FinTech business words glossary

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FinTech business words glossary

WRITTEN BY FOUNDER AND CEO OF PENTAREDDYN.COM

Whether you’re new to the world of financial services technology or not, it can be hard to keep up with the emerging tech business words and acronyms. That’s why we decided to create our glossary – a one stop shop that demystifies the most popular and trending terms that the world of fintech can’t live without.

Enjoy diving into our definitions and if you’d like to suggest a business words addition, get in touch.

Our glossary covers terms we get asked about most often but we are keen to expand it – everyone loves a new business words!

Table of Contents

•     3D Secure

3D Secure is a three part security protocol used to prevent fraud in online credit and debit card transactions. Shoppers are required to input their assigned password in order to verify a transaction.

•       Alternative finance

Alternative finance refers to a range of finance solutions that sit outside of traditional forms (stocks, bonds, cash). It’s a term used to describe financial products, instruments and tools that have been developed outside of the traditional financial services system, with peer-to-peer lending and crowdfunding as examples.

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Alternative lending

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Alternative lending refers to the various loan options beyond a traditional bank loan. Generally, these forms of loan are more flexible in terms of repayment and approval, but often have higher interested rates. Alternative lending may be necessary for either an established business or start-up as they can exceed the maximum loan amount of a bank and do not necessarily require an established credit history.

•     Angel investors

An angel investor (also known sometimes referred to as a business angel, informal investor, angel funder, private investor, or seed investor) is an affluent individual person who provides funding capital for to a business start-up business, usually in exchange for a stake in the business – often in the form of shares or equity, convertible debt or ownership equity.

•       Application programming interface (API)

An application programming interface (API) is a set of routines, protocols, and tools for building software applications that essentially allows multiple systems or applications to ‘speak’ to one another. This allows customisation of applications, depending on the needs of the user and can streamline day-to-day processes.

•          Banking licence

A banking licence is legally required in order to establish a bank. There are various prerequisites in order to obtain a banking licence; from capitalisation to an extensive business plan. These differ depending on the jurisdiction in which the business operates.

•     Big Data

Big Data refers to structured and unstructured data that is too large or too complex to be processed by a traditional data management application. Financial services use Big Data to better understand their customers’ behaviour using predictive data analytics. You will typically find Big Data implemented for sentiment analysis, fraud detection, fraud prevention and personalising customer interaction.

•       Blockchain

Blockchain is essentially a secure digital record of transactions. Each block contains data around an individual transaction such as date, time, amount and is designed to be difficult to alter. Blockchain is structured so that individual blocks, are linked together in a single list, called a chain. They are popularly used in cryptocurrencies such as bitcoin.

•          Business incubators

A business incubator is an existing company that offers support to a start-up business. This is commonly through the provision of office space, mentoring, networking opportunities.

•     Challenger banks

Challenger banks tend be digital only with no physical branches, renowned for driving innovation, personalisation, new operational models and customer centricity but the term is not widely agreed upon and in the UK is also used to describe mid-tier banks, specialist banks and non-bank brands. Challenger banks are often known for delivering niche aspects such as real time transactions or no foreign transactions fee.

•       Cloud provider

A cloud provider delivers a cloud computing service. This allows companies to host their data remotely, accessing it only via the internet, as opposed to using a local server.

•          Cloudsourcing

Cloudsourcing is the outsourcing of IT services, rather than using inhouse resource. The external provider will also host the company’s cloud computing. This allows all IT services to be processed through one external provider.

•          Collaborative economy

A collaborative economy (also known as a sharing economy) is when a group of users connect in order to share/swap/loan rather than of relying on a large company to provide goods or services. This is often through the use of a purpose-built website or platform.

•     Crowdfunding

Crowdfunding occurs when an individual or company submit a request, generally via the internet, for monetary donations from the general public. The money raised then goes towards funding a project or venture.

•       Cryptocurrencies

Cryptocurrency is a virtual, decentralised currency, and is a sub-class of crypto-assets. The value of a cryptocurrency is not controlled by a bank but is instead determined by supply and demand. The most renowned cryptocurrency is Bitcoin.

•          Data management platform (DMP)

A data management platform is a tool that facilitates the collation and management of data from various sources including first, second and third party audience data. Once collated, the combined data set can be segmented and pushed out across wider channels. DMPs are a core tool for digital marketing as the large data set allows for refined audience targeting. Examples of DMPs include Salesforce, Adobe Audience Manager and Oracle.

•     Data mining

Data mining describes the process whereby you dig through data to discover hidden connections and patterns, and then use this data to predict future trends. Most often it uses a combination of machine learning and artificial intelligence and is very much related to Big Data.

•       Datafication

Datafication is the practice of taking aspects of life that have previously never been quantified and turning them into data that can be assigned a value. Financial services use datafication to help make decision making faster and more accurate. It is used in a variety of ways: Risk assessment, customer segmentation, fraud analysis and prevention, and compliance.

•          Deep data

Deep data is the collection and processing of data on a large-scale, whilst maintaining a high level of quality and a great amount of insight. Deep data is the relevant and actionable information that is gained when big data is analysed.

•     Deep learning

Deep learning takes vast, unstructured data and uses machine learning to process multiple layers. Deep learning continually analyses, similarly to the human brain. This allows it to learn and draw conclusions and make predictions.

•       Digital banks/Neobank

Neobanks operate solely online and through mobile apps. Customers are able to carry out traditional banking processes such as money transfers, loans, reviewing savings accounts without the need for a physical bank branch. A neobank won’t necessarily have their own banking licence but may instead be a partner of a traditional bank.

•          Digital fingerprint

A digital fingerprint is the condensed version of a larger data set, used for efficient identification. A digital fingerprint minimises the risk of tampering, as they are not reconstructable. The hash function is commonly used to produce a digital fingerprint.

•     Digital identity

A digital identity is an individual’s online version of their physical identity, developed based on their online activity. A user’s digital identity is made up of data attributes such as username, search activities, purchasing behaviour.

•       Digital wallet

A digital wallet (also known as an E-wallet) involves the housing of payment information on an electronic device. Some forms of digital wallet can also store other cards such as a driver’s licence and loyalty cards.

•          Disposable virtual cards

A virtual card is a debit or credit card that does not come with a physical card, but can instead be accessed via a website of mobile app. These can be used for most online purchases. A disposable virtual card can be used once, and then the card details are automatically erased, and new details are generated. These are generally used in order to protect against online card fraud.

•     Distributed Ledger Technology (DLT)

Distributed Ledger Technology (DLT) is the use of nodes (independent computers which are spread across a geographical area) to replicate, share and synchronise transactions in their digital ledgers. Unlike traditional ledgers, there is no centralised ledger or central owner / administrator and the data is not stored or held in one particular place. The most popular type of distributed ledger is the blockchain system, however not all DLTs use the blockchain system.

•       Dual interface chip card

Dual interface chip cards are credit or debit cards that are able to process transactions both contact and contactless, through a single embedded chip.

•          eCheck

An eCheck (or electronic check) is a form of electronic funds transfer. Echecks are the digital version of a conventional paper check and can be used to cover the same range of transactions.

•     Electronic Identity Verification (eIDV)

eIDV (Electronic Identity Verification) uses both public and private databases in order to identify whether an individual is who they claim to be, in order to minimise fraud.

•       Equity crowdfunding

Equity crowdfunding occurs when individuals invest in a start-up company, and receive shares in return. The investors then usually become shareholders – entitling them to a percentage of profit made.

•          ESG

Environmental, Social and Governance (ESG) refers to the criteria for measuring the sustainability and ethical impact of a company. These factors are often measured when determining whether a company meets the standards for a socially conscious investor.

•     FinTech

FinTech, short for Financial Technology, is the word used to describe the emerging industry that aims to modernise, improve and automate the delivery of financial services. Through the use of modern software and infrastructure, FinTech solutions aim to compete with traditional methods to deliver financial solutions.

•       FinTech sandboxes

A sandbox is a term used to describe a testing programme for new business models that are not protected by existing regulations. This allows companies to test their new offering prior to becoming fully licenced, within a representative environment.

•          Freemium

Freemium (a combination of free and premium) is a strategy that offers a limited version of a product or service for free, with the option to access additional features for a fee.

•          Gazelle company

A gazelle company is one which achieves a revenue growth of at least 20% annually. Alongside sales growth, gazelles are also commonly known for their fast employment expansion.

•     Geolocation

A geolocation is the physical location of an individual or digital device.

•       Hashing codes

Hashing codes refer to the numeric value that aids in the identification of objects during equality testing. Hashing codes can likewise serve as indexes for the objects. A unique quality of hashing codes is that the value contained within them isn’t permanent in nature. They’re primarily used to help with efficient insertion and lookup of data collections, which are in turn based on hash tables.

•          IaaS

Infrastructure as a service (IaaS) is a type of cloud computing whereby a company provisions hardware resources which are owned and managed by an external company, and delivered over the internet, often as a subscription (therefore the software does not get installed on the user’s device). IaaS provides access to cost effective additional computing capacity on demand to organisations. It includes services such as virtual server space, network connections, bandwidth and load balancers.

•     ICO

An Initial Coin Offering (ICO) is a type of fundraising which uses cryptocurrency. Companies or projects sell cryptocurrency or ‘tokens’ to investors in exchange for money, with the hope that the token will have more value in future. It is somewhat similar to an Initial Public Offering (IPO).

•       Incumbent

The term incumbent typically refers to an individual responsible for a specific office within government or a corporation but can also be used to describe the responsibilities and obligations an individual or company is required to perform. An organisation’s incumbents (directors, officers, etc) will all be listed on an incumbency certificate. Incumbent might also be in reference to a company with a lot of power and a large portion of the market share.

•          Initial Public Offering

When a private corporation undergoes the process of offering its shares to the public for the first time, it is called an Initial Public Offering (IPO). Growing companies in need of capital can use IPOs to raise funds; established firms can use IPOs to permit the owners to exit part or all of their ownership through selling shares to the public.

•     Insurance technology

Insurance Technology, also referred to as InsurTech, is technology that is designed to increase the efficiency of insurance companies. InsurTech is disrupting the insurance industry by reducing the costs for consumers and insurance companies, while also enhancing customer satisfaction. Most visibly, you can see it in customer-facing phone applications and wearables, however it is also used successfully to improve underwriting, claims processing and asset management.

•       InsurTech

Insurance Technology, also referred to as InsurTech, is technology that is designed to increase the efficiency of insurance companies. InsurTech is disrupting the insurance industry by reducing the costs for consumers and insurance companies, while also enhancing customer satisfaction. Most visibly, you can see it in customer-facing phone applications and wearables, however it is also used successfully to improve underwriting, claims processing and asset management.

•          Integrated Circuit Card

An Integrated Circuit Card or a Smart Card is a card with an embedded electronic chip. Most often used as a type of payment or as an identification card, they are used as a way to increase security and combat identity theft. Most smart cards use metal contacts to connect to the internal chip, and increasingly most are now contactless.

•     Internet of Things (IoT)

The Internet of Things, or IoT, is a system of interconnected objects, devices, machines, gadgets, and more. An IoT-enabled device has a unique identifier (UID) which gives it the ability to transfer data over a network without the usual requirement of human-to-computer or human-to-human input.

•       KYC (Know Your Customer)

Know Your Customer, otherwise known as KYC, is the process whereby a business verifies the identity of the client. This process can be completed either before or during the business begins to do business with them. It is increasingly common to see financial institutions use KYC as a requirement to do business.

•          Ledger

A ledger, is traditionally the primary book detailing economic transactions. However, with the rise of digitised account keeping, it is also known as a distributed or shared ledger, and is a consensus of digital data which is replicated, shared, and synchronised geographically spread across multiple institutions, sites, or countries. Distributed ledgers inherently lack a central administrator and centralised data storage. One example of a distributed ledger is the blockchain system.

•     Machine learning

Machine learning utilises Artificial Intelligence (AI) to provide systems with the ability to automatically learn and revise from experience, without the need for explicit programming. Machine learning typically focuses on the development of computer programs which can access data, using it to learn.

•       Mass payment

Mass payment is the method of paying multiple recipients simultaneously through an online transaction. In place of inputting each recipient’s payment details separately, users can upload a document containing all the relevant data. Alternatively, a mass payment Application Programming Interface (API) can be used.

•          Merchant aggregator

A merchant aggregator, sometimes called a payment aggregator or simply known as an aggregator, is a service provider that allows merchants to take payments without having to set up a merchant account. Essentially, aggregators accept payments on behalf of merchants.

•     Micropayment

Micropayments are financial transactions typically involving a very small amount of money. Micropayments usually occur online and, depending on who the provider is, are defined as a transaction less than £20. Micropayments are becoming increasingly common, with most companies and websites now accepting them.

•       Mid-sized full service banks

Mid-sized full-service banks are generally defined as having fewer than 10 million customers, with a limited number of physical branches. Mid-sized banks usually operate regionally or nationally and with little to no international presence.

•          Multi-factor Authentication (MFA)

Multi-factor Authentication, also known as MFA, is a type of security system that requires a user to verify their identity through more than one method of authentication. Most typically, you will see this in use as Two-Factor authentication whereby a user will enter the password and then need to enter a code (or similar) from their phone.

•     Multi-sided business model

A multi-sided business model, sometimes referred to as a two-sided market, is one in which a business grows its primary user-base while generating revenue through another customer group. A good example of this type of business are social media platforms, where their main user base uses the platforms for free, while companies pay to advertise their product/service to the user base.

•       MVP (Minimum Viable Product)

The Minimum Viable Product (MVP) is an early stage when developing a product that sees it released with the bare minimum functions to satisfy early adopters and allow them to provide feedback and testing for the next stage of product or service development. It is an attempt to reduce the time spent developing technologies before release, instead operating in a lean and dynamic way.

•          Near-field communication (NFC)

Near-field communication (NFC) is a technology that allows communication between two devices when they are touching or within close proximity with each other. An example of this would be contactless payments, or transferring an image between a mobile and desktop by touching them together. NFC is secure due to the need to be within a few centimetres distance in order for the devices to communicate.

•     Non-bank brands

Non-bank brands are organisations that may have some aspect of a financial institution; such as lending money, investments or currency exchange, but do not have a full banking licence. Often, their parent companies are major players in other industries which have strong brand authority.

•       Online investment platforms

Until now, the corporate loan and bond market has remained largely untransformed by technological innovation, but online investment platforms are now making this asset class accessible to a wider investment audience.

•          Open banking/PSD2

Open Banking is a term that references the practice of sharing financial information securely, and in a way in which the customer approves of. This is achieved through use of open APIs, which enable developers to build applications and services. This allows users to share data such as spending habits and payments with authorised providers such as budgeting apps, other banks and challenger banks.

•          Open source software

The term “open source” refers to something people can modify and share because its design is publicly accessible.

•     P2P platform lending

Peer-to-peer platform lending, also known as P2P lending or crowdfunding, is the practice of lending money to businesses or individuals over an online platform that matches lenders with borrowers. Since most of these platforms run online, it often allows them to run with lower overheads and costs than typical financial institutions.

•       P2P transactions

Peer-to-peer (P2P) transactions are the transmission of funds from one person’s bank account or credit card to another individual’s bank account via the internet, most often through a mobile phone. The increased popularity and acceptance of online banking and e-commerce has meant increased use or person-to-person payments.

•          P2P transfer apps

Peer-to-peer (P2P) transactions transfer apps allow people to send and receive money with ease. They connect to your bank account and quickly transfer money whenever someone requires it.

•     PaaS

Platform as a Service (PaaS) is a cloud computing model whereby an external company provides an organisation with a platform and an environment which allows them to build applications and services over the internet. PaaS gives developers the tools and services required for code to be deployed efficiently. They are designed to avoid the cost and complexity of building and maintaining the platform themselves.

•       Passwordless authentication

Passwordless authentication is a method of user verification where the user does not need to login to an application or website with a password. Instead, the user logins using a token delivered via text or email, fingerprint, magic link, or some other manner. This enhances security as it avoids the user using the same password for every application.

•          Payment gateway

A payment gateway is a platform or service that protects and identifies fraud for an online or offline business. A payment gateway sends payment information securely from a website or application to the payment network for processing and authentication, before returning the response to the website.

•          Proof of Concept (POC)

Proof of Concept (POC) is a kind of demonstration designed to illustrate that a theory or concept is viable, with the potential for real-world application. It’s a protype designed to determine feasibility though it does not represent deliverables. POC is also known as proof of principle.

•     PropTech

Property Technology, referred to as PropTech, is the implementation of technology in the real estate industry. It refers to any technology that has been created in response to a problem or opportunity in the property industry.

•       Real-time information discovery

Real-time information discovery refers to the sifting through the ever-growing mass of real-time public data with the purpose of identifying and determining the significance of breaking events through their digital signatures as they happen.

•       RegTech

Regulatory technology, sometimes known as RegTech, is the use of information technology within the financial services industry to enhance the regulatory processes. Within RegTech, the main functions include compliance, reporting, and regulatory monitoring amongst others. RegTech largely consists of companies using cloud computing technology to help comply with financial regulations more efficiently and cost-effectively.

•          Regulatory technology

Regulatory technology, sometimes known as RegTech, is the use of information technology within the financial services industry to enhance the regulatory processes. Within RegTech, the main functions include compliance, reporting, and regulatory monitoring amongst others. RegTech largely consists of companies using cloud computing technology to help comply with financial regulations more efficiently and cost-effectively.

•     Robo advisor

Robo advisors are a new class of financial advisor that help provide financial assistance and advice or investment management using computer algorithms and advanced software. Normally, these robo advisors require little to no human intervention and are used across investment portfolios, tax optimisation and more.

•       SaaS

Software as a Service (SaaS) is a cloud based technology that uses the internet to deliver an application which is owner, managed and developed by an external party. Normally run on a subscription basis, the software is usually not installed on the user’s device.

•          Seed accelerator

Start-up accelerators are programs that support early-stage, growth based start-up companies through financing, business education, networking and mentoring. These programs are normally time limited and finish with a pitch type event to a larger group of investors. Accelerators attempt to compress years’ worth of experience into a few months to help companies grow fast.

•     Seed money

Seed money or seed capital is the initial funding used to fund a new start-up company during its launch phase. Seed money may be from an entrepreneur’s personal savings, an individual investor or a firm, and is normally gained in return for an equity stake in the new business.

•       Series A funding

When a start-up business has developed a track record of consistent revenue, an established user base, and other performance indicators, they may decide to opt for a Series A funding. Series A funding is the first round of funding past the seed stage of investment, whereby the entrepreneur has developed a business model that will generate a long-term profit. Because it is the first round of funding, it is usually the first time that ownership of a company is offered to external investors.

•          Series B funding

A Series B round of funding is used to take a start-up company past the development stage of a business into one of expanding market reach. Typically, a Series B funding is used to grow the business to meet levels of demand by acquiring new talent, processes and platforms.

•     Shared platforms

A shared platform is an emerging technological model whereby organisations strategically collaborate on a digital project to reduce costs, improve compliance, and improve the customer experience. Examples of shared platforms include fraud, trade finance, and regulatory reporting.

•       Sharing economy

The sharing economy is a peer-to-peer based economy where the acquisition and provision of goods and services is shared amongst a community. The sharing economy is forcing traditional financial services and products to change to meet new wants in the market such as peer-to-peer lending.

•          Single sign-on

Single sign-on (SSO) is an authentication process that allows a user to access multiple applications with one set of login credentials. This service authenticates the actions of the end user for all the applications to which the user has been granted rights, eliminating further prompts when the user switches applications during the same session.

•     Smart contract

A smart contract is a self-executing piece of code that allows the processing and verification of a transaction. Typically, a smart contract runs on a decentralised ledger such as a blockchain, which monitors and enforces the contract.

•       Smart money

Smart money is investments or transactions that are made by people who have expert knowledge of financial markets. This capital is primarily controlled by market leaders, funds, central banks, investors and other financial professionals.

•          Social finance

Social finance is a collection of approaches to managing money, where the primary objective is to positively impact society or the environment. This can include investing or lending money to social enterprises, charities and co-operatives who partake in social and environmentally conscious activities.

•     Specialist banks

Specialist banks, sometimes referred to as niche banks, offer a limited range of products or target a specific market or type of customer. They often have limited physical presence, instead relying on third-party distribution channels and a small customer base.

•       Split payment

Split payment is a multi-payment method that allows goods or services to be paid for using more than one payment method, for example, using a debit card and cash to pay for goods. Retailers typically allow split payments in store. However, they are rarely permitted for online transactions.

•       SRI (Stanford Research Institute)

Headquartered in Menlo Park, California. Stanford Research Institute (SRI) is an independent, non-profit research centre that utilises advanced research and development (R&D) to service governments, businesses and private organisations.

•          Start-up accelerator

A start-up accelerator, also known as a seed accelerator, is a program specifically designed to help facilitate growth in new businesses. These programmes provide co-working spaces, professional networks, mentoring, workshops and advice from experts over a set period of time.

•     Start-up company

A start-up company is a new business venture, started by entrepreneurs, that is in its first stages of operation typically with a fast-paced, forward-thinking approach. The primary objective is to build and validate a scalable business model; however, due to limited initial revenue and high costs, many fail without additional funding from venture capitalists.

•       TES

A business can be defined as a ‘technology enabled service’ if it is one which uses technology to better deliver the service it provides. For a TES, technology is the primary input, as opposed to labour.

•          Tokenisation

Tokenisation is the method of replacing sensitive data with unique identification symbols, phrases or words, referred to as tokens. This process retains all of the sensitive information without compromising the security of the data. It can be used to enhance e-commerce transaction security without needing to incur additional costs for industry compliance and government regulation.

•     Unicorn company

The term ‘unicorn’ was popularised by venture capitalist Aileen Lee and is used to define a start-up company with a valuation of over $1 billion. It refers to the rarity of a company reaching this valuation, similarly to the mythological creature. Recently the term ‘super-unicorn’ has been used to describe companies with a valuation of more than $100 billion.

•       VC (Venture capital)

Venture capital (VC) is a cash injection provided to start-up companies and small businesses that appear to have high growth potential. Venture capital typically comes from investors, investment banks or other financial institutions in exchange for equity in the company.

 

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