The world of financial technology — also known as fintech — involves lots of buzzwords, jargon and often obscure terminology.
Here's a list of some of the industry's main lingo.
Fintech
Or financial technology is the industry known for championing software and technology in the financial sector. A very broad term, it includes anything from a bank ATM, to software used to help spot manipulation of securities markets.
Crpytocurrency
A digital currency that relies on cryptography to validate and secure transactions. There are different types of cryptocurrencies - bitcoin and Ether are among the best known.
Bitcoin
A digital - or crypto - currency that enables payment in a decentralised peer-to-peer (P2P) network not governed by any central authourity or middleman.
Blockchain
Software that first emerged as the system underpinning bitcoin. Also known as distributed ledger technology (DLT), it is a shared record of information that is maintained and updated by a network of computers rather than a central authourity. It is protected and secured by advanced cryptography.
Ethereum
A type of blockchain network. The bitcoin and Ethereum blockchains differ primarily in purpose and capability. While the bitcoin blockchain is used to track ownership of the digital currency bitcoin, the Ethereum blockchain can be used to build decentralised applications. The virtual currency associated with Ethereum is called Ether.
P2P Lending
Also known as social lending, peer-to-peer lenders run websites where borrowers can secure money directly from lenders bypassing banks.
Smart contracts
Software that runs on blockchain technology and can automatically enforce the terms of an agreement. A “smart bond”, for example would automatically make interest payments to investors.
Robo-advice
Financial advice given through the use of computer algorithms. Robo-advisors, also known as online investment managers, typically invest their clients’ money in portfolios made up of low cost exchange-traded funds.
Insurtech
Inspired by the term fintech, insurtech champions the use of technology to modernise and improve the insurance business.
Regtech
Or regulatory technology. The term refers to software and other technology aimed at helping financial services businesses comply with regulations efficiently and inexpensively, or regulators enforce rules.
Open banking
A term used to refer to the use of open APIs by banks to enable third party software developers to create applications and software using the bank’s data. APIs are application programming interfaces, a set of instructions and tools that enable software developers to create applications that can interact with another company’s systems. For example, by connecting to a bank’s API, a fintech startup could develop a mobile phone app that moves money in an out from the accounts of a bank’s customers, or simply lets them check their balance.
Underbanked/Unbanked
People or businesses that have little or no access to mainstream financial services. The World Bank estimates that there are 2 billion adults worldwide without access to formal financial services.
Financial Inclusion
Term used to refer to financial products and services aimed at providing more affordable and mainstream options to the underbanked. In fintech, this often involves taking advantage of technology, such as mobile phones, to offer cheaper services to those who have been traditionally overlooked by banks and other financial firms.
ICO
Initial Coin Offering, or a token sale. The process or event in which funds are raised for a new cryptocurrency venture and contributors receive tokens in return.
Equity-Crowdfunding
When people invest through a website in a company not yet listed on a stock exchange and receive back shares in the firm.
More generic terminology often heard in fintech spheres:
KYC
Or know your client/customer. A process to ensure businesses identify and verify the identity of their clients, for anti-money laundering (AML) purposes.
Encryption
The process of encoding messages. Once something has been encrypted, a key is required to turn that code back into useful data.
Omni channel
A retail model that integrates different purchasing methods for customers such as online, by phone or in store. Omnichannel banking, for example, means offering banking across those three methods.
Accelerators and Incubators
Organisations that select entrepreneurs or startups and offer them coaching, mentoring as well as exposure to potential clients and investors - often in exchange for an equity stake.
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