Fintech is a complex system that is hard to understand, which is why there is a list of difficult terms and their meanings for you to read. It’s always a safe option to study up on a new program or approach before actually using it.
This list of glossary can help you a lot in adapting to the program easily.
Accelerators: A venture or scheme that promotes and aids the rapid growth of selected new small businesses.
Acquirer: A company that buys the rights to another company or business relationship. Acquirers are also financial institutions which buy rights to a merchant account which allows them to service and manage the merchant’s bank account.
Acquiring processor: Acquiring processors are the set of system that provide the connectivity to the networks or payment gateways to process transactions
Adverse media: Adverse media is a type of screening performed on individuals or businesses. To goal is to check for conviction or link to any criminal activity relating to financial crime (fraud, money-laundering, terrorism funding, etc.)
Anti-Money Laundering (AML) A set of laws, regulations, and procedures that aim at preventing criminals from disguising illegally obtained funds as legitimate income.
Artificial intelligence (AI): Artificial intelligence refers to the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions. The term may also be applied to any machine that exhibits traits associated with a human mind, such as learning and problem-solving. The ideal characteristic of AI is its ability to rationalize and take actions that have the best chance of achieving a specific goal.
Application Programming Interface (API): An application programming interface, or API, often acts as a mediator that enables a software program to interact with other software. In the context of trading for example, an API often refers to the interface that enables software to connect with a broker to obtain real-time pricing data or place trades.
A programmer writing an application program can make a request to the Operating System using API (using graphical user interface or command interface). It is a set of routines, protocols and tools for building software and applications.
Assets under management (AUM): Assets under management (AUM) refers to the total market value of the investments that a person or entity manages on behalf of clients.
In the calculation of AUM, some financial institutions include bank deposits, mutual funds, and cash in their calculations. Others limit it to funds under discretionary management, where the investor assigns authority to the company to trade on his behalf.
Overall, AUM is only one aspect used in evaluating a company or investment. It is also usually considered in conjunction with management performance and management experience. However, generally, investors can consider higher investment inflows and higher AUM comparisons as a positive indicator of quality and management experience.
Automated Clearing House (ACH): The Automated Clearing House (ACH) Network is an electronic funds-transfer system run by NACHA, formerly the National Automated Clearing House Association, since 1974. This payment system deals with payroll, direct deposit, tax refunds, consumer bills, tax payments, and many more payment services in the United States.
Authorization: Request from the acquirer to the issuer that the card has enough funds to cover a specific amount. The approval is sent from the processor of the acquirer to the processor of the issuer. An authorization must complete in 9000 milliseconds before it times out.
Automated reconciliation: The process of matching card transactions and outstanding documents for consistent, accurate and complete accounting.
Amazon Web Services (AWS): AWS is a secure cloud services platform, offering compute power, database storage, content delivery and other functionality to help businesses scale and grow.
BIN Sponsor: BIN Sponsors are institutions members of schemes (Visa, Mastercard etc.) and are authorized to issue cards. The BIN Sponsors are often used by Fintech companies to avoid becoming members of the schemes which might be a lengthy and costly process.
Bitcoin: Bitcoin is a digital currency that was created in January 2009. Also, known as a cryptocurrency, Bitcoins are not backed by any country’s central bank or government. They offer the promise of lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority, unlike government-issued currencies.
There are no physical bitcoins, only balances kept on a public ledger in the cloud, that – along with all Bitcoin transactions – is verified by a massive amount of computing power. Bitcoins are not issued or backed by any banks or governments, nor are individual bitcoins valuable as a commodity. Despite its not being legal tender, Bitcoin charts high on popularity, and has triggered the launch of other virtual currencies collectively referred to as Altcoins.
Bitcoin Wallet: A Bitcoin Wallet is a software program where Bitcoins are stored. Technically, Bitcoins are not stored anywhere; there is a private key (secret number) for every Bitcoin address that is saved in the Bitcoin wallet of the person who owns the balance. Bitcoin wallets facilitate sending and receiving Bitcoins and gives ownership of the Bitcoin balance to the user. The Bitcoin wallet comes in many forms; desktop, mobile, web and hardware are the four main types of wallets.
Blockchain: A blockchain is a public ledger that records all Bitcoin transactions, eliminating the need for a third party to process payments. Blocks, or the most recent transactions being recorded, are like an individual banking statement. Each completed block is added to the chain, and another block begins, forming the constantly growing blockchain..
Blockchain Wallet: A digital wallet that allows users to manage, monitor and conduct cryptocurrency. Blockchain Wallet is provided by Blockchain, a software company founded by Peter Smith and Nicolas Cary.
Blockchain operating system: An operating system that primarily uses blockchain as a support in the background. When a blockchain-based OS is installed on a device captures all commands and transactions from a user’s device but authenticating, executing, and recording them occurs on the blockchain.
BigTech: The major technology companies such as Apple, Google, Amazon and Facebook, which have inordinate influence.
Big data: The growth in the volume of structured and unstructured data, the speed at which it is created and collected, and the scope of how many data points are covered. Big data often comes from multiple sources and arrives in multiple formats.
Biometrics: Technology that aims to protect data and preventing data breaches. It is often defined as a method of data security used to prevent data breaches, such as credit card hacks. Biometrics uses any data that is physically unique to an individual that can prove identity, such as a fingerprint, rather than relying on passwords or PIN codes that can be more easily hacked.
BitPesa: BitPesa is a trading and universal payment platform in Africa. It facilitates sending and receiving payments to and from Africa. The services provided by BitPesa are especially of use to businesses dealing in the transfer of money to suppliers and distributors within and outside Africa.
Business Correspondent (BC)- A business correspondent is nothing but an approved bank agent offering terminal or micro ATM services to banks.
Card Personalization: The process used by card manufacturers to encode cardholder data on the chip and magnetic stripe, and also imprint on the physical card body.
Charge card: A card with a credit line from an issuing bank that has to be repaid in full at the end of the billing term — usually 30 days. Some software companies like Expensify adopt 1 day billing cycle to minimize risk.
Contactless card: A card that uses near field communication (NFC) or other radio-frequency transmission protocols to initiate payments with POS terminals.
Card Not Present: Card not present (CNP) is the description of a transaction during which the card wasn’t physically presented such as in the case of online transactions.
Card Verification Value: Card verification value (CVV) is a 3 digit number used for additional security of online transactions often found at the back of the card.
Clearing: The process of turning an authorization promise into actual movement of money until the transaction is settled.
Credit card: A card with a revolving credit line that can be repaid to the issuing bank in multiple installments and not necessarily at the end of the billing term. Any outstanding balances usually incur interest rate from the issuing bank.
Cryptocurrency: A digital or virtual currency that uses cryptography for security and is often difficult to counterfeit because of this security feature. Many cryptocurrencies are decentralized systems based on blockchain technology; a distributed ledger enforced by a disparate network of computers. A defining feature of a cryptocurrency, and arguably its biggest allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
Cryptocurrency exchange: A cryptocurrency exchange is any system that operates on the basis of trading cryptocurrencies with other assets. Like a traditional financial exchange, the cryptocurrency exchange’s core operation is to allow for the buying and selling of these digital assets, as well as others. A cryptocurrency exchange is also known as a digital currency exchange (DCE).
Crypto-token: Crypto-tokens represent a particular fungible and tradable asset or a utility that is often found on a blockchain.
Crypto-asset: Crypto-assets are digital assets which utilize cryptography, peer to peer networking, and a public ledger to regulate the generation of new units, verify the transactions, and secure the transactions without the intervention of any middleman.
Cloud computing: Cloud computing is the delivery of different services on external data centers and without direct management by the user. These resources include tools and applications like data storage, servers, databases, networking, and software.
Challenger banks: A challenger bank is a small bank that is threatens the rankings of large banks. The term includes any new or upcoming bank that has recently gained a license. In a nutshell, it is a small bank that is biting at the heels of the ‘big four’ or ‘big five’ banks.
Crowdfunding: The use of small amounts of capital from a large number of individuals to finance a new business venture. Crowdfunding makes use of the easy accessibility of vast networks of people through social media and crowdfunding websites to bring investors and entrepreneurs together and has the potential to increase entrepreneurship by expanding the pool of investors from whom funds can be raised beyond the traditional circle of owners, relatives and venture capitalists.
Crowdsourcing: Crowdsourcing involves obtaining work, information or opinions from a large group of people who submit their data via the Internet, social media and smartphone apps. People involved in crowdsourcing sometimes work as paid freelancers, while others perform small tasks on a voluntary basis.
Card-not-present fraud: Card-not-present fraud is a type of credit card scam in which the customer does not physically present the card to the merchant during the fraudulent transaction. Card-not-present fraud can occur with transactions that are conducted online or over the phone. It is theoretically harder to prevent than card-present fraud because the merchant cannot personally examine the credit card for signs of possible fraud, such as a missing hologram or altered account number.
Counter-terrorist financing: A group of laws and regulations that have been implemented to reign in the financing of terrorist activity. Under these policies, most financial institutions are required to fulfil many strict requirements regarding monitoring customers’ transactions and behavior, conducting proper due diligence, and maintaining appropriate records.
Chargeback: A chargeback is a charge that is returned to a payment card after a customer successfully disputes an item on his account transactions report. It is the processor of disputing a fraudulent transaction with the issuing bank.
Consensus protocol: Those protocols that create an irrefutable system of agreement between various devices across a distributed network, whilst preventing exploitation of the system. These protocols help to keep all the nodes on a network synchronized with each other, while providing an answer to the question: how do we all make sure that we agree on what the truth is?
Collaborative finance: A category of financial transaction that occurs directly between individuals without the intermediation of a traditional financial institution. This new way to manage informal financial transactions has been enabled by advances in social media and peer-to-peer online platforms.
Core banking: A centralized system established by a bank which allows its customers to conduct their business irrespective of the bank’s branch. Thus, it removes the impediments of geo-specific transactions. In fact, CORE is an acronym for “Centralized Online Real-time Exchange”, thus the bank’s branches can access applications from centralized data centres. Other than retail banking customers, core banking is now also being extended to address the requirements of corporate clients and provide for a comprehensive banking solution.
Certified Management Accountant (CMA): Certified Management Accountant is an accounting designation that signifies expertise in financial accounting and strategic management. This certification builds on financial accounting proficiency by adding management skills that aid in making strategic business decisions based on financial data. The Institute of Management Accountants (IMA) issues the CMA certification.
Common Reporting Standard (CRS): The Common Reporting Standard (CRS) is an information standard for the Automatic Exchange of Information (AEOI) regarding bank accounts on a global level, between tax authorities, which the Organization for Economic Co-operation and Development (OECD) developed in 2014.
Coinbase: Coinbase is a bitcoin broker that provides a platform for traders to buy and sell bitcoin with fiat money. In addition to its primary operation as a broker, Coinbase is also a bitcoin exchange and wallet provider.
Consumer Bankers Association (CBA): The Consumer Bankers Association (CBA) is a US trade organization representing financial institutions offering retail lending products and services. The CBA is a retail banking interest group; it also provides educational courses, industry research and federal and state-level representation on issues relating to consumer banking. It is recognized as a voice on retail banking issues in the nation’s capital and provide financial education programs and resources that help bankers stay on top of industry practices.
Cybersecurity: Cybersecurity is the protection of internet-connected systems, including hardware, software and data, from cyberattacks.
Cybercriminal: An individual who commits cybercrimes, where he/she makes use of the computer either as a tool or as a target or as both.
Debit card: A card that works with a prefunded bank account and immediately transfers funds from it.
Distributed ledger technology (DLT): A digital system for recording the transaction of assets in which the transactions and their details are recorded in multiple places at the same time. Unlike traditional databases, distributed ledgers have no central data store or administration functionality.
Digital native: An individual who was born after the widespread adoption of digital technology. The term digital native doesn’t refer to a particular generation but is primarily a catch-all category for children who have grown up using technology like the Internet, computers and mobile devices. This exposure to technology in the early years is believed to give digital natives a greater familiarity with and understanding of technology than people who were born before it was widespread.
Disaster-Recovery-as-a-Service: A cloud computing and backup service model that uses cloud resources to protect applications and data from disruption caused by disaster. It gives an organization a total system backup that allows for business continuity in the event of system failure. DRaaS is often offered in conjunction with a disaster recovery plan (DRP) or business continuity plan (BCP). The other name for DRaaS is business continuity as a service (BCaaS).
Disaster recovery site: It is a place that a company can temporarily relocate to following a security breach or natural disaster. The site is just one facet of the company’s larger disaster recovery plan.
Discount rate: Acquirers charge merchants in the form of a discount rate for handling card payments. Discount rates are charged from the transaction amount, so that card payments can be the same cost as cash payments to the consumers. In this case the interchange fees for the issuers are paid out of the merchant discount rate.
Decentralized Autonomous Organization (DAO)
An entity in a digital system facilitated by smart contracts. Smart contracts involve digital tools and protocols that help support specific transactions or other contract elements. The decentralized autonomous organization works with popular cryptocurrency and digital ledger operations that many world governments and businesses are moving toward for more transparency and for evolving anti-corruption innovations.
DASH: A peer-to-peer cryptocurrency that was forked out of Bitcoin to offer faster and more private transactions to users. It is also considered to be one of the first digital currency with a decentralized blockchain governance system. Dash is a blend word for Digital Cash and its currency symbol in the markets is DASH.
Data breach: An unauthorized access and retrieval of sensitive information by an individual, group, or software system. It is a cybersecurity mishap which happens when data, intentionally or unintentionally, falls into the wrong hands without the knowledge of the user or owner.
Distributed application: Software that is executed or run on multiple computers within a network. These applications interact in order to achieve a specific goal or task. Traditional applications relied on a single system to run them. Even in the client-server model, the application software had to run on either the client, or the server that the client was accessing. However, distributed applications run on both simultaneously. With distributed applications, if a node that is running a particular application goes down, another node can resume the task.
Domestic payment: Payments made within the geographical region of the issuer. It’s often the country, but some fintech companies define it more broadly on a currency level.
Electronic money: Electronic money (e-money) is a digitally stored record of monetary value held by an issuer for the purpose of making payment transactions. These are issued by EMI authorized to hold funds and issue e-money.
Electronic Money Institution: Electronic Money Institutions (EMI) are financial institutions granted a license to issue e-money by a local financial regulatory body like FCA (UK), BaFIN (Germany), and BNB (Bulgaria).
EMI agent: EMI agents are third-party providers registered with the local regulatory body for the purpose of selling or marketing services of EMIs without the permission to hold customer funds.
Ethereum: Launched in 2015, Ethereum is a decentralized software platform that enables smart contracts and distributed applications to be built and run without any downtime, fraud, control or interference from a third party. The platform is also the basis for its own virtual currency, Ether. Ethereum is not just a platform but also a programming language (Turing complete) running on a blockchain, helping developers to build and publish distributed applications. The potential applications of Ethereum are wide ranging.
Ethereum Classic: An open source, decentralized, blockchain-based distributed cryptocurrency platform that runs smart contracts. Based on the principle of “Code is Law,” smart contracts are self-executing autonomous digital applications that are capable of running on their own as programmed. Examples of such applications include systems that manage working of the automatic teller machines (ATM) and the bitcoin system.
Encryption: A means of securing digital data using an algorithm and a password, or key. The encryption process translates information using an algorithm that turns plain text unreadable. When an authorized user needs to read the data, they may decrypt the data using a binary key.
Encryption is an important way for individuals and companies to protect sensitive information from hacking. For example, websites that transmit credit card and bank account numbers should always encrypt this information to prevent identity theft and fraud.
Encryption and Security – Ensuring that no data is leaked as financial data is extremely sensitive.
EMV : The value of an investment at the end of an investment period. In private equity, ending market value (also called the residual value) is the remaining equity that a limited partner has in a fund.
In accounting, a company’s investments are reported as assets on its balance sheet. At the end of an accounting period, an accountant “marks” the securities to their current market price to arrive at the ending market value of the securities. The updated value is reported on the company’s financial statements by increasing or decreasing its investment account balance to record the positive or negative change in the securities’ market value over the period.
eIDV (electronic identity verification): The use of public and private databases to quickly confirm whether an individual is who they claim to be. eIDV uses personal information such as name, date of birth, Social Security number and address. The result of trying to confirm an individual’s identity could be a match, non-match, or partial match.
eCommerce: A business model that lets firms and individuals conduct business over electronic networks, most notably: the internet. Electronic commerce operates in all four of the following major market segments:
• Business to business
• Business to consumer
• Consumer to consumer
• Consumer to business
E-payment: Paying for goods or services on the internet. It includes all financial operations using electronic devices, such as computers, smartphones or tablets. E-payments come with various methods, like credit or debit card payments or bank transfers.
European Securities and Markets Authority (ESMA)
EU securities and markets regulatory body that sets out to ensure integrity, transparency, efficiency and orderly functioning of securities markets, as well as investor protection. ESMA fosters supervisory convergence amongst securities regulators, and across financial sectors by working closely with EBA and EIOPA.
European Banking Authority (EBA)
A regulatory body that works to maintain financial stability in the EU banking industry. It was established in 2010 by the European Parliament and replaced the Committee of European Banking Supervisors (CEBS).
e-Check: A form of payment made via the Internet, or another data network, designed to perform the same function as a conventional paper check. Since the check is in an electronic format, it can be processed in fewer steps. Additionally, it has more security features than standard paper checks including authentication, public key cryptography, digital signatures, and encryption, among others.
Fundamental Review of the Trading Book (FRTB)
A Basel Committee on Banking Supervision initiative to overhaul trading book capital rules, with the aim of replacing the current crop of measures under Basel 2.5 with a more coherent and consistent framework.
Facial Recognition: A biometric software application capable of uniquely identifying or verifying a person by comparing and analyzing patterns based on the person’s facial contours. Facial recognition is mostly used for security purposes, though there is increasing interest in other areas of use. In fact, facial recognition technology has received significant attention as it has potential for a wide range of application related to law enforcement as well as other enterprises. Facial recognition is also known as face recognition.
Financial Industry Regulatory Authority (Finra): A regulatory body charged with governing business between brokers, dealers and the investing public. Finra was created by merging the New York Stock Exchange’s regulatory committee and the National Association of Securities Dealers. The consolidation of these two regulators into Finra was meant to do away with overlapping or redundant regulation, and to reduce the cost and complexity of compliance.
Fintech Charter: Fintech Charters refer to the Office of the Comptroller of the Currency’s (OCC) new federal charters that will enable fintech businesses to operate nationwide under a single set of national standards, without needing to seek state-by-state licenses or joining with brick-and-mortar banks.
Fintech: A financial services sector that emerged in the 21st century. Essentially, fintech is any technological innovation in the financial sector. This can include advances in financial education, retail banking, investment and crypto-currencies. Examples of fintech include: Stock trading apps and websites, Peer-to-peer lending sites that open competition for loans, thereby reducing rates, Robo-advisor services that provide online, algorithm-based portfolio management, All-in-one online personal finance management, and Budgeting tools. Fintech has four categories of users: Business-to-business for banks, Business-to-business for banks’ clients, Business-to-client for small businesses, and Business-to-client for consumers. The fintech industry is growing rapidly, and its growth is expected to continue.
Financial Regulator: Financial Regulators are national bodies that regulate and supervise the financial services and payment providers on the market. They are members of the European Banking Authority.
FIX Protocol: Financial Information eXchange (FIX) is a vendor-neutral electronic communications protocol for the international real-time exchange of securities transaction information, which is useful to funds, investment managers, and firms. The FIX Protocol messaging standard transfers accurate and timely financial information concerning securities trades through and across security exchange houses. Its use enables users to make timely and accurate decisions. FIX has become the de-facto messaging standard for pre-trade, trade, and post-trade communication, as well as for U.S. regulatory reporting. It is compatible with almost every commonly used network technology. FIX Protocol, Ltd. owns and maintains the FIX Protocol.
GAFA (Google, Amazon, Facebook and Apple)Google, Apple, Facebook, and Amazon — the four most powerful American technology companies.
GDPR: The General Data Protection Regulation (GDPR) 2016/679 is a regulation in EU law on data protection and privacy for all individuals within the European Union and the European Economic Area. It also addresses the export of personal data outside the EU and EEA areas.
Gig economy: A labour market that is characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. This economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime career.
Global payment innovation (GPI) An initiative by SWIFT that aims to streamline and increase transparency of cross-border payments. The initiative introduces a multilateral service level agreement across banks to create a common standard for processing cross-border payments, which in turn will transform correspondent banking. Through the first of these service level agreements, corporate treasurers will gain same-day use of funds, have access to rich payment information which is transferred between parties to a transaction, and have greater transparency and predictability of fees, including FX costs.
Global Financial Markets Association (GFMA): A finance industry body which “joins together some of the world’s largest financial trade associations to develop strategies for global policy issues in the financial markets and promote coordinated advocacy efforts. The member trade associations count many of the world’s largest financial institutions as their members.” (according to their website). GFMA currently has three members: The Association for Financial Markets in Europe (AFME), the Asia Securities Industry & Financial Markets Association (ASIFMA), and, in the United States, the Securities Industry and Financial Markets Association (SIFMA).
Google Pay Google Pay is a mobile payments service that utilizes Near Field Communication (NFC) to initiate secure payments between Google devices and contactless POS terminals.
Hadoop: An open source distributed processing framework that manages data processing and storage for big data applications running in clustered systems. It is at the center of a growing ecosystem of big data technologies that are primarily used to support advanced analytics initiatives, including predictive analytics, data mining and machine learning applications. Hadoop can handle various forms of structured and unstructured data, giving users more flexibility for collecting, processing and analyzing data than relational databases and data warehouses provide.
Hard-fork: A radical change to the protocol that makes previously invalid blocks/transactions valid (or vice-versa) in blockchain. This requires all nodes or users to upgrade to the latest version of the protocol software. In other words, a hard fork is a permanent divergence from the previous version of the blockchain, and nodes running previous versions will no longer be accepted by the newest version. This essentially creates a fork in the blockchain: one path follows the new, upgraded blockchain, and the other path continues along the old path. Generally, after a short period of time, those on the old chain will realize that their version of the blockchain is outdated or irrelevant and quickly upgrade to the latest version.
Hybrid cloud: A cloud computing environment that uses a mix of on-premises, private cloud and third-party, public cloud services with orchestration between the two platforms. By allowing workloads to move between private and public clouds as computing needs and costs change, hybrid cloud gives businesses greater flexibility and more data deployment options.
Hyperledger: An umbrella project, which offers the necessary framework, standards, guidelines and tools, to build open source blockchains and related applications for use across various industries. Using the available artefacts under the Hypeledger project, a business can apply various available blockchain solutions and services to significantly improve the performance of their operations and the efficiency of their business processes.
International Organization for Standardization (ISO): An international standard-setting body composed of representatives from various national standards organizations. Founded on 23 February 1947, the organization promotes worldwide proprietary, industrial and commercial standards.
Initial coin offering (ICO): A type of fund raising that is primarily done by crowdfunding. In an ICO, a quantity of cryptocurrency is sold in the form of “tokens” (“coins”) to speculators or investors, in exchange for legal tender or other cryptocurrencies such as Bitcoin or Ethereum. The tokens sold are promoted as future functional units of currency if or when the ICO’s funding goal is met and the project launches. In some cases, like Ethereum the tokens are required to use the system for its purposes.
Initial Public Offering (IPO): The initial sale of stock issued by a company to the public. IPO is underwritten by one or more investment banks, who also arrange for the shares to be listed on one or more stock exchanges.
Initial token offering (ITO): An ITO distributes tokens, which are a digital unit designed to provide access to a system. Tokens are not designed as a store of value, instead they have programmable potential built in. In other words, new software can be programmed into them.
Identity verification: The automatic identification of living individuals by using their physiological and behavioral characteristics; “negative identification can only be accomplished through biometric identification”; “if a pin or password is lost or forgotten it can be changed and reissued but a biometric identification cannot”.
Insurtech: The use of technological innovations designed to squeeze out savings and efficiency from the current insurance industry model. Insurtech is a combination of the word’s “insurance” and “technology,” inspired by the term fintech. The belief driving insurtech companies and investments by venture capitalists in the space is that the insurance industry is ripe for innovation and disruption. Insurtech is exploring avenues that large insurance firms have less incentive to exploit, such as offering ultra-customized policies, social insurance and using new streams of data from internet-enabled devices to dynamically price premiums according to observed behavior.
International bank account number (IBAN): An international bank account number (IBAN) is a standard international numbering system, developed to identify bank accounts from around the world. Banks in Europe originally developed the system to simplify transactions involving bank accounts from other countries. An IBAN does not replace a bank’s own account number; rather, this is an additional number, with further information, which helps in identification for overseas payments.
Internet of Things (IoT): A system of interrelated computing devices, mechanical and digital machines, objects, animals or people that are provided with unique identifiers (UIDs) and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.
Intraday trading: The market in which securities are traded during regular business hours. These securities include stocks and exchange-traded funds (ETFs). Intraday also signifies the highs and lows that the asset crossed throughout the day. Intraday price movements are particularly significant to short-term or day traders looking to make multiple trades over the course of a single trading session. These busy traders will settle all their positions when the market closes.
Islamic Banking: A banking system that is based on the principles of Islamic or Sharia law and guided by Islamic economics. Two fundamental principles of Islamic banking are the sharing of profit and loss, and the prohibition of the collection and payment of interest by lenders and investors. Islamic law prohibits collecting interest or “riba.”
Issuer: Issuers are members of networks (Visa, Mastercard etc.) and are authorized to issue cards by setting up BIN programs. Issuers are either banks, electronic money institutions or payment institution. Issuer is often referred to a company, government, or organization that offers shares, bonds, etc for sale.
Interchange fee: Interchange is a fee paid from the scheme to the issuer to cover the costs of handling the transactions. The interchange fee is a strong revenue stream for card issuers.
International payment: Payments made outside the geographical region of the issuer.
KYB Business Know Your Business is a process performed by an issuer to comply with anti-money laundering regulations and frauds.
KYC: A standard protocol driven by regulators and market participants that ensures bodies know detailed information about their clients’ risk tolerance, investment knowledge, and financial position. KYC iniatives aim to protect both clients and firms.
Knowledge based authentication (KBA): A security measure that identifies end users by asking them to answer specific security questions in order to provide accurate authorization for online or digital activities. Knowledge-based authentication has become prevalent in many different types of network setups and across the Internet, where companies often ask users to answer these questions in order to gain access to personal, password-protected areas of a site.
Kickstarter: A funding platform where creators can share and gather interest on a particular creative project they’d like to launch. It’s entirely driven by crowdfunding, meaning that the general public (and their money) is what sends these projects into production.
Lendingtech : Lendingtech or lending technology is defined as a unique combination of primary information source, screening and underwriting policies/procedures, loan contract structure, and monitoring strategies/mechanisms.
Merchant: Merchants are legal entities allowed to accept card payments using virtual or physical POS terminals provided by Acquirers.
Merchant Bank: The bank that manages the account of a merchant where funds from transactions are accumulated.
Merchant Category Code(MCC) Code identifying the type of activity performed by the merchant which is often used to identify the type of transaction being performed.
Match rate: The percentage of users from a file that an on boarder is able to find and anonymously tag with data. As data onboarding becomes a core part of every marketer’s toolbox, knowing the match rate for your user set is critical for understanding the size of your online audience.
Merchant Discount Rate(MDR) is the rate charged to a merchant for payment processing services on debit and credit card transactions. The merchant must set up this service and agree to the rate before accepting debit and credit cards as payment.
Messaging commerce: Messaging commerce or conversational commerce is a term coined by Uber’s Chris Messina in 2015. The term refers to the intersection of messaging apps and shopping. Meaning, the trend toward interacting with businesses through messaging and chat apps such as Facebook Messenger, WhatsApp, Talk, and WeChat.
Matching systems: An electronic system that matches buy and sell orders for a stock market, commodity market or other financial exchange. The order matching system is the core of all electronic exchanges, used to execute orders from participants in the exchange.
Merchant Identification Number (MID). This unique code is similar to a bank account number. It’s used to identify the merchant while processing transactions.
Middleware: Middleware is the software that connects network-based requests generated by a client to the back-end data that client is requesting. It is a general term for software that serves to “glue together” separate, often complex and already existing programs. Middleware programs come in on-premises software and cloud services, and they can be used independently or together, depending upon the use case. While cloud providers bundle middleware into cloud services suites, such as middleware as a service (MWaaS) or integration PaaS (iPaaS), industry researchers note that many businesses still choose independent middleware products that fit their specific needs.
Middle office: The middle office is the department in a financial services company, investment bank, or hedge fund that manages risk and calculates profits and losses. A financial services company is logically broken up into three parts: The front office includes sales personnel and corporate finance, the middle office manages risk and IT resources, and the back office provides administrative, support, and payment services.
Manages the merchant’s switch configurations – Defines a sub-merchant ID for each merchant payment configuration. And, communicates with the payment switch using this ID to validate transactions.
Merchant’s transaction roles – defines limitations for merchant’s transactions. e.g the minimum and maximum amount a merchant can transact from a card in a day, restrict transactions from credit cards issued from a particular region, etc.
Manages the merchant’s 3D secure configurations – As discussed above, the payment gateway communicates with the card-network with the help of payment switch. It checks if the cardholder is enrolled for the 3DS, then the related MPI will then lookup in Card’s directory services and the returns response to the payment gateway.
Multi-currency card: A card that works with multiple bank accounts in different currencies and dynamically selects the account that matches the currency of the transaction thus avoiding exchange rates.
Needs analysis: A formal process focused on how a product addresses needs. It is not an official business development tool but is considered a valuable analytical technique to better gauge the marketability of a product or a service to a human consumer.
Near-field Communication(NFC) A short-range high frequency wireless communication technology that enables the exchange of data between devices.
Nostro reconciliation systems: An online, real-time system, designed to automatically reconcile incoming statements from a bank’s nostro accounts against internal general ledger statements, or directly against the general ledger database.
Non-reloadable Prepaid Card: A card that can be loaded only once. Non-reloadable prepaid cards are often used for gift cards and vouchers.
Non-reloadable Virtual Card: A card that can be loaded only once. Non-reloadable prepaid cards are often used for online gift cards and online vouchers.
The practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company’s own employees and staff.
Open banking: Open banking is a system that provides a user with a network of financial institutions’ data through the use of application programming interfaces (APIs). The Open Banking Standard defines how financial data should be created, shared and accessed. By relying on networks instead of centralization, open banking helps financial services customers to securely share their financial data with other financial institutions. Benefits include more easily transferring funds and comparing product offerings to create a banking experience that best meets each user’s needs in the most cost-effective way. Open banking is also known as “open bank data.”
Order management system (OMS): An electronic system developed to execute securities orders in an efficient and cost-effective manner. Brokers and dealers use order management systems when filling orders for various types of securities and can track the progress of each order throughout the system. An OMS is also referred to as a “trade order management system.”
Payment gateway: The front-end technology that reads payment cards and sends customer information to the merchant acquiring bank for processing. To learn more click here.
Passporting: Payment and electronic money institutions can passportize their rights to perform services outside of their national boundaries by passporting their license across other European Economic Area member states.
Paperless card: Any type of card that works with built-in expense management software that is in compliance with local regulation to throw away paper receipts and invoices after card transactions.
Prepaid card: A card that has a prepayment balance without being connected to a bank account. Prepaid cards are often not accepted by merchants for hotels, car rentals, online purchases and other business-related bookings.
Process Payments – makes a request to the payment switch to process payments and receives results and returns to the customer.
Processor is an organization contracted with the acquirer to process the credit card transactions.
Processing Bank : The bank that processes the transaction once a credit card number is entered.
Payment card industry (PCI) compliance: The technical and operational standards that businesses must follow to ensure that credit card data provided by cardholders is protected. PCI compliance is enforced by the PCI Standards Council, and all businesses that store, process or transmit credit card data electronically are required to follow the compliance guidelines.
Point of sale (POS): POS a critical piece of a point of purchase, is the place where a customer executes the payment for goods or services, and where sales taxes may become payable. It can be in a physical store, where POS terminals and systems are used to process card payments, or a virtual sales point such as a computer or mobile electronic device.
P2P: Peer-to-peer (P2P) lending enables individuals to obtain loans directly from other individuals, cutting out the financial institution as the middleman. Firms that facilitate peer-to-peer lending have greatly increased its adoption as an alternative method of financing. P2P lending is also known as social lending or crowdlending. It has only existed since 2005 but the crowd of competitors already includes Prosper, Lending Club, Peerform, Upstart, and StreetShares.
Policy management systems: Used to execute a number of core policy processes including rating, quoting, binding, issuing, endorsements, and renewals. It is the system of record for all policies that an insurance company has written. However, commercial and specialty lines insurance can be quite complex.
Politically exposed person (PEP) A politically exposed person (PEP) is a person who has a public status and functions. PEPs are usually subject to stricter measures due to a higher risk of potential involvement in corruption, bribery or money-laundering.
Processed markets: Processed markets are one where schemes process transactions directly without the presence of a national processor.
Processor: A processor is a software system connected to the networks that process all transactions for the Issuer. The link between a processor and an issuer is usually a configuration setup rather than an integration effort.
PSD2Second Payment Services Directive (PSD2) is a EU Directive by the European Commission that regulates payment services and providers within the European Economic Area and the European Union.
PSD2 AIS Account Information Service allows third-party providers to access existing banks and provide an aggregate view of accounts, balances and transactions.
PSD2 PIS Payment Initiation Service allows initiation of payments from third-party systems connected to bank accounts after user consent.
Quick response (QR) codes A type of 2D bar code that is used to provide easy access to information through a smartphone.
Qualified Security Assessors (QSA) are independent security organizations that are qualified to perform PCI Compliance audits.
Regtech: The management of regulatory processes within the financial industry through technology. The main functions of regtech include regulatory monitoring, reporting, and compliance.
Repurchase agreements: A form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day. For the party selling the security and agreeing to repurchase it in the future, it is a repo; for the party on the other end of the transaction, buying the security and agreeing to sell in the future, it is a reverse repurchase agreement. Repos are typically used to raise short-term capital.
Reference data systems: Reference data is a catch-all term used to describe counterparty and security identifiers used when making a trade. As opposed to market data the reference data is used to complete financial transactions and settle those transactions.
Reconciliation: The process of matching card transactions with receipts and invoices for consistent, accurate and complete accounting.
Refund: Return of funds for transactions that were already settled.
Revert: Withdraw of an authorization request. Often used with test authorization to ensure the card is valid and has a positive balance.
SSL- Secure Sockets Layer (SSL) is a standard security technology for establishing an encrypted link between a server and a client—typically a web server (website) and a browser, or a mail server and a mail client (e.g., Outlook).
Software-as-a-Service (SaaS): A software licensing model in which access to the software is provided on a subscription basis, with the software being located on external servers rather than on servers located in-house. SaaS is typically accessed through a web browser, with users logging into the system using a username and password. Instead of each user having to install the software on his computer, the user is able to access the program via the internet. Businesses commonly use SaaS in customer retention management, human resources, and procurement.
Secular market: A market driven by forces that could be in place for many years, causing the price of a particular investment or asset class to rise or fall over a long period of time. In a secular bull market, positive conditions such as low interest rates and strong corporate earnings push stocks prices higher. In a secular bear market, where flagging corporate earnings or stagnation in the economy leads to weak investors sentiment, stocks experience selling pressure over an extended period of time. A cyclical market, in contrast, is shorter in duration in its peak-trough-peak movements.
SWIFT: Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, SWIFT uses a standardized proprietary communications platform to facilitate the transmission of information about financial transactions. Financial institutions securely exchange this information, including payment instructions, among themselves.
Security token: A portable device that authenticates a person’s identity electronically by storing some sort of personal information. The owner plugs the security token into a system to grant access to a network service. Security Token Services (STS) issue security tokens that authenticate the person’s identity.
Service-level agreement (SLA): An SLA provides specific and measurable aspects related to service offerings. For example, SLAs are often included in signed agreements between Internet service providers (ISP) and customers. SLA is also known as an operating level agreement (OLA) when used in an organization without an established or formal provider-customer relationship.
Smart contracts: Self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism. They render transactions traceable, transparent, and irreversible. While blockchain technology has come to be thought of primarily as the foundation for bitcoin, it has evolved far beyond underpinning the virtual currency.
Safeguarded account: Safeguarded or pooled accounts are used by electronic money institutions to store customer funds.
Samsung Pay: Samsung Pay is a mobile payments service that utilizes Near Field Communication (NFC) to initiate secure payments between devices and contactless POS terminals.
Sanction lists: Sanction lists are shared between governments and regulators to identify people who have been involved in financial crimes for the purpose of fraud prevention and anti-money laundering control.
Scheme: Scheme or Networks (US term) are Mastercard, Visa, Amex and other networks that facilitate card payments.
Source of funds: The term relates to the origin of the funds that is subject of movement between a Financial Institution and a customer.
Scheme exchange rate: The spot exchange rate charged by the schemes for a given transaction, currency, and date.
Settlement: The actual movement of funds as part of the clearing process from an issuer to an acquirer.
Strong customer authentication: To improve the security of online transactions, schemes enforce a strong customer authentication (SCA) method that uses 2 of the following 3 things: something the user has (credit card), something the user knows (password), something the customer is (biometrics).
Transaction Discount Rate (TDR) is a charge taken by Payment Gateway as there fees or commission as specified by RBI, In simple terms, it’s payment gateway charges excluding taxes that.
Two-factor authentication (2FA) is a second layer of security to protect an account or system. 2FA increases the safety of online accounts by requiring two types of information from the user, such as a password or PIN, an email account, an ATM card or fingerprint, before the user can log in. The first factor is the password; the second factor is the additional item.
Terminal value: Determines the value of a business or project beyond the forecast period when future cash flows can be estimated. This allows financial models to value a business with a greater degree of accuracy.
Third-party providers: Third-party providers (TPP), service providers or often called Fintech companies that can be licensed under the PSD2 to manage electronic money, payment initiation and account information services.
Tokenized Card: A card that has it’s Primary Account Number (PAN) replaced with a token for the purpose of data protection. Apple Pay and other mobile payment services use tokenized cards to allow contactless transactions without the need of a plastic card.
Unicorn: A start-up company with a value of over $1bn.
Underbanked: Individuals that manage their finances through cash transactions instead of established financial services such as checking accounts, savings accounts, credit cards and loans.
Underwriting: The process by which an individual or institution takes on financial risk for a fee. The risk most typically involves loans, insurance, or investments. The term underwriter originated from the practice of having each risk-taker write their name under the total amount of risk they were willing to accept for a specified premium. Although the mechanics have changed over time, underwriting continues today as a key function in the financial world.
Unified Payment Interface (UPI): A smartphone application which allows users to transfer money between bank accounts. It is a single-window mobile payment system developed by the National Payments Corporation of India (NPCI). It eliminates the need to enter bank details or other sensitive information each time a customer initiates a transaction.
Unit Investment Trust (UIT): An investment company that offers a fixed portfolio, generally of stocks and bonds, as redeemable units to investors for a specific period of time. It is designed to provide capital appreciation and/or dividend income. Unit investment trusts, along with mutual funds and closed-end funds, are defined as investment companies.
Universal Market Integrity Rules (UMIR)
A set of rules governing trading practices in Canada. These rules are set out by an independent regulator, the Investment Industry Regulatory Organization of Canada (IIROC). UMIR were established to promote fair, equitable and efficient markets. Prior to the formation of the UMIR, each individual exchange was responsible for governing its trading practices. By making these practices universal, Canadian exchanges ensure equal fairness and improve investor confidence in all the exchanges.
Virtual card: A card that can be used for online transactions and doesn’t have a physical plastic card. Any type of card can be a virtual card: credit cards, debit cards, prepaid card etc
Venture capital: Financing that investors provide to start-up companies and small businesses that are believed to have growth potential. Venture capital generally comes from well-off investors, investment banks and any other financial institutions.
Vendor: The term used to describe fintech service providers as they work with financial service firms.
Volatility: A statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a “volatile” market.
Velocity limits: Velocity limits or card limits are scheme enforced limits on cards to prevent frauds, and are configured by the issuer when a card program is set up.
Wealth management: An investment advisory service that combines other financial services to address the needs of affluent clients. It is a consultative process whereby the advisor gleans information about the client’s wants and tailors a bespoke strategy utilizing appropriate financial products and services.
Whale: Individuals or entities that hold large amounts of bitcoin in cryptocurrency world.
Weak AI: Weak AI, or Narrow AI, is a machine intelligence that is limited to a specific or narrow area. Weak Artificial Intelligence (AI) simulates human cognition and benefits mankind by automating time-consuming tasks and by analyzing data in ways that humans sometimes can’t.
Wearable technology: A category of electronic devices that can be worn as accessories, embedded in clothing, implanted in the user’s body, or even tattooed on the skin. The devices are hands-free gadgets with practical uses, powered by microprocessors and enhanced with the ability to send and receive data via the internet. The rapid adoption of such devices has placed wearable technology at the forefront of the internet of things (IoT).
Wholesale banking: Banking services between merchant banks and other financial institutions. This type of banking deals with larger clients, such as large corporations and other banks, whereas retail banking focuses more on the individual or small business. Wholesale banking services include currency conversion, working capital financing, large trade transactions and other types of services.
eXtensible Business Reporting Language (XBRL)
A standard that was developed to improve the way in which financial data is communicated, making it easier to compile and share this data. eXtensible Business Reporting Language (XBRL) is a type of XML (extensible markup language), which is a specification that is used for organizing and defining data. XBRL uses tags to identify each piece of financial data, which then allows it to be used programmatically by an XBRL-compatible program. XBRL allows for easy transmission of data between businesses.
XRP: The cryptocurrency used by the Ripple payment network. Built for enterprise use, XRP aims to be a fast, cost-efficient cryptocurrency for cross-border payments.
Zero Basis Risk Swap (ZEBRA)
An interest rate swap agreement between a municipality and a financial intermediary. A swap is an agreement with two counterparties, where one party pays the other party a fixed interest rate and receives a floating rate. This particular swap is considered zero-risk because the municipality receives a floating rate that is equal to the floating rate on their debt obligations.