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A Glossary of FinTech Terms for the Uninitiated

The term ‘Fintech’ is used to describe technology which aims to automate and improve the use and provision of financial services. It is used to assist companies in multiple sectors, from consumers to business owners or managers, in a bid to develop better financial operations.

If you would like to discover more about what exactly Fintech is, then check out our previous blog here.

Fintech is a complex sector which involves areas such as, mobile payments, fundraising, asset management, loans and money transfers, therefore, it contains elements of traditional banking, modern technologies, and of course, new financial services which all come with their own jargon and terminology.

To help you better understand the world of FinTech, we have designed a brief glossary of terms for the totally uninitiated, hesitant beginner, or potential entrepreneur.

AMLAnti-Money Laundering = laws or processes used to reduce illegally acquired money

API – Application Programming Interface = refers to computer programming rules or protocols which are followed to allow improved building and developing of software.

Cryptocurrency = Digital currency, such as, Bitcoin or Ripple which uses cryptography for security and regulation. Cryptocurrencies are run on Blockchain systems which means no central entity exists as overseer.

Bitcoin = the most commonly used type of Cryptocurrency and the first of its kind.

Blockchain = the virtual ‘ledger’ where cryptocurrencies are stored. Information can be added at any time but never altered or deleted.

Collaborative Consumption = a ‘sharing’ economic model used as the basis for platforms such as Airbnb, and Crowdfunding such as Indiegogo.

DRAAS – Disaster Recovery As A Service = a third party hosting, which is used in cases of emergency, as a backup for vital data.

Encryption = the process of encoding messages for security. Fintech, Blockchain, and so on, all need encryption services to ensure high security levels. Data is turned into code using an algorithm which can be reverted back into useable data using a specially formulated key.

FinTech – Financial Technology = the merging of financial and technological knowledge to create a new sector which advocates software, and technology within financial services sector. Fintech is considered to be a challenge to tradition banking systems and institutions.

FinServ – Financial Services = an abbreviation which is mostly found on Twitter and relates to financial services industry.

KBA – Knowledge based Authentication Aids = are often used in fraud prevention. For instance, the ‘secret question’ used by many sites which must be answered before accessing information.

Messaging Commerce = an e-commerce process which allows consumers to make purchases through messaging apps.

On-boarding = an umbrella term used to include all the stages for getting new customers assimilated into a program. Faster and more efficient on-boarding is one distinct advantage that Fintech has over traditional banks.

Payment Gateway = a merchant service with the power to authorise card payments for e-commerce, bricks and mortar businesses, or online retailers. They are often an intermediary between consumer and trader but can also be offered directly such as, in the case of a bank.

PCI Compliance – Payment Card Industry Compliance = is the industry security standards used to protect sensitive information (card numbers, address, personal information and so on) during financial transactions.

P2P Lending – Peer-to-peer lending = also known as social lending, involves the lending of money directly to borrowers without the standard structure and processes, through an online matching service. It means that individuals and businesses can borrow money for purposes such as, start-ups, student loans, business assets or property from those lenders who have signed up for the investment.

Robo-Advisors = are financial advisors who offer financial advice and investment management via online portals with limited human interaction. They are based upon mathematical rules or algorithms.

SSO – Single Sign On = the type of authentication which uses one set of login details for multiple applications. Examples might include signing in using your Facebook login details to access other information online.

Smart Contracts = are computer programs which generate self-executing contracts for terms of agreement between a buyer and seller. As they are automated systems, based in Blockchain technology, they are able to save time and money on lengthy, human-based legal contracts for common transactions.

SaaS – Software as a Service = a vendor is paid to host applications on a cloud system for online users to access remotely. This is commonly offered by Startups so many struggle with knowing how to classify their business – should they be Fintech or SaaS?

Tokenisation = the act of replacing sensitive data with unique symbols in order to keep data secure. One of the most commonly known uses for this is when you repeat purchase online using your credit or debit card and part of your card number is displayed using the hash symbol, for example, 4456 #### #### 3390.

Underbanked = this is the term used to describe people who do not have access to proper banking or financial services offered by retail banks. Those who are considered to be ‘underbanked’ often have access to a bank account but largely rely on other methods. Underbanked people can easily be helped by Fintech and this is one of its most appealing aspects.

 

Hopefully our glossary has given you a brief insight into the world of Fintech, but should you require any further information please check out our training courses which offer useful insights into the world of Fintech, Cryptocurrencies and more.

Alternatively, please contact us here.

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