Fintech buzzwords
Digital banks/Neobank
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.
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.
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.
Specialist banks (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.
A multi-sided business model (two-sided market)
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 is 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.
A gazelle company
one which achieves a revenue growth of at least 20% annually. Alongside sales growth, gazelles are also commonly known for their fast employment expansion.
A start-up accelerator (a seed accelerator)
- 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
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.
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.
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.
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.
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.
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.
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.
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.
An Integrated Circuit Card (a Smart Car)
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.
Venture capital (VC)
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.
Software as a Service (SaaS)
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.
Platform as a Service (PaaS)
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.
Social finance
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.
An eCheck (or electronic check)
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.
Proof of Concept (POC)
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.
Passwordless authentication
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.
Split payment
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.
Robo advisors
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.
The sharing economy
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.
A payment gateway
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.
A smart contract
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.
A merchant aggregator (payment aggregator, aggregator)
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.
An application programming interface (API)
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.
Freemium (a combination of free and premium)
a strategy that offers a limited version of a product or service for free, with the option to access additional features for a fee.
The Internet of Things (IoT)
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.
Near Field Communication (NFC)
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.
Open banking/PSD2
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.
FinTech sandboxes
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.
3D Secure
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.
A data management platform (DMP)
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.
Infrastructure as a service (IaaS)
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.
An Initial Coin Offering (ICO)
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).
Multi-factor Authentication (MFA)
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.
Cryptocurrency
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.
An angel investor (a business angel, informal investor, angel funder, private investor, or seed investor)
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.
single sign-on (SSO)
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.
A shared platform
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
A business incubator
an existing company that offers support to a start-up business. This is commonly through the provision of office space, mentoring, networking opportunities.
A digital identity
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.
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.
Dual interface chip cards
credit or debit cards that are able to process transactions both contact and contactless, through a single embedded chip.
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.
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.
Blockchain
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.
Micropayments
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
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.
Smart money
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.
A digital wallet (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.
MVP (Minimum Viable Product)
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.
A banking licence
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.
Non bank brands
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.
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.
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.
Open source software
refers to something people can modify and share because its design is publicly accessible.
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.
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.
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.
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.
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.
Insurance Technology (InsurTech)
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.
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.
Deep data
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.
A digital fingerprint
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.
Property Technology (PropTech)
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.
Seed money (seed capital)
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.
Mass payment
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.
Tokenisation
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.
Cloudsourcing
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.
A geolocation
the physical location of an individual or digital device.
Peer-to-peer platform lending (P2P lending or crowdfunding)
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.
Datafication
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.
Know Your Customer (KYC)
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.
Regulatory technology (RegTech)
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.
Distributed Ledger Technology (DLT)
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.
Financial Technology (FinTech)
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.
A ledger
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.
A Series B round of funding
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
Electronic Identity Verification (eIDV)
uses both public and private databases in order to identify whether an individual is who they claim to be, in order to minimise fraud.
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.
A collaborative economy (a sharing economy)
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.