According to Bahaa Abdul Hussein, banking jargons are not static but keeps changing. Some trends in banking create new terms like DeFi, embedded finance and BaaS. You do not want to ask in a meeting, what is being talked about when such terms are thrown around. Following are some terms that crop up often in the banking industry.
Buy Now Pay Later
The term is quite clear and does not require much explanation but how is it different from the traditional loans? The main difference is that this option is usually associated with small amount consumer product purchases. The amount can be paid later over several weeks or months.
Cryptocurrency
A digital currency not regulated by any central bank. Bitcoin is the most popular and widely used cryptocurrency. There are hundreds of cryptocurrencies in use. They are known for their highly volatile prices. Central banks around the world do not support cryptocurrencies except in 1-2 countries where they have been tried with some legal backing.
Banking as a Service (Bass)
This is a setup whereas banking and financial companies partner with fintech companies to provide traditional financial services through the platform of a fintech company. Lots of products and services are being offered as a service to make them affordable and attract more users. At present, very few financial institutions have adopted a BaaS strategy. It is like a white label product that fintech companies can sell under their brand.
Decentralized Finance (DeFi)
This financial mechanism works over the Internet and all stakeholders of the financial product have some control over it, leading to greater transparency as the transaction details cannot be hidden. DeFi is being used for financial transactions, NFTs and decentralized arbitrage.
Digital Banking
It is all pervasive now and banking institutions are no exception. Digital transformation is taking place in every aspect of financial transactions. It is not limited to banking over the Internet. Banking institutions have to understand many critical terms like cloud computing, application programming interfaces, chatbots, machine learning tools and business intelligence.
Embedded Finance
Financial services are integrated and work behind the scene in mobile apps, business processes and websites. This term covers all types of financial products including banking, insurance, lending and payments. Experts warn banks to be careful when partnering with any non-finance company as there are many risks and understanding the subject requires some technical knowledge.
Embedded Fintech
It is the opposite of embedded finance. In this setup, it is the products and services of fintech companies that financial institutions integrate into their business processes, mobile applications, websites and products.
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