Understanding the Fintech Lexicon
The term Fintech, referring to Financial Technologies, has quickly become very popular with professionals in the financial sector as well as with individuals. But Fintech is much more than a fashion phenomenon, and now impact personal finance. This new trend of the banking and insurance sector also brings its share of new words.
The following list of definitions will help you to have a better understanding of Fintech, and all the technologies it refers to.
The term AI (Artificial Intelligence) includes a set of software, logic, calculations and philosophical disciplines that aim to get computers to perform functions previously perceived as being human specific, such as perceiving meaning oral or written language, learning, recognizing facial expressions, and so on.
API (Application Programming Interface) refers to a programming interface used to establish connections between software. It allows the exchange of data between different applications to enrich a software.
Big data is a term that describes the large volume of data — both structured and unstructured — that inundates a business on a day-to-day basis. But it’s not the amount of data that’s important. It’s what organizations do with the data that matters. Big data can be analyzed for insights that lead to better decisions and strategic business moves. (Source: SAS)
Bitcoin is a peer-to-peer, digital currency. It’s a decentralized payment system, which means that all bitcoin transactions are almost instantaneous (up to ten minutes), have minimal or no transaction fees, and can be made anonymously. (Source: Tearsheet)
Blockchain is essentially a decentralized way of keeping up with information — normally transactions, but it can be used for essentially any purpose. Although most people automatically believe blockchain and bitcoin are the same thing, the reality is that bitcoin is only a manifestation of blockchain. Blockchain is essentially the platform that enables bitcoin, as well as other cryptocurrencies, to exist.
A chatbot is a software capable of interacting with a system, via a platform or a messaging application. These chatbots can interface with one or more applications to get new functionality. Chatbots will offer automated answers, trying to meet the expectations of customers. There are two types of bots: those that operate within a pre-established framework defined by their creator and those who learn based on the exchanges they have (by using machine learning).
Coopetition is a neologism coined to describe cooperative competition. Coopetition therefore refers to a process that aims to cooperate in the longer term with competitors. Such a partnership often occurs on activities for which the actors do not have a competitive advantage and for which they perceive in the coopetition the possibility of savings. Traditional banks are increasingly relying on coopetition to benefit from innovations made by fintech companies.
Crowdfunding is a participatory financing system that raises funds directly from individuals through an online platform. Internet users pay a contribution to the project and receive a compensation defined by the creator of the operation. This system allows funds to be obtained without going through traditional actors such as banks.
A cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation. (Source: Investopedia)
Digital Wallet (or E-Wallet)
A digital wallet refers to an electronic device that allows an individual to make electronic transactions. This can include purchasing items on-line with a computer or using a smartphone to purchase something at a store. An individual’s bank account can also be linked to the digital wallet. They might also have their driver’s license, loyalty card(s) and other ID documents stored on the phone. The credentials can be passed to a merchant’s terminal wirelessly via near field communication (NFC). Increasingly, digital wallets are being made not just for basic financial transactions but to also authenticate the holder’s credentials.
This term has been used for several years to define the strategy of innovative companies, especially start-ups, who shake a traditional market with an original offer, based on new technologies or a new business model. The relevant market is undergoing a profound change.
Fintech (Financial Technology) is an industry composed of companies and startups offering financial services based on new digital technologies. Fintech companies offer service both to B2B and B2C, some even developing offers to traditional banks. They aim at niche activities and are characterized by their agility and their flexible business model, centered on the needs of the customers.
Insurtech refers to startups which independently or associated with large insurance companies, create new services and insurance offers 100% digital, and based on technology innovations, data collection and analysis.
Machine Learning is a method of Data Analysis that automates Analytical Model Building. Using algorithms that literately learn from data, Machine Learning allows computers to find hidden insights without being explicitly programmed where to look. (Source: SAS)
Open Banking refers to a concept in which banks share the data they have with other banking services. This new technological revolution makes it possible to link banks with a large ecosystem of financial services. Data sharing is often made possible by APIs (Application Programming Interface), programming interfaces that allow to link database with a tier program.
A robot-advisor is a type of automated wealth management advisor who manages portfolios online with minimal human intervention. The robot provides overall advice on the purchases and sales to be made based on algorithms and big data, leaving the customer the choice to carry out these operations.
A proof of concept (POC) is a concrete and preliminary experimental realization, short or incomplete, illustrating a certain method or idea to demonstrate its feasibility. A proof of concept is usually considered as an important step in the creation of a fully functional prototype.
XaaS (Anything as a Service) gather all the IT services directly accessible from the Internet and that are developed on the cloud computing business model. They are its very core and develop in parallel with acronyms ‘’as a Service ‘’ (aaS). The most famous of them are the SPI: Saas — Software as a Service, PaaS — Platform as a Service, IaaS — Infrastructure as a Service. Even blockchain can be implemented through BaaS — Blockchain as a Service on Microsoft Azure.