems, along with detailed explanations:

1. Financial Inclusion: Payment banking systems aim to promote financial inclusion by providing
basic banking services to underserved and unbanked populations. These systems focus on reaching
individuals who may not have access to traditional banking services, such as savings accounts,
remittance services, and payment facilities.

2. Limited Services: Payment banks offer a limited range of services compared to traditional banks.
They primarily focus on providing basic banking services, such as accepting deposits, facilitating
remittances, and enabling bill payments. However, payment banks do not provide lending services
like loans or credit cards.

3. Digital Payments: Payment banking systems heavily rely on digital payment channels to facilitate
transactions. They leverage technology and digital platforms to offer convenient and accessible
payment solutions. This includes mobile banking apps, online banking portals, and other digital
payment methods like mobile wallets and QR code payments.

4. Agent Network: Payment banks often establish a widespread network of agents to reach remote
areas and provide banking services. These agents act as intermediaries between the payment bank
and the customers, assisting with account opening, cash deposits, withdrawals, and other basic
banking transactions. This agent-based model helps extend banking services to areas with limited
physical bank branches.

5. Regulatory Framework: Payment banking systems operate within a specific regulatory framework
set by the respective country's central bank or financial regulatory authority. These regulations
ensure consumer protection, financial stability, and adherence to anti-money laundering and know-
your-customer requirements. The regulatory framework also defines the eligibility criteria for
entities to become payment banks and the limitations on the services they can offer. These aspects
of payment banking systems highlight their focus on financial inclusion, limited service offerings,
reliance on digital payments, agent networks, and adherence to regulatory frameworks.

5. Types of Payment banks

Payment banking can be categorized into different types based on their operational models and
target customers. Here are three common types of payment banking:

1. Mobile Wallets: Mobile wallets are a type of payment banking that allows users to store money
digitally on their mobile devices. These wallets enable users to make payments, transfer funds, and
perform other financial transactions using their smartphones. Examples of popular mobile wallets
include Paytm, Google Pay, and Apple Pay.

2. Prepaid Payment Instruments (PPIs): Prepaid payment instruments are another type of payment
banking that involves loading funds onto a prepaid card or account. These instruments can be used
for various transactions such as shopping, bill payments, and online purchases. PPIs are typically
issued by non-banking entities and can be physical cards or virtual accounts.

3. Payment Banks: Payment banks are a specialized type of bank that focuses on providing basic
banking services to individuals and small businesses. These banks are licensed by the central bank
or financial regulatory authority and offer services like savings accounts, remittances, bill payments,
and mobile banking. Payment banks often leverage technology and digital platforms to reach a
wider customer base. These are just a few examples of payment banking types. Each type offers
unique features and benefits to cater to different customer needs and preferences. It's important to
note that the availability and specific types of payment banking may vary depending on your
location and the regulations in place.

6. Digital Wallets
Let's dive into digital wallets. Digital wallets are a type of payment method that allows you to store
your payment information securely on your smartphone or other digital devices. Here are the key
points about digital wallets:

1. Convenience: Digital wallets make it super convenient to make payments. Instead of carrying
physical cash or digging through your wallet for cards, you can simply use your smartphone to make
quick and easy transactions.

2. Security: Digital wallets use encryption and tokenization to secure your payment information.
This means that your card details are not directly shared with the merchant, reducing the risk of
your information being compromised.

3. Contactless Payments: Digital wallets often support contactless payment methods such as Near
Field Communication (NFC) or Quick Response (QR) codes. This means you can make payments by
simply tapping your device or scanning a code, making transactions faster and more seamless.

4. Multiple Cards in One Place: With a digital wallet, you can store multiple payment cards, such as
credit cards, debit cards, and even loyalty cards, all in one convenient location. This eliminates the
need to carry around a bulky wallet filled with different cards.

5. Enhanced Tracking and Budgeting: Some digital wallets offer features that allow you to track your
spending and manage your budget more effectively. You can view your transaction history, set
spending limits, and receive notifications about your purchases, helping you stay on top of your
finances. These are just a few highlights of digital wallets. They offer convenience, security,
contactless payments, multiple card storage, and improved tracking and budgeting.
7. Mobile Banking
Mobile banking refers to the use of a smartphone or other mobile devices to access banking
services and perform financial transactions. Here are the key points about mobile banking:

1. Convenient Access: With mobile banking, you can access your bank accounts anytime and
anywhere using your smartphone. This means you can check your account balance, view
transaction history, transfer funds, pay bills, and even deposit checks without having to visit a
physical bank branch.

2. Secure Transactions: Mobile banking apps employ advanced security measures to protect your
financial information. These include encryption, biometric authentication (like fingerprint or facial
recognition), and secure login credentials. This helps ensure that your transactions are safe and
your personal data is protected.

3. Quick and Easy Transactions: Mobile banking allows you to perform various transactions with just
a few taps on your phone. You can transfer money between accounts, make bill payments, set up
recurring payments, and even send money to friends and family, all within seconds.

4. Notifications and Alerts: Mobile banking apps provide real-time notifications and alerts that keep
you informed about your account activity. You can receive alerts for low balances, large
transactions, payment due dates, and even fraudulent activity, helping you stay on top of your
finances.

5. Enhanced Banking Services: Mobile banking apps often offer additional features and services.
These can include budgeting tools, financial planning resources, loan applications, investment
tracking, and more, providing a comprehensive banking experience right at your fingertips. Mobile
banking offers convenient access, secure transactions, quick and easy transactions, notifications and
alerts, and enhanced banking services. It's a great way to manage your finances on the go.

Additional Link

1. https://www.shine.com/blog/top-10-emerging-technologies-in-the-financial-
services-industry-in-2022
2. https://www.linkedin.com/pulse/emerging-technology-trends-transforming-
banking#:~:text=Blockchain%20Technology%3A%20Blockchain%20technology
%20is,and%20fostering%20trust%20among%20stakeholders.
3. https://www.esds.co.in/blog/what-exactly-is-core-banking/#:~:text=Core
%20Banking%20Solution%20(CBS)%20is,branch%20to%20do%20banking
%20transactions.
4. https://www.linkedin.com/pulse/ways-which-technology-impacting-banking-sector-
semsindia#:~:text=POSITIVE%20IMPACT%20OF%20TECHNOLOGY%20ON%20THE
%20BANKING%20SECTOR%2D&text=Maintenance%20and%20retrieval%20of
%20documents,centralized%20data%20and%20are%20interconnected.
5. https://portal.ct.gov/DOB/Consumer/Consumer-Education/ABCs-of-Banking--
Banks-Thrifts-and-Credit-Unions#:~:text=They%20are%20commercial%20banks%2C
%20thrifts,identities%20have%20become%20less%20distinct.
Discuss
1. Discuss the five most important banking services.
Long answer
1. What is Core Banking?
Core banking is a centralised system that allows customers or business bodies to carry on
business operations regardless of the bank’s branch.
The main objective of core banking solutions is to offer tailor-made offerings to customers
at their convenience. These solutions differ in nature and are dependent a lot on the
customer base. CBS refers to the networking of different bank branches that enables
customers to opt for varied banking facilities from different corners of the world. The entire
banking application is based on a centralised server and can be used via the internet.
Different functions of core banking encompass transactions, payments, loans and more.
Internet banking, ATMs (Automated Teller Machines), Phone banking, Fund transfer
remotely and instantly (IMPS, NEFT, RTGS and more), interest computation on loans and
deposits etc., are some of the core banking solutions types.
While customers or business bodies reap the benefits of carrying out transactions freely,
financial institutions via core banking solutions benefit from lesser time and can save upon
resources that are used for repetitive business activities.

MCQ

1. Q: What is the technology that allows for secure and transparent transactions without the
need for a central authority?
a) Blockchain
b) Artificial intelligence
c) Machine learning
d) Big data
Answer: a) Blockchain

2. Q: What is the term for using biometric data, such as fingerprints or facial recognition, for
authentication and authorization in banking?
a) Biometrics
b) Encryption
c) Cybersecurity
d) Fintech
Answer: a) Biometrics

3. Q: What is the practice of using artificial intelligence to analyze large amounts of data
and make predictions in banking?
a) Robotic process automation
b) Data analytics
c) Chatbots
d) Machine learning
Answer: d) Machine learning

4. Q: What is the technology that enables customers to conduct banking transactions through
their mobile devices?
a) Mobile banking
b) Contactless payments
c) Digital wallets
d) Internet banking
Answer: a) Mobile banking
1. Q: What is the term for a centralized system that manages a bank's customer accounts,
transactions, and other banking operations?
a) CBS
b) CRM
c) ATM
d) EFT
Answer: a) CBS

2. Q: What is the technology that allows banks to integrate various banking channels, such
as online banking, mobile banking, and ATM networks?
a) Omnichannel
b) API
c) RPA
d) KYC
Answer: a) Omnichannel

3. Q: What is the practice of using artificial intelligence and machine learning to analyze
customer data and provide personalized banking experiences?
a) Personalization
b) Data analytics
c) Chatbots
d) RPA
Answer: b) Data analytics

4. Q: What is the term for the process of transferring funds electronically between different
banks or financial institutions?
a) EFT
b) ACH
c) RTGS
d) SWIFT
Answer: a) EFT

1. Q: What is the technology that allows for secure and convenient access to banking
services anytime, anywhere?
a) Mobile banking
b) Online banking
c) Digital payments
d) Biometrics
Answer: a) Mobile banking

2. Q: What is the term for using automation and artificial intelligence to streamline banking
processes and improve efficiency?
a) Fintech
b) Robotic process automation
c) Data analytics
d) Blockchain
Answer: b) Robotic process automation

3. Q: What is the practice of using advanced data analytics to detect and prevent fraudulent
activities in the banking system?
a) Cybersecurity
 b) Biometrics
c) Fraud detection
d) Machine learning
Answer: c) Fraud detection

4. Q: What is the technology that enables faster and more secure transactions between
different banks and financial institutions?
a) Blockchain
b) Real-time gross settlement
c) SWIFT
d) Contactless payments
Answer: b) Real-time gross settlement

1. Q: What is the term for a decentralized system that allows individuals to directly interact
and transact with each other without intermediaries?
a) P2P
b) Blockchain
c) Cryptocurrency
d) Decentralization
Answer: a) P2P

2. Q: What is the technology that enables users to share files, resources, or services directly
with other users without relying on a central server?
a) Torrent
b) P2P
c) Cloud computing
d) VPN
Answer: b) P2P

3. Q: What is the practice of borrowing or lending money directly between individuals

without involving traditional financial institutions?
a) Crowdfunding
b) P2P lending
c) Microfinance
d) Credit unions
Answer: b) P2P lending

4. Q: What is the term for a network architecture that allows computers to communicate and
share resources directly with each other?
a) P2P
b) Client-server
c) LAN
d) WAN
Answer: a) P2P

1. Q: What is the term for the process of electronically transferring funds from one bank
account to another?
a) Transfer
b) Deposit
c) Withdrawal
d) Wire
 Answer: d) Wire

2. Q: What is the technology that allows customers to access their bank accounts and
perform transactions using their mobile devices?
a) ATM
b) Online banking
c) Mobile banking
d) POS
Answer: c) Mobile banking

3. Q: What is the term for a unique identification code assigned to each bank and financial
institution for international money transfers?
a) IFSC
b) BIC
c) SWIFT
d) RTGS
Answer: c) SWIFT

4. Q: What is the practice of using biometric data, such as fingerprints or facial recognition,
for secure authentication in banking systems?
a) Biometrics
b) Encryption
c) Tokenization
d) Two-factor authentication
Answer: a) Biometrics

1. Q: What is the term for a type of bank that focuses on providing basic banking services
and facilitating transactions, especially for underbanked and unbanked populations?
a) Retail
b) Commercial
c) Payment
d) Cooperative
Answer: c) Payment

2. Q: What is the term for a type of bank that specializes in processing electronic payments,
such as credit card transactions and online transfers?
a) Retail
b) Commercial
c) Payment
d) Investment
Answer: c) Payment

3. Q: What is the term for a type of bank that primarily offers payment services and does not
engage in traditional lending or deposit-taking activities?
a) Retail
b) Commercial
c) Payment
d) Investment
Answer: c) Payment

4. Q: What is the term for a type of bank that focuses on providing payment services and
facilitating financial inclusion through digital platforms and technology?
 a) Retail
b) Commercial
c) Payment
d) Investment
Answer: c) Payment

1. Q: What is the term for a digital wallet developed by Apple that allows users to make
payments using their iPhone, Apple Watch, or other Apple devices?
a) Google Pay
b) Samsung Pay
c) PayPal
d) Apple Pay
Answer: d) Apple Pay

2. Q: What is the term for a digital wallet developed by Google that enables users to make
payments using their Android devices?
a) Apple Pay
b) Samsung Pay
c) Google Pay
d) Venmo
Answer: c) Google Pay

3. Q: What is the term for a popular digital wallet that allows users to make secure online
payments and money transfers?
a) Venmo
b) Cash App
c) PayPal
d) Zelle
Answer: c) PayPal

4. Q: What is the term for a digital wallet developed by Samsung that allows users to make
payments using their Samsung devices?
a) Google Pay
b) Apple Pay
c) Samsung Pay
d) Venmo
Answer: c) Samsung Pay

1. Q: What is the term for a type of banking that allows users to conduct financial
transactions using a mobile device?
a) E-commerce
b) Mobile banking
c) Online banking
d) Digital banking
Answer: b) Mobile banking

2. Q: What is the term for a popular mobile banking service that allows users to send and
receive money, pay bills, and manage their accounts through a mobile app?
a) Venmo
b) Cash App
 c) Zelle
d) Mobile banking
Answer: d) Mobile banking

3. Q: What is the term for a type of banking that enables users to access and manage their
bank accounts through the internet using a mobile device?
a) E-commerce
b) Mobile banking
c) Online banking
d) Digital banking
Answer: c) Online banking

4. Q: What is the term for a mobile banking service that allows users to deposit checks by
taking a photo with their mobile device?
a) Venmo
b) Cash App
c) Zelle
d) Mobile deposit
Answer: d) Mobile deposit

Glossary
Tokens
Are units of value that blockchain-based organizations or projects develop on top of existing
blockchain networks. While they often share deep compatibility with the cryptocurrencies of
that network, they are a wholly different digital asset class. Cryptocurrencies are the native
asset of a specific blockchain protocol, whereas tokens are created by platforms that build
on top of those blockchains. For example, a stablecoin such as Gemini dollar1 is a token on
the Ethereum network but Ether is the cryptocurrency on the network.
Virtual currency
A digital representation of value used as a medium of exchange, a unit of account, or a store
of value, but does not have legal tender status as recognized by the United States
government.
Wallet
the digital home for your digital assets. It is generally an application (app) or web-based
way to store cryptocurrencies. Wallets manage and store users’ public and private keys.

FAQs

1. What is technology in the banking industry?

Technology in the banking industry refers to the use of various digital tools and solutions to
enhance banking operations, customer experiences, and financial services.

2. How is technology improving banking services?

Technology is improving banking services by enabling faster and more convenient
transactions, providing online and mobile banking platforms, enhancing security measures,
and offering personalized financial solutions.

3. What are some examples of technology in banking?

Examples of technology in banking include online banking platforms, mobile banking apps,
ATMs, digital wallets, biometric authentication, chatbots for customer support, and artificial
intelligence for fraud detection.
4. Is it safe to use technology in banking?
Banks prioritize the security of their technology systems and employ measures to protect
customer data and transactions. However, it's important for customers to follow
recommended security practices, such as using strong passwords and keeping their devices
secure.

5. How does technology impact customer experiences in banking?

Technology improves customer experiences by providing 24/7 access to banking services,
enabling self-service options, offering personalized recommendations, and streamlining
processes for faster and more efficient transactions.

6. Can technology replace human bankers?

While technology is automating certain banking processes, human bankers still play a
crucial role in providing personalized advice, handling complex financial situations, and
building relationships with customers.

7. How can I stay updated on technology trends in the banking industry?

To stay updated on technology trends in the banking industry, you can follow industry news,
subscribe to banking and technology publications, attend relevant conferences or webinars,
and engage with banking and fintech communities online.