The Ultimate Fintech Glossary
Financial technology, or FinTech (whose definition you will also find in this dictionary), is an innovation that has come to stay. Many words or concepts have jumped into the global financial services industry following its evolution. If you have ever felt lost at some point during a conversation with a friend or colleague about banking and finance, you will understand the benefit of having an online glossary of FinTech terms. In this article, we will provide the meanings of the most popular terms in FinTech and answer some frequently asked questions about financial technology.
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3D Secure is a security protocol that uses three domains to keep online card transactions free from fraud. When you enable 3D Secure on your card or account, you will be prompted to authenticate each transaction using your PIN code or password. In that way, 3D Secure prevents authorised payments with your credit and debit cards.
Note that the term “3D” is an abbreviation for "three domains”: the first is the card issuer; the second is the store accepting the payment; and the third is the 3DS infrastructure platform, which serves as a secure intermediary between the customer and the retailer.
Asset-based loan (ABL)
An asset-based loan (ABL) is a type of business finance that is secured by a corporate asset. The funds are frequently used to increase short-term cash flow. Property, equipment, cars, and accounts receivable are examples of assets that can be used to secure loans.
Account Information Service Provider (AISP)
In Open Banking, an Account Information Service Provider (AISP) refers to a licensed company that allows third-party institutions to access the financial information of a customer with his or her approval. AISPs provide instant access to information about their customers’ finance, loan approvals, and savings.
An acquiring bank (or acquirer) acts as a middleman in payment card transactions. It connects merchants with banks that issue credit and debit cards to the public. Acquirers offer the financial support and infrastructure that retailers need to accept payments via cards while issuing banks deal directly with cardholders.
Alternative finance (Alt-fi)
Alternative finance refers to a variety of financial solutions that are not typical (stocks, bonds, cash). It is a phrase used to characterise financial products, instruments, and methods created outside of the traditional financial services sector, such as peer-to-peer lending and crowdfunding.
Alternative lending refers to borrowing choices other than a standard bank loan. These types of loans are often more flexible in terms of repayment and approval, but they frequently have higher interest rates. Alternative financing may be required for an existing firm or a start-up because it can surpass a bank's maximum loan amount and does not necessarily require an established credit history.
AML (Anti-money laundering)
AML is carried out by a financial institution and consists of rules, processes, and regulations that strive to meet legal criteria. AML keeps an eye out for suspicious activity and prevents techniques such as disguising criminal cash as legitimate revenue.
An angel investor (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is a wealthy individual who provides funding capital for a new business in exchange for a stake in the company, typically in the form of shares or equity, convertible debt, or ownership equity.
API banking is a collection of regulated protocols, tools, or procedures that allow a financial or third-party organisation to access banking services via API. These banks grant third-party systems secure and restricted access to their central bank systems to carry out activities.
Application Programming Interface (API)
An application programming interface (API) is a collection of procedures, protocols, and tools for developing software applications that enable various systems or applications to communicate with one another. This enables application customization based on the needs of the user and can help to streamline day-to-day activities.
APR (Annual Percentage Rate)
You are likely to come across the term Annual Percentage Rate while researching different loan or credit card choices (APR). The annual percentage rate (APR) is the entire cost of the loan over a year, including interest and normal fees.
Artificial intelligence (AI)
Artificial intelligence is the replication of human intellect in robots that are programmed to think and act like humans. The phrase may also refer to any machine that demonstrates human-like characteristics such as learning and problem-solving. The capacity of AI to rationalise and execute actions that have the highest possibility of reaching a certain objective is its ideal feature.
Automated Clearing House (ACH)
Since 1974, NACHA, previously the National Automated Clearing House Association, has operated the Automated Clearing House (ACH) Network, an electronic funds-transfer system. In the United States, this payment system handles payroll, direct deposit, tax refunds, consumer bills, tax payments, and a variety of other payment services.
Bank Identification Number (BIN)
The first 4 to 8 numbers on a credit, debit, or prepaid card is the Bank Identification Number (BIN). BIN is used to identify the card issuer and assists retailers in validating credit/debit/prepaid card transactions.
A banking licence is a legal document that permits a bank to operate in a country or jurisdiction. It is necessary by law in order to establish a bank. A banking licence requires a number of qualifications, ranging from capitalization to a comprehensive business strategy. These vary according to the country in which the company operates.o
Big Data refers to organised and unstructured data that is too massive or complicated for a standard data management programme to process. Using predictive data analytics, financial firms employ Big Data to better understand their clients' behaviour. Big Data is generally used for sentiment analysis, fraud detection, fraud prevention, and personalising consumer interactions.
Blockchain is simply a secure digital transaction record. Each block contains data on a single transaction, such as the date, time, and value, and is meant to be impossible to change. Individual blocks in a blockchain are connected together in a single list called a chain. They're often employed in cryptocurrencies like bitcoin.
A broker is a finance professional whose duty it is to find their clients the finest financing offer for their needs. Commercial brokers frequently collaborate with banks and other types of lenders, including alternative finance and specialty lenders.
A business incubator is an existing company that provides assistance to new businesses. This is often accomplished through the offer of office space, coaching, and networking opportunities.
Buy Now Pay Later (BNPL)
BNPL is a contemporary type of retail finance in which consumers benefit from no-cost EMI and simple repayments. BNPL services are developing at a rate of more than 39% per year because they disguise the sense of a loan by providing credit at the point of sale.
Capital refers to the cash that a business has available to fulfil the day-to-day costs of running it, such as paying employees and purchasing merchandise. It encompasses working capital, debt, equity, and trading capital, as well as cash and financial assets.
Cash flow (cash flow statement)
Cash flow refers to the money that goes in and out of a firm. A cash flow statement is a document that provides information on the cash received by a firm from its activities and the cash spent during a specified time period.
Challenger banks are known for promoting innovation, customisation, new operating models, and client centricity. They refer to designate mid-tier banks, specialised banks, and non-bank brands. Challenger banks are frequently noted for providing unique features such as real-time transactions and no international transaction fees.
A chargeback is the amount of money refunded to the cardholder as a result of a dispute he or she filed. It is a consumer protection measure that allows cardholders to easily seek payment reversal from the issuing bank.
A cloud provider is a company that provides cloud computing services. This enables businesses to host their data remotely, simply using internet connectivity, rather than having a local server.
Cloudsourcing is the practice of outsourcing IT services rather than employing internal resources. The company's cloud computing will likewise be hosted by an external source. This permits all IT services to be handled by a single third-party vendor.
A collaborative economy (also known as a sharing economy) occurs when a group of people join to share/swap/loan products and services rather than depending on a huge corporation to deliver goods or services. This is frequently accomplished through the use of a custom-built website or platform.
Collateral is an asset that serves as security for a loan. It is intended to protect the lender by allowing the lender to sell the asset to recuperate some or all of the losses if the firm fails to satisfy the repayment requirements.
Personal and corporate credit scores are numerical scores based on an individual's or company's credit history. When you apply for a credit card, mortgage, personal or business loan, the lender will look at your credit score to see if you qualify for the cash.
Cross-border payments involve wholesale, retail, or recurrent transactions between individuals, banks, businesses, and other entities that operate in separate countries.
Crowdfunding happens when an individual or corporation requests monetary donations from the general public, usually over the internet. The funds obtained are then used to sponsor a project or venture.
Cryptocurrency is a type of crypto asset that is a virtual, decentralised currency. The value of a cryptocurrency is established by supply and demand rather than by a bank. Bitcoin is the most well-known cryptocurrency.
Data Management Platform (DMP)
A data management platform is a technology that allows for the collection and administration of data from many sources, such as first, second, and third-party audience data. Once compiled, the combined data collection can be split and distributed through broader channels. DMPs are essential tools for digital marketing since their massive data sets enable for precise audience targeting. Salesforce, Adobe Audience Manager, and Oracle are examples of DMPs.
Data mining is the act of combing through data to uncover hidden relationships and patterns, which are then used to forecast future trends. It frequently employs a combination of machine learning and artificial intelligence and is closely tied to Big Data.
Datafication is the process of converting previously unquantifiable parts of life into data that can be ascribed a monetary value. Datafication is used in financial services to assist make decisions faster and more precisely. It is used for several purposes, including risk assessment, fraud detection and prevention, customer segmentation, and compliance.
DeFi (Decentralised Finance)
Decentralised Finance (DeFi) is a blockchain-based system that makes products and services available on a decentralised public network. DeFi facilitates transparent transactions through peer-to-peer contact via a software-based mediator.
Deep data is the collecting and processing of massive amounts of data while keeping a high degree of quality and insight. Deep data is the useful and actionable information derived from large data analysis.
Deep learning employs machine learning to analyse many layers of massive, unstructured data. It constantly analyses data to learn, make inferential conclusions, and provide forecasts.
Neobanks only operate online and via mobile applications. Customers may do typical banking transactions such as money transfers, loans, and savings account reviews without the requirement for a real bank office. A neobank may or may not have its own banking licence but may be a partner of a regular bank.
A digital fingerprint is a compressed form of a bigger data set that is used for accurate identification. Because digital fingerprints cannot be recreated, they reduce the possibility of tampering. A digital fingerprint is typically created using the hash function.
A digital identity is a person's online version of their physical identity that is based on their online behaviour. Pieces of data such as a user's username, search activity, and purchase behaviour comprise a user's digital identity.
Digital wallet (e-Wallet)
An electronic device for storing payment information is referred to as an "e-wallet" or a "digital wallet." A driver's licence and loyalty cards are two examples of additional cards that may be stored in some types of digital wallets.
Disposable virtual cards
A virtual card is a debit or credit card that doesn't have a physical card and can only be used online or through a mobile application. Most internet purchases may be made with them. Once a disposable virtual card is used, the card's information is immediately deleted, and fresh information is created. These are typically employed to guard against online credit card theft.
Distributed Ledger Technology (DLT)
The use of nodes (independent computers dispersed across a geographical region) to duplicate, share, and synchronise transactions in their digital ledgers is known as distributed ledger technology (DLT). In contrast to traditional ledgers, there is no centralised ledger or central owner/administrator, and the data is not saved or retained in a single location. The blockchain system is the most common kind of distributed ledger, however, it is not used by all DLTs.
Electronic Identity Verification (eIDV)
eIDV (Electronic Identity Verification) is used to reduce fraud. It uses both public and private databases to determine whether a person is who they say they are.
When people participate in a startup firm and earn shares in exchange, this is called equity crowdfunding. The investors then often become shareholders, giving them the right to a part in any profits.
Environmental, Social, and Governance (ESG) refers to the standards used to evaluate a company's environmental and social responsibility. When considering if a firm satisfies the criteria for a socially aware investor, these aspects are frequently taken into account.
The term "FinTech," which stands for "financial technology," is used to denote a growing sector of the economy that strives to streamline, modernise, and automate the provision of financial services. FinTech solutions compete with conventional means of delivering financial solutions by utilising contemporary infrastructure and software.
Testing programmes for novel business models that are not covered by current laws are referred to as "sandboxes". As a result, businesses may test their new product in a realistic setting before receiving a complete licence.
Freemium is a mix of "free" and "premium". It is a marketing approach that allows users to access a basic version of a product or service for free with the option of paying for extra capabilities.
A business is considered a gazelle if its yearly sales growth is not below 20%. Along with rapid job development, gazelles are well recognised for their brisk sales growth.
"Green finance" is any organised financial activity designed to secure a better environmental outcome. It covers loans and investments that support the creation of green initiatives, the mitigation of climate change, or both.
Infrastructure as a Service (IaaS) is a kind of cloud technology where a business makes available physical resources that are owned and managed by a third party and supplied over the internet, frequently as a subscription (so the user's device does not need to have software installed). IaaS gives businesses access to cost-effective extra computer power on demand. It comprises things like network connections, bandwidth, virtual server space, and load balancers.
An Initial Coin Offering (ICO) is a kind of cryptocurrency-based fundraising. Companies offer investors cryptocurrencies or "tokens" in return for cash, with the expectation that the token would increase in value over time.
Initial Public Offering
An initial public offering (IPO) is when a private corporation sells its shares to the public for the first time (IPO). Growing businesses in need of finance can utilise IPOs to generate money while existing businesses can use IPOs to let owners sell some or all of their ownership stakes to the general public.
Insurance Technology (InsurTech)
Technology created to improve the productivity of insurance firms is known as insurance technology, or InsurTech. By lowering costs for both consumers and insurance providers and increasing customer happiness, InsurTech is radically changing the insurance sector. It is most prominently employed in wearables and customer-facing phone apps, but it is also effectively applied to enhance underwriting, claims handling, and asset management.
Internet of Things (IoT)
Internet of Things (IoT) is a network of linked gadgets, machines, and other things that have software or sensors for data exchange. A unique identifier (UID) on an IoT-enabled device enables data transfer over a network without the typical need for human-to-human or human-to-computer interaction.
KYC (Know Your Customer)
Know Your Customer, sometimes referred to as KYC, is the procedure through which a company confirms the client's identity. Financial organisations are increasingly using KYC as a requirement for doing business.
Machine learning makes use of artificial intelligence (AI) to provide systems with the capacity to automatically learn from experience and update without the need for explicit programming. The creation of computer programmes that can access data and learn from it is the main emphasis of machine learning most of the time.
Using a single internet transaction, a mass payment is a technique for concurrently paying several recipients. Users can submit a document with all the necessary information rather than entering each recipient's payment information separately. Another option is to utilise a mass payment Application Programming Interface (API).
A merchant aggregator, also known as an aggregator or a payment aggregator, is a service provider that enables businesses to accept payments without first setting up a merchant account. Aggregators essentially act as payment processors for businesses.
Mergers and acquisition
Although the terms merger and acquisition are commonly used interchangeably, they refer to two distinct concepts. An acquisition occurs when one business fully buys another. A merger is the joining of two businesses to create a new legal entity.
Microfinance is a fundraising process through which capital is made available to low-income business owners who would not otherwise have access to it. The borrower pays back the loan with interest.
Multi-factor Authentication (MFA)
Multi-factor authentication (MFA) is a security system for a user to verify their identity using several confirmation methods. This is most frequently used as two-factor authentication, where a user must first input their password and then enter a code (or something similar) from their phone.
Near-field communication (NFC)
Technology known as near-field communication (NFC) enables two devices to communicate when they are touching or in close proximity to each other. It is a secure way to make contactless payments at point-of-sale terminals or other devices that are NFC-enabled.
Non-fungible token (NFT)
A Non-fungible Token (NFT) is essentially a digital asset or cryptographic asset, such as a graphic drawing or an artistic work, that has a special code and metadata for its identification in a blockchain. NFTs cannot be sold or swapped for comparable value.
Open Banking is a concept that refers to the practice of securely exchanging customers' financial information with their consent. It is accomplished by utilising open APIs, which allow developers to create apps and services. Users may share data like spending patterns and payments with authorised third parties, including other banks.
Peer-to-peer lending, often known as crowdlending or crowdfunding, is the practice of making loans available to individuals or businesses using an internet platform that connects lenders and borrowers. Most of these platforms provide a more affordable alternative finance. They frequently have fewer overheads and costs than traditional financial institutions because they operate entirely online.
Peer-to-peer (P2P) transactions include the transfer of money from one person's bank account or credit card to another's bank account through the internet. The rising use of person-to-person payments has resulted from the increased use and acceptance of online banking and e-commerce.
PaaS (Platform as a Service)
Platform as a Service (PaaS) is a cloud computing paradigm in which a third-party business offers a platform and an environment to an organisation, enabling them to develop online applications and services. PaaS provides developers with the resources they need to deploy code effectively. It saves you the expense and difficulty of creating and maintaining the platform on your own.
A payment gateway serves as an interface between the acquirer and the merchant website to accept credit/debit transactions from customers. The system verifies card information, makes sure there are enough funds, and then permits payment to be made to retailers.
Payment Card Industry Data Security Standard (PCI DSS) safeguards sensitive customer information. Businesses that store, handle, or transfer cardholder data in clear or encoded forms are to comply with the standards set by the PCI DSS.
POP (Point-of-Purchase) refers to the actual place where a customer interacts with a product at a store and decides whether or not to buy it.
The POS (Point of Sale) is where the customer interacts with the product and begins a transaction. It enables a store to check out the products purchased by a consumer.
PropTech (Property Technology)
PropTech, or property technology, is the application of technology to improve real estate business. It refers to any technology developed in response to a problem or opportunity in the real estate market.
RegTech (Regulatory Technology)
Regulatory technology, often called RegTech, is the application of information technology in the financial services industry to improve regulatory operations. Among the key purposes of RegTech are compliance, reporting, and regulatory monitoring. RegTech consists mostly of businesses that use cloud computing technology to help them comply with financial rules more efficiently and cost-effectively.
Robo advisers refer to computer systems that use complex algorithms and specialised software to give financial advice or investment management assistance. They often require little to no human participation and are used for investment portfolios, tax optimization, and other purposes.
SaaS (Software as a Service)
SaaS is a cloud-based technology that leverages the internet to offer an application that is owned, maintained, and developed by a third party. The programme is normally run on a subscription basis and is not installed on the user's device.
A shared platform is a new technical paradigm in which organisations collaborate strategically on a digital project to minimise costs, increase compliance, and improve the customer experience. Fraud, trade finance, and regulatory reporting are all examples of shared platforms.
The sharing economy is a peer-to-peer market in which the purchase and provision of products and services are pooled by a community. The sharing economy is pressuring traditional financial services and products, such as peer-to-peer lending, to adapt to new market demands.
A smart contract is a self-executing piece of code that enables transaction processing and verification. It is often implemented on a decentralised ledger, such as a blockchain, which monitors and enforces the contract.
Social finance is a set of money-management systems with the primary goal of positively impacting society or the environment. This might involve investing in or lending money to social entrepreneurs, charities, and co-ops that engage in social and environmental initiatives.
Specialist banks, sometimes known as niche banks, provide a restricted range of products or serve a certain market or kind of consumer. They typically rely on third-party distribution networks and a tiny customer base.
A start-up accelerator, usually referred to as a seed accelerator, is a programme created especially to support the expansion of young enterprises. Over a certain length of time, these programmes offer coworking spaces, professional networks, mentorship, courses, and guidance from specialists.
A start-up company is a fresh, forward-thinking commercial enterprise, founded by entrepreneurs, and still in its early phases of operation. The main goal is to create and prove a scalable business model.
TES (technology-enabled service)
If a company uses technology to better deliver the service it offers, such services are said to be "technology enhanced." As opposed to labour, technology is the main input of TESs.
Tokenization is the process of substituting sensitive data with unique identifier words, phrases, symbols, or tokens. It does not compromise data security. Tokenization keeps all of the sensitive information about a financial operation. It can be used to increase the security of e-commerce transactions without adding extra expenditures for industry compliance and governmental oversight.
Unicorn company (Unicorns)
Aileen Lee, a venture investor, popularised the term "unicorn," which refers to a startup company valued at more than $1 billion. Similar to the mythical beast, it alludes to the rarity of a corporation achieving this price. Recently, firms with a valuation of more than $100 billion have been referred to as "super-unicorns."
VAT (Value-added tax)
The tax we must pay when we acquire goods or services is known as value-added tax (VAT). A summary of the VAT associated with the sales and purchases made by your company is included in your VAT return.
VC (Venture Capital)
Startup enterprises and small businesses with promising development prospects can receive financial boosts through a fundraising process known as a venture capital (VC). Investors, investment banks, and other financial organisations frequently provide venture capital in return for stock in the business.
Wearable technology refers to any electronic equipment that is meant to be worn on the body. Jewellery, accessories, medical gadgets, and clothes or garment pieces are examples of the forms in which such devices can come. The Apple Watch and Fitbit are iconic examples of wearable technology, but they're not the only ones being produced today.
In finance, yield is the amount of money that an investment earns over a specific period of time. It is commonly expressed as a percentage that depends on the amount invested, the current market value, or the face value of the instrument. It includes earned interest and dividends.
The term "financial technology," or simply "Fintech," is used to describe new technology that aims to enhance and automate the provision of financial services. It uses specialised software and algorithms that are run on computers, and increasingly smartphones, to help individuals, businesses, and company owners better manage their financial operations and processes. Read about the fundamentals of FinTech in our previous post.
Today, fintech spans a variety of fields and industries, including investment management, fundraising and nonprofit, retail banking, and education, to mention a few. Fintech also covers the creation and use of cryptocurrencies like Bitcoin and crypto exchanges like Binance.
Here are some popular concepts in FinTech: 3D Secure, Big Data, blockchain, challenger banks, neobanks, cryptocurrencies, digital wallet, ESG, InsurTech, multi-factor authentication, near-field communication, open banking, P2P transactions, PaaS, payment gateway, robo advisor, SaaS, smart contract, and venture capital.
The term "FinTech" (financial technology) refers to software, mobile applications, and other technologies developed to enhance and automate conventional forms of finance for both businesses and individuals. It streamlines financial transactions for individuals or organisations, increasing accessibility and lowering costs overall. It can also be applied to businesses and services that use AI, big data, and encrypted blockchain technology to enable extremely secure internal network transactions.
No! FinTech and blockchain are not the same. A blockchain is a decentralised, distributed, and public digital ledger for recording crypto transactions across numerous computers in a way that prevents the data from being changed. On the other hand, FinTech is a new industry that uses technology to advance financial operations with a focus on making services more available to the general public.
Nevertheless, there are FinTech companies that use blockchain technology to deliver cryptocurrency trading and payment services. Examples of them are Binance, Wirex, Unbanked, Uphold, Crypto.com, and Coinbase.
FinTech refers to modern technology that streamlines and automates the provision of financial services. Banks, on the other hand, are financial institutions that are authorised to lend money and accept deposits from their clients. While FinTech companies concentrate on enhancing customer experience through convenience, functionality, personalization, and accessibility, banks place a greater emphasis on traditional services, security, and the control of financial risks.
Additionally, Fintech has organisational structures that are more open to new ideas and trends. Banks, however, have a rigid organisational structure that may prevent the quick adoption of innovative changes. And while Fintech has a wider market distribution because of the use of online technologies, smartphones, advanced computers and AI-powered tools, traditional banks, on the other hand, only have a small market share, which they can increase by opening branches.
Fintech and digital banking are frequently grouped together, yet they are fundamentally distinct from one another. Financial technology, or FinTech, uses cutting-edge technologies, products, and business models to improve the way financial services are provided. On the other side, digital banking is the digitization of conventional banking operations, services, or products that are made available through internet channels, software, and mobile platforms.
Note that digital banks without physical branches are also known as neobanks. They include the following examples
There are many categories of FinTech companies. They are often grouped by the products or services they offer. Nevertheless, here is our list of four, plus one (bonus), categories of FinTechs and examples of companies, products, or services that belong to them:
- Mobile payments services – Apple Pay, Samsung Pay, Google Pay.
- Insurance companies – Next Insurance, Zipari, GoHealth, and Lemonade.
- Crowdfunding platforms – Kickstarter, GoFundMe, Goji, LenderKit, and StartEngine.
- International money transfer services – TransferGo, Paysend, XE, Wise, and WorldRemit.
- Blockchain and cryptocurrency services – Find several examples here.
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