Digital Banking and Technology Flashcards

What is the primary purpose of a 'digital sandbox' environment in banking?

Answer: To test new fintech applications and APIs in a controlled environment without affecting production systems

A digital sandbox allows banks and fintechs to test new products, APIs, and integrations safely without exposing real customer data or disrupting live systems.

Which of the following best describes 'neobanks' in the US financial ecosystem?

Answer: Fully digital financial institutions that operate without physical branches

Neobanks are fully digital financial institutions with no physical branches, offering banking services exclusively through mobile apps and web platforms.

In digital lending, what is 'alternative data' used for?

Answer: Assessing creditworthiness using non-traditional sources like utility payments, rental history, and social media

Alternative data expands credit assessment beyond FICO scores by incorporating non-traditional data sources, helping lenders evaluate thin-file or unbanked applicants.

What does 'tokenization' accomplish in digital payment security?

Answer: Replaces sensitive card data with a non-sensitive surrogate value (token) for processing

Tokenization replaces sensitive payment card data with a unique token, so even if the token is intercepted, it cannot be used to retrieve the original card information.

Which cloud deployment model do most large US banks prefer for core banking workloads due to regulatory and control requirements?

Answer: Private cloud or hybrid cloud

Large banks prefer private or hybrid cloud models for core banking workloads to maintain control over sensitive data while leveraging cloud flexibility for non-core functions.

What is 'digital identity verification' (eKYC) in banking?

Answer: Electronic Know Your Customer processes that verify customer identity remotely using digital documents and biometrics

eKYC uses digital channels, document scanning, facial recognition, and data verification to onboard and verify customers remotely without requiring in-person visits.

Which emerging technology allows multiple banks to share a distributed ledger for interbank settlements without a central clearing authority?

Answer: Distributed ledger technology (DLT)

Distributed ledger technology (DLT), including blockchain, enables banks to share a synchronized, immutable record of transactions without requiring a central intermediary.