Fintech is democratizing at a brisk pace. It has invaded the financial press and will soon be on the program for CFA candidates. But when we talk about FinTech, the terms used are sometimes confusing.
To help you better understand the world of FinTech, the industry where finance and technology intertwine, here is a small lexicon (not exhaustive) terms regularly used in this environment:
1. API ( Application Programming Interface )
An API (application programming interface) is an interface that allows two software or systems to communicate with each other, which simplifies the exchange of data.
“A programming interface is a clearly defined frontage through which software provides services to other software. ( Source: Wikipedia )
APIs are used in particular for Open Banking.
2. Big Data
The Big Data (big data) means “data sets become so large that they exceed the intuition and human capacity for analysis and even those of conventional computer tools. ” (Source: Wikipedia)
The Big Data refers to the study of these data in order to identify correlations or trends that are not visible with traditional analysis process.
To discover the potential of Big Data in a rather fun way, read Everybody Lies: What the Internet Can Tell Us About Who We Really Are by Seth Stephens-Davidowitz.
[I warn you, after reading this book, you may never want to use Google again. And it’s a very good thing!!!
Use DuckDuckGo or Qwant. Otherwise, you will at least pay attention to what you search via Google …]
The Bitcoin is the first cryptocurrency which has been founded in 2009 by an unknown person using the name Satoshi Nakamoto as a pseudonym.
It is a decentralized virtual currency that does not depend on any central bank.
It relies on a blockchain which aims to create a secure and decentralized peer-to-peer payment.
The blockchain is the technology behind the creation of Bitcoin and subsequently other cryptocurrencies (Ethereum, etc.).
The blockchain is a technology: 1. storage and transmission of information, 2. transparent, 3. secure, and 4. functioning without central control body.
A blockchain is a secure and distributed database: it is shared by its different users, without intermediaries, which allows everyone to check the validity of the chain.
5. cloud computing (cloud computing)
The cloud is “access via a telecommunications network, on-demand, and self-service, in shared computing resources configurable.
It is, therefore, a relocation of the IT infrastructure. ( Source: Wikipedia )
The cloud has made possible the analysis of big data and the remote use of applications in SaaS(Software as a service) mode.
6. Crowdfunding ( crowdfunding )
The crowdfunding means “all the tools and methods of financial transactions that involve a large number of people to finance a project.” (Source: Wikipedia )
This mode of financing with the “crowd” (the Net surfers) is done without the intervention of the traditional intermediaries of the financing ( banks ).
7. Crowdlending (Online loan)
The crowdlending is a type of participatory financing ( crowdfunding ) based on the loan.
When talking about crowdlending, “we are referring to the loan platforms, specially designed for crowdfunding. “
The borrower addresses, through a web platform, a multitude of lenders who will participate at their best.
“Cryptography is one of the cryptology disciplines that strives to protect messages (ensuring confidentiality, authenticity, and integrity) by often using secrets or keys. ” (Source: Wikipedia )
Cryptography ensures the security of blockchains as well as data from other FinTech applications.
The cryptomonads based on cryptography.
A cryptocurrency (or virtual currency) is an “electronic money and peer-to-peer, based on the principles of cryptography to validate transactions and the generation of the currency itself.”
The most famous crypto coins are Bitcoin and Ether ( Ethereum ).
” Cybersecurity means all the tools, policies, security concepts, security mechanisms, guidelines, risk management methods, actions, training, best practices, safeguards and technologies that can be used to protect the cyber environment and organizations and users.
Cybersecurity is about ensuring the availability, integrity, and confidentiality of data.
The Ethereum is a blockchain created by Vitalik Buterin and funded by ICO ( Initial Offering Corner ) in July 2015.
The cryptocurrency associated with Ethereum is the ether.
This blockchain has enabled the creation of smart contracts, which differentiates it from that of Bitcoin.
12. Alternative Finance ( Shadow Banking )
The alternative finance, more known as the shadow banking, shadow banking and “shadow banking system,” includes ” unregulated entities which, without being subject to a regulatory bank, conducting activities close banking. “
In the world of FinTech, these are mainly online peer-to-peer lending organizations ( crowdlending ).
To find out more: What is shadow banking?
“An incubator of businesses or startup accelerator is a support structure of business creation projects. “
The incubator can provide support in terms of accommodation, advice, and financing during the early stages of the company’s life. (Source: Wikipedia )
In the field of Tech and FinTech, two incubators are particularly well known. This is Startupbootcamp and Y Combinator.
14. Initial Coin Offering (ICO)
An ICO is a method of financing projects for new cryptocurrencies or linked to a blockchain.
An ICO is selling tokens to enthusiasts for the future of the newly funded project.
To put it simply, an ICO is a mix between crowdfunding and IPO (Initial Public Offering).
To learn more: Cryptocurrency: What is an ICO?
15. Disruptive innovation
According to Clayton Christensen, Harvard professor, a disruptive innovation is characterized by “massive and simple access to products and services that were previously difficult to access or expensive .”
A disruptive innovation is a breakthrough innovation, as opposed to incremental innovation that merely optimizes the existing one. (Source: Hub One )
“The assurance proposes to rely on digital and digital technologies to create value on the car, home, life savings and other professional guarantees products. ” (Source: Credit Purchase)
17. Artificial Intelligence ( AI )
The artificial intelligence is “the set of theories and techniques used to achieve machines able to simulate intelligence. “
Artificial intelligence, therefore, corresponds to a set of concepts and technologies rather than to an autonomous discipline. (Source: Wikipedia)
18. Internet of Things (Internet of Things)
“The Internet of Things (” Internet of Things ” or IoT) is the extension of the Internet of things and places in the physical world. “
IoT is considered the third evolution of the Internet, the Web 3.0.
The Internet of Things is partly responsible for an exponential increase in the volume of data generated on the network, at the origin of big data. (Source: Wikipedia)
19. Machine Learning
The machine learning (“machine learning”) is a field of study of artificial intelligence.
It concerns the design, analysis, development, and implementation of methods allowing a machine (in the broad sense) to evolve through a systematic process, and thus to fulfill difficult or problematic tasks by more conventional algorithmic means. (Source: Wikipedia )
20. Open Banking
The Open Banking is “Allowing through APIs to third parties involved in connecting to services in a simple and standardized way bank to develop their own applications.”
Basically, the Open Banking uses APIs to share information securely.
21. Open Source
“The open source designation, or” open source code “, applies to software (and now extends to works of the mind) whose license meets criteria established by the Open Source Initiative, i.e. the possibilities of free redistribution, access to source code and creation of derivative works. “
Made available to the general public, this source code is usually the result of collaboration between programmers. (Source: Wikipedia)
The RegTech is a sub-sector of the FinTech.
The goal of RegTech is to help “financial actors manage regulatory constraints in innovative ways to reduce costs. “
23. Robo Advisor (Robot-Advisor)
A robo-advisor (“robot-advisor” ) is a type of automated wealth management advisor who manages online portfolios with little human intervention.
The advice given by the robo-advisors is based on algorithms, the study of big data, and the evolution of the financial markets. (Source: Wikipedia )
24. SaaS ( Software as a service )
” Software as a service or software as a service (SaaS) is a commercial operating model of software in which it is installed on remote servers rather than on the user’s machine. ” (Source: Wikipedia )
Customers do not pay a license for a version, but use the online service freely or, more generally, pay a subscription.
25. Smart contracts (intelligent contracts)
A “smart contract ” is an “automated transfer of securities based on mutually agreed terms” that operates on a blockchain.
The smart contracts are standalone programs that automatically run the terms and conditions of a contract, without the need for human intervention once started.