The following terminology is used in FinTech. It is constantly evolving and we update regularly:
Accelerator / Incubator
A centre or programme where FinTech start-ups are given mentorship and/or funds to accelerate them through the research, development and launch phases.
Access to Accounts / XSTA
Allows financial institutions and regulated FinTechs to access to the bank accounts of EU consumers as part of PSD2. Such organisations are positioned between the customer and their bank and act as third party Payment Service Providers.
A Bitcoin address is a unique string of 27-34 alphanumeric characters. An address can be created freely with the use of a wallet and always starts with a 1 or a 3.
A.I. / ArtificiaI Intelligence
Artificial intelligence is when a system can replicate human thought or is inspired by human reasoning but at higher degrees of volume or complexity. IBM Watson studies thousands of data points, validates data at certain levels of confidence and recognises patterns in data.
AISP / Account Information Service Provider
AISPs offer solutions that allow companies and consumers to have a consolidated view of their financial situation. Under PSD2 AISPs can access their customers data at other financial institutions and use it to offer services and solutions.
Instructions which tell a computer what to do. These can be highly complex and include multiple options (and, or, not) based on multiple data and scenarios but are based on simple rationale.
AltFi / Alternative Finance
Lenders and instruments which have emerged and exist outside of the traditional finance system of regulated capital markets, such as P2P. Sometimes referred to as AltFi or the shadow banking system.
API / Application Programming Interface
A set of commands, functions and procedures which allows two pieces of software to talk to each other instantly and seamlessly, making it easier to exchange data and execute tasks. An essential element of PSD2.
ASIC / Application Specific Integrated Circuit
Technology used in Bitcoin mining, ASIC is able to generate orders of magnitude more hashes per watt of power than the next best technology.
ASPSP / Account Servicing Payment Service Provider
All financial institutions that offer payments, current accounts, credit cards, etc with online access are classed as ASPSPs. Under PSD2 they are obliged to provide an interface to allow authorised third parties to access account information and initiate payments.
The analysis of large, complex, unstructured or rapidly changing data sets to identify linkages or trends that would not be apparent through traditional data processing methods.
A cryptocurrency which is manufactured, stored and exchanged without reference to a central bank. Value is based on supply and demand. Bitcoin transactions are recorded using blockchain technology and user identity is not revealed. Increasingly a mainstream way to exchange value between parties.
A block is a unit of the code which comprises the blockchain. It is the record of transactions that have occurred since the last block was created and a confirmation to previous transactions. Each block links to the block before it, thus creating a full chain back to the original genesis block.
A digital ledger which records transactions as a chain of data and stores them on a decentralised peer-to-peer network. Each peer then maintains a shared append-only ledger which are kept sycronised through a consensus protocol. Theoretically impossible to change and allows participants to see the same version on the truth at the same time. Best known for cryptocurrency transactions but a range of Public Blockchain and Private Blockchains exist for different purposes.
CFT / Combating the Financing of Terrorism
Laws and regulations to be implemented by financial service providers to prevent or uncover the funding of terrorism or illegal purchase of assets.
A new financial institution which has been granted a banking license and uses FinTech to engage clients better, create an efficient back office, agile businedd model, etc. UK examples include Atom Bank, Mondo, Starling and Tandem.
A computer program capable of holding textual or auditory conversations with humans, uses AI to understand context and improve responses.
When software or infrastructure are provided over the internet, aka the cloud. Data is hosted on servers at a remote data centre but can be utilised on local computers. Versions include private, public and government cloud. Allows buyers to leverage the economies of scale and expertise of the provider while offer their solutions in a SaaS format. Requires good cyber security, back-up and disaster recovery procedures.
A slow growing but resilient FinTech, the opposite of a Unicorn.
A self-learning computer system which attempts to mimic human thinking using data mining, pattern recognition and natural language processing.
The process of moving cryptocurrencies to an offline wallet, reducing the potential for hackers to steal private keys.
When private persons or organizations share, swap, rent and trade products and services, such as P2P.
The consensus protocol is an algorithm which sets the rules and procedures among the participant nodes. Allows network members to agree on the value of a piece of data or a proposed transaction such as trading of cryptocurrency, which then updates the ledger.
Core Banking System
A system supporting ‘core’ functions such as client records and messaging, transaction management, configuration, reporting, general ledger. Distinction must be made between new breed ‘digital core’ systems with open architecture and legacy core systems which may be closed and not real-time.
Transactions occurring between persons and companies via a marketplace. Includes debt, invoices and equity in return for interest, shares and rewards. Provides liquidity to those who might otherwise be excluded from the market and a new asset class for investors.
A digital means of payment which uses encryption to secure transactions, verify transfer for funds and control the creation of new units using Blockchain technology. Exist as an alternative to fiat currencies and operate independently of a central bank. Best know examples include Bitcoin, Dash and Ether but companies and countries also issue their own cryptocurrencies via IPO to give their holders an investment exposure or method to transfer value.
Wallet provider who takes custody of their clients cryptocurrencies by controlling the private keys, opposite of self-hosted wallet.
Processes and technologies used to keep data, solutions (software), devices and systems (hardware) secure from damage, theft, hijack and misuse.
A cryptocurrency offering instant, private payments using a secure, open source platform.
Decentralized Autonomous Organisation / DAO
Organisation who's technology operates autonomously and who's by-laws are coded into the Ethereum blockchain, making them immutable.
The provision of financial services through mobile apps and internet banking channels.
A person who has grown up using digital technology, including Millennials and Generation Y.
The journey businesses undergo to implement technology in their organisation. Requires not only new technology but new skills, processes and business change.
An application which allows you to check balances, make financial transactions and collect rewards on a mobile device. Typically linked to a real money account thus is becoming an alternative to credit and debit cards.
A technology which radically alters consumer behaviours and/or business models, such as FinTech, the sharing economy or platformication.
EBA / European Banking Authority
Independent EU Authority tasked with ensuring effective and consistent prudential regulation and supervision across the European banking sector.
eID / Electronic Identity
Identity in a digital format. Often involves an identity card with embedded chip, certification, seperate signatures for authentication and verification, etc. eID is legally binding and used to sign smart contracts in a number of countries.
The process of encoding sensitive data using algorithms to secure it, for example between browsers or parties to a transaction. To access or activate the data a key is usually required.
The native cryptocurrency of the Ethereum platform.
A digital network, similar to Blockchain, which can be used build decentralised applications.
Financial products or services aimed at providing access to more affordable and mainstream options for the underbanked and unbanked.
FinTech / Financial Technology
The use of software to provide financial services including personal finance, capital markets and enterprise accounting. Alternatively, a start-up providing financial services via digital channels.
FX / Foreign Exchange
The conversion of one currency to another. A number of large FinTech’s such as Revolut and Transferwise focus on this segment. Large corporates and banks have used algorithmic trading in FX for over 20 years.
GDPR / General Data Protection Regulation
An EU policy aimed at strengthening and unifying data protection for individuals within the European Union and governing the export of personal data outside of the EU.
The very first block created at the beginning of the blockchain.
A hash is the output of a hash function and, as it relates to Bitcoin, the hash rate is the speed at which a computer completes an operation in the Bitcoin code. The higher the hash rate the higher the opportunity of finding the next block and receiving the reward when mining.
ICO / Initial Coin Offering
An event where funds are raised, say to develop a FinTech business, by offering new cryptocurrencies in return for a cash investment.
FinTech firms focusing on the insurance segment, including sales, broking and crowd insuring.
Short for cryptographic keys, which use algorithms to transform data to allow secure communication. In cryptocurrency the private key effectively generates a signature required to unlock the funds. The private key is used to mathematically derive the public key, which is effectively the address where funds are received.
KYC / Know Your Client
A set of checks which must be made by financial services providers to identify their clients. Typically used during onboarding, it helps check for anti-money laundering (AML) and combat financing of terrorism (CFT). The digitalisation of KYC is leading to a boom in RegTech solutions.
Unlike conventional computer programs, machine-learning algorithms modify themselves to better perform their assigned tasks. Increasingly used to improve credit analysis.
An acquirer is a financial institution that processes credit or debit card payments on behalf of a merchant (e.g. retailer).
MIFID / Markets in Financial Instruments Directive
An EU policy aimed at governing the provision of investment services in financial instruments by banks and investment firms and operation of trading venues.
The process by which new blocks are created and all Bitcoin transactions are verified. Examples include Self Mining using own equipment, Cloud Mining where you rent hashing power or Mining Pool where multiple particpants share resources and rewards. Over the years the mathematical difficulty of discovering leading cryptocurrencies has grown beyond what a regular individual can achieve at home, large scale operations using industrial hardware prevail.
Payment services performed from a mobile device and operated within financial regulation.
Mechanism to split control over an address among mutiple Private Keys, with a specified number of keys required to unlock the funds stored.
MVP / Minimum Viable Product
A version of a new product with sufficient features to be usable but not the full solution. Allows IT companies to work with clients to validate what is required for the final product.
NFC / Near Field Communication
Technology which facilitates the exchange of data over a short distance, such as between the chip in a card or smartphone and the payment reader.
A retail finance model where service is delivered to customers using different channels such as branch, mobile, web, retail POS and partners connected by API.
An Open (or Public) API is a free-to-use, publicly available application programming interface (API) that provides access to a proprietary software application.
Open banking is an emergent trend based on using APIs that enable 3rd party developers to build applications and services around a financial institution. The financial institution defines product and technical standards and maintains the API layer or middleware. IT companies supply solutions which plug-in to this, increasing choice and innovation.
Software which is made freely available to anyone who has the skills and applications to apply it.
Facilitates the online payment for goods and services using a card, linking the buyer, merchant and acquiring bank. Prominent example includes PayPal.
PSP / PISP / Payment (Initiation) Service Provider
An organisation that offers companies, retailers, merchants, etc an online solution is for accepting electronic payments. PSP often also handles data security standard compliance, fraud protection, etc.
Category of Payment Service Provider that came about as a result of PSD. Offer customers services such as executing payment transactions, issuing of payment instruments, card processing, money remittance, foreign exchange services and sometimes short-term credit.
PSD2 / Payment Services Directive 2
An EU policy aimed at standardising and making inter-operable card, mobile and internet payments within the EU. Expected to reduce barriers to entry for third party providers by allowing them to make payments and debit the customers bank account via API. Will allow FinTech’s to offer services on top of bank’s data and infrastructure, increasing competition.
P2P / Peer-to-Peer
Transactions occurring between persons via a marketplace, typically short-term personal lending. Provides liquidity to borrowers who might otherwise be excluded from market, and potentially high returns for investors.
A blockchain network where permission in required to participate. The invitation must be validated either by the network starter or by the rules/conditions placed by the network starter.
A Public Blockchain is completely open and anyone can join and participate in the network, execute the consensus protocol and maintain the shared ledger. The network typically has an incentivizing mechanism to encourage more participants to join. To achieve consensus each node in a network must solve a complex cryptographic problem called a proof of work to ensure all are in sync thus computation power is required.
FinTech firms focusing on the regulatory and compliance segment, including AML, KYC and fraud.
Automated solution which provides advice and/or allocates assets based on the prevailing market conditions relative to the pre-defined risk:reward strategy. In essence an algorithm replaces a human. Growing fast for automated, standardised asset management services due to cost and speed advantages.
ROI / Return on Investment
Measuring the benefit created relative to the IT investment cost.
SaaS / Software-as-a-Service
A licensing model whereby the application is hosted by the vendor in the cloud and accessed by users online in return for a periodic subscription fee.
The process of extracting data from text so that it can be displayed on another device, such as account data. Screen scraping increasingly has an evaluation purpose in analytics or credit scoring
The founder’s initial capital used to start a business, usually relatively small and sourced from family and friends.
Owner of cryptocurrency controls the private keys, as opposed to a Custodial Wallet.
A company’s first round of venture capital financing, usually occurring between proof of concept and growth stages.
A company’s second round of venture capital financing.
Digital contracts automatically prepared based on specific inputs. Often signed using an eID. Such contracts have been commonplace in advanced countries such as Estonia for over a decade but are now seeing mainstream use.
STP / Straight Through Processing
Automating an entire process from end-to-end. Increasingly used in online deposits and lending due to its efficiency and accuracy.
TCO / Total Cost of Ownership
The total of customisation, license and service throughout the life of an IT contract.
TPP / TPPSP / Third Party Payment Service Providers (TPP/ TPPSP)
Together, the Account Information Service Provider (AISPs) and Payment Initiation Service Providers (PISPs) that work alongside the customer and the banks in the payment process.
Where elements of sensitive data are replaced by a token in order that it can be securely transferred. The token has no intrinsic value of its own and the recipient uses software to convert it back to its original data form.
People or businesses with no access to mainstream financial services. Financial Inclusion initiatives are improving the provision of services and affordability of this segment.
People or businesses with poor access to mainstream financial services. Access to credit continues to be a problem for many in the low income bracket.
A start-up or scale-up with a valuation in excess of USD 1bn, typically based on growth assumptions rather than
actual profitability. Opposite of a Cockroach.
FinTech firms focusing on the wealth management segment, including investing, portfolio management and Robo-advisory.