How Are Databases Used in Banking? [Banking Database 101]

If you’re looking to understand how databases are used in banking, you’re in the right spot.

In this article, we’ll be discussing the different types of bank databases and how they’re used, including what kind of information they store.

This coud be of interest to you if you recently experienced a blocked account or the bank requested additional information that they never requested before.

Feel free to use the table of contents to jump ahead to any sections most relevant to you.

Table of Contents

  1. How Are Databases Used in Banking?
  2. What Is a Bank Database?
  3. How Does a Bank Database Work?
  4. How Do Banks Use Relational Databases?
  5. What Kind of Data is Found on a Banking Database?
  6. Can You Request Your Personal Information From a Banking Database?

How Are Databases Used in Banking?

While it’s true that every organization stores some customer data in their customer databases, the information that is stored by banks is often more sensitive including personal, financial, tax, and other information.

With this in mind, individuals can often be concerned about that the information stored by banks is unsafe and susceptible to misuse, theft, or financial fraud.

Well, that’s not exactly true…

Financial institutions implement database management systems that securely record and store customers’ data. We’ll share specifics on how they are used in banking below.

What Is a Bank Database?

A database refers to a repository system where the data of subjects (customers, vendors, suppliers) are stored and recorded in physical or electronic form.

In the context of banks, a database is a storage record that holds information regarding the customers and offset transactions, including Personal Identifiable Information, deposits, withdrawals, and transfers.

How Does a Bank Database Work?

Since the age of digitization, most banking information is stored electronically on a database management system – a solution solely overseen and managed by a distributed network of processes.

The benefit of a distributed system is that it delegates tasks to several processors and eliminates the need to depend on a single processor to handle all requests at once. As a result, banks can access specific customer data more quickly and securely than they could with a traditional centralized system.

In addition, each branch has access to the most recent customer information thanks to a distributed database management system. Instead of transferring it to the central server, the bank makes a local duplicate of the customer’s account information that enables it to record and process each transaction.

How Do Banks Use Relational Databases?

Distributed database management system has undoubtedly streamlined banking operations and workflow. Now, they can access anyone’s data with just a few clicks.

However, banks also use relational databases, such as SQL (Structured Query Language) or Oracle, for some business departments. The main reason for using relational databases is to retrieve customer information in a tabular, easy-to-read format.

With a relational database, every data point is linked and can exhibit clarity of stored information of a data subject.

Moreover, a relational database supports transaction processing and is based on the ACID framework, here is a further explanation.

ACID (Atomicity; Consistency; Isolation; Durability.) Framework

  • Atomicity: Transaction process takes place at once or never happens at all
  • Consistency: Transactions follow the rules laid down by the business
  • Isolation: Transactions occur independently without interference
  • Durability: Transaction changes are completed even if the system fails

The ACID framework ensures integrity and keeps transactions secure, which is one of the prominent objectives of banks.

Furthermore, a relational database organizes data and avoids redundancy, meaning that complete records are kept.

Also, relational databases allow banks to monitor consistency and ensure that initial regulatory rules are never violated. This ensures that relational databases help in meeting compliance requirements as well.

Nonetheless, the inherent properties of an ACID framework explain why a relational database is a perfect management tool for banks.

What Kind of Data is Found on a Banking Database?

Banks are the foundation of a country’s efforts to boost financial inclusion and drive market growth. Therefore, even a small bank operating in several provinces has tons of data to store and record per regulatory requirements.

Example of Basic Data Stored by Banks

  • Transaction details
  • Customer information (Names, Date of Birth, Address, Contact)
  • Loan details
  • Credit scores
  • Customer’s history with the bank

In the case of large commercial banks, a bank’s database will also include details of financial statements, government policies, and stakeholder information.

Can You Request Your Personal Information From a Banking Database?

Of course, every customer has the right to obtain information about their personal data collected by financial institutions.

However, even though customers have the right to obtain their data, they cannot request a data removal from the bank as they might another source. That said, customers can submit a request to prevent data sharing with other third parties.

Additionally, customers have the right to seek recourse if they have sufficient evidence to prove that a bank has misused their details.

Ready to Explore Your Options?

If you would like assistance navigating your banking options at home or abroad, we can help.

You can access GlobalBanks IQ, our international banking intelligence platform, in just a few clicks. Unlock our bank database, individual bank profiles, account opening strategies and reports, banker scripts, and more.

But, if you want a 100% personalized account opening service that taps into our team’s expertise and provides direct banker introductions, you can get started with GlobalBanks Insider.

Of course, if you have any questions, please contact us directly.

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