The FINTECH Alphabet (2/3)

When it comes to FinTech and Financial Services in general, the list of buzzwords can feel endless, especially with innovations popping up every few months or so.

To get you started on your jargon-busting catalogue of lingo, here's my own FinTech Alphabet; breaking down the jargon for easy understanding and easy application.

In case you missed it, you can catch up with Part 1 here and jump to Part 3 here.

H

Heatmap.

A heat map is a kind of matrix where risks are ranked based on their potential impact and their likelihood of occurring, which allows you to prioritise the risks that pose the greatest threat. What sets heat maps apart is that the severity of each risk is indicated by colour. Most risk heat maps use standard traffic colours to represent the level of the risks: green for low risk, red for high, and yellow for those that fall in between.

Horizon scanning.

Horizon scanning is used as an overall term for analysing the future: considering how emerging trends and developments might potentially affect current policy and practice. This helps policy makers in government and compliance teams in businesses to take a longer-term strategic approach, and makes present policy more resilient to future uncertainty. In developing policies and procedures, horizon scanning can help to develop new insights and to think ‘outside the box’.

I

Initial Public Offering (IPO).

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.

Internet Of Things (IoT).

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

J

J-Curve Effect.

The J curve represents a hypothetical short-term increase in a country's trade deficit that occurs immediately following a decline in the value of its currency.

Joint Venture.

When two parties (individuals or companies) come together to start a business, they form what’s known as a joint venture. As well as sharing ownership of the business, they share the returns, risks and governance that goes with it.

K

Know Your Customer (KYC).

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

Kalifa Review.

Ron Kalifa OBE carried out an independent review to identify priority areas to support the UK’s Fintech sector. The Kalifa Review outlines objectives for supporting the growth and adoption of UK Fintech, and for maintaining the sector’s reputation on the global stage.

L

Ledger.

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

Line of Credit.

A line of credit, or a revolving credit facility, is a form of finance that permits businesses to access additional funds on an ‘as needed’ basis. It’s a flexible form of business finance and much like an overdraft, it comes with a set maximum amount.

M

Minimum Viable Product (MVP).

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

Merchant Aggregator.

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

N

Near-field communication (NFC).

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

Non-bank brands.

Non-bank brands are organisations that may have some aspects 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.

O

Open Banking / PSD2 (Payment Services Directive)

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

Open source software (OSS).

Open source software (OSS) is software that is distributed with its source code, making it available for use, modification, and distribution with its original rights.

P

Peer-to-peer (P2P).

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

Point of sale (POS).

POS is the critical point of a purchase 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.

-

If you would like to join an ever-growing network of Financial Technologists, to be kept up to date with current and ongoing news, events and opportunities within the industry, you can register your interest here!

Liz. #FTWL