What is FinTech?
FinTech is the term used to describe disruptive technology and companies that are improving and automating the delivery and use of financial services.
The History of FinTech
The use of the term “Financial Technology” (FinTech) did not start with the crash of 2008 as most would logically conclude. It was used around as early as 1993 at Citicorp when they created the Financial Services Technology Consortium, established by Citicorp in 1993.
However, the Financial Technology or “FinTech” that we know today was mostly propagated by the crush of 2008. Everyone (except bankers!) initially recognized the need to shakeup the banking industry by reinventing the way business is done and changing the way customers handle money.
The need for reinventing and reimagining Banking was necessitated by the fact that banking was inefficient and inflexible.
Trivia: Online banking was first introduced in Britain by the Nottingham Building Society in 1983. (It was introduced in the United States in 1980 but abandoned in 1983).
5 Reasons why FinTech was able to disrupt financial services very quickly?
- Cynicism from banking executives highlighted in the way banks reacted to the initial disruption caused by FinTech 1.0
- FinTech has taken the banking industry, laden with legacy systems, and facilitated a lot of streamlining which has resulted in cost reduction and increased opportunity and efficiency.
- Unlike FinTechs which have the luxury of starting all over again, banks face severe consequences. As such, banks cannot fully and in real-time embrace the technological revolution that’s facilitating FinTechs.
- With their focus on singular use case solutions, FinTechs have the ability and opportunity to think narrow and deep.
- FinTech has leveled the playing field through the increase in financial inclusion by opening the door to financial services for less developed countries as well as access to more banking segments
The Complex FinTech Ecosystem
In 2021 FinTech companies and new tech solutions have managed to redraw the competitive landscape and blur the lines that define participants in the financial services sector.
FinTechs offer digital technologies that continue to reshape the value proposition of existing financial products and services.
The rise of FinTech has been heavily aided by disintermediation. In financial services, disintermediation refers to the withdrawal of funds from intermediary financial institutions, such as banks and savings and loan associations, to invest them directly.
The following financial services sectors have seen heavy to moderate disruption by FinTech and in 2021 will continue to be disrupted:
- Consumer Banking
- Funds Transfer
- Investment and Wealth management
- SME Banking
- Brokerage service
- Property & Casualty Insurance / Life Insurance
- Commercial Banking
- Insurance Intermediary
- Market operators & Exchanges
- Fund operators
- Investment Baking
FinTech 2.0 and the immergence of Fintegration and Co-opetition
Once the banks realized that FinTech represents a new revenue stream, they started to adopt a more opportunistic approach to dealing with financial technology innovation. What it really means in the long run is that banks are adapting to the changing financial services landscape.
The competition and startups precipitated by the rise of FinTech are also indirectly helping banks create better, more convenient products and services for their customers.
Fintegration is the integration of FinTech within banks. FinTech 2.0 necessitated the increased collaboration between banks and FinTechs. Banks have the compliance expertise, the the track record, and the know-how while FinTech comes up with great new customer experiences that need to scale. The main challenge of ‘fintegration’ is to preserve the acquired FinTech’s agility and innovation, while integrating it to the controls and assets of the bank.
Co-opetition refers to the scenario in the relationship between FinTech and banks where FinTech startups compete with classical banks but have to be close to them too in some cases. FinTechs end up benefitting from collaboration and competition with banks in the long run.
7 ways in which banks went on the offensive against FinTech:
- They acquired FinTech companies (e.g. Credit Sesame acquisition of Stack, BBVA acquisition of Simple)
- They launched their own FinTech subsidiaries (BankMobile from Customers Bank)
- They set up venture funds to fund FinTech services (e.g. BofA with Dropbox,Yodlee, Bill.com)
- They rebranded purchased FinTech services
- They established start-up programmes to incubate FinTech companies (e.g. Deutsche Bank Innovation Labs, Barclays Accelerator, Wells Fargo Startup Accelerator, SixThirty, Anthemis Foundry)
- They started to buy from and sell services to FinTech companies
- They engaged in joint partnerships with FinTech companies (e.g. HSBC and Tradeshift, Bizum in Spain
FinTech of the year 2020
In 2020 the following FinTech companies and innovations were recognized for offering the most innovation in the global financial services and technology industry as part of the 5th annual FinTech Breakthrough Awards program.
The best overall FinTech innovations 2020
- Best FinTech Startup: homelight
- Best Overall FinTech Software: numerated
- Best Overall FinTech Mobile App: ondot-systems
- Best Use of AI in FinTech: HSBC
- Best Use of Blockchain in FinTech: r3
- Best Overall FinTech Company: Chase wepay
The best consumer lending innovations 2020
- Best Consumer Lending Platform: opploans
- Best Consumer Lending Product: self-financial
- Best Consumer Lending Company: cunexus
- Best Overall Peer-to-Peer Lending Platform: moneypot
- Best Loan Origination Platform: bakerhill
- Innovation Award for Consumer Lending: Experian
The best business lending innovations 2020
- Best Business Lending Platform: fis-global
- Best Business Lending Product: precesion-lender
- Best Small Business Lending Solution: become
- Best Overall Business Lending Company: credibly
- Innovation Award for Business Lending: quckfi
The best wealth management innovations 2020
- Best Wealth Management Platform: charles-river-development
- Best Wealth Management Product: emoney-advisor
- Best Wealth Management Company: apex-clearing
- Innovation Award for Wealth Management: moonfare
- Best Robo Advisory Platform: bamboo
The best personal finance innovations 2020
- Best Personal Finance Platform. yolt
- Best Personal Finance Product: cit-bank
- Best Personal Finance Company: facet-wealth
- Innovation Award for Personal Finance: branch
- Best Financial Product Comparison Service: envestnet
- Best Personal Budgeting Service: afterpay
- Best Digital Mortgage Broker: mojo-mortrages
- Best Digital Mortgage Platform: simple-nexus
- Best Digital Mortgage Product: qualia
- Best Digital Mortgage Company: fiserv
- Digital Mortgage Innovation Award: lending-home
The best payments innovations 2020
- Best Consumer Payments Platform: paynearme
- Best Consumer Payments Product: razer-fintech
- Best Consumer Payments Company: splitit
- Consumer Payments Innovation Award: paykey
- Best Point of Sale Company: toast
- Best Small Business Payments Solution: honeybook
- Best Credit Card Payments Solution: i2c
- Best B2B Payments Platform: fundbx
- Best B2B Payments Product: ebury
- B2B Payments Innovation Award: vela
- Best B2B Payments Company: mypost
Best investments innovations 2020
- Best Retail Investment Platform: open-invest
- Best Retail Investment Company: fast-invest
- Best Social Trading Platform: ticker-tocker
- Best Stock Trading App: sofi
- Best Institutional Investment Platform. aurigin
- Best Institutional Investment Solution: halo-investing
- Best Real Estate Investment Platform: divvy-homes
- Best Trading Platform: ssc-technologies
The best consumer banking innovation 2020
- Best Consumer Banking Mobile App: paytm
- Best Digital Bank: bank-mobile
- Banking Innovation Award: kasasa
The best financial research and data innovations 2020
- Best Overall Analytics Platform: pico
- Best Predictive Analytics Platform: finnova
- Innovation Award for Analytics: transunion
- Best Risk Management Service: numerix
- Best Risk Management Platform: quantifi
- Best Data Visualization Solution: bmll-technologies
- Best Financial Research and Data Company: alpha-sense
The best banking infrastructure innovations 2020
- Best Banking Infrastructure Platform: jack-henry-and-associates
- Best Banking Infrastructure Software: trust-grid
- Best Banking Transaction Solution: banking-circle
- Best Open Banking API: bbva-open-flatform
The best fraud prevention and transaction security innovations 2020
- Best Fraud Prevention Platform: western-union
- Best Fraud Prevention Company: thetaray
- Fraud Prevention Innovation Award: nice-actimize
- Best Financial Transaction Security Platform: bottomline-technologies
- Best Financial Transaction Security Company: brighterion
- Innovation Award for Transaction Security: fraugster
- Best Overall Fraud Prevention and Transaction Security Company: risk ident
The best crowdfunding innovation 2020
- Best Crowdfunding Platform: smartlands
- Best Crowdfunding Company: crowdstreet
- Crowdfunding Innovation Award: fanvestor
The best InsurTech innovations 2020
- Best InsurTech Solution: john-hancock
- Best InsurTech Company: metromile
- Best InsurTech Startup: zego
- InsurTech Innovation Award: cover-genius
The best RegTech innovations 2020
- Best RegTech Solution: workiva
- Best RegTech Startup: ascent
- Best RegTech Company: bgl-corporate-solutions
- RegTech Innovation Award: moodyes-analytics
The best Cryptocurrency innovations 2020
- Best Cryptocurrecy Exchange: crypto-dot-com
- Best Cryptocurrency Wallet: curv
- Best Cryptocurrency Info Source: ipc
The best Procurement innovations 2020
- Best Procure-to-Pay Software: Yooz
- Best AP Solution: avid-exchange
- Best Overall eProcurement Software: go-procure
What is the difference between FinTech and TechFin?
“TechFin” refers to a technology company that embeds financial products and services on the basis of their existing tech solutions to make their own products more attractive. Classic examples of TechFin institutions include Google, Amazon, Fаcеbook and Apple (GAFA) in the United States, and Bаidu, Аlibаbа, and Tеnсеnt (BAT) in China.
Differences between FinTech and TechFin
|They embed financial services to make their own products more attractive BUT their business model does not depend on margin in those financial products and services||They embed technology to make their own products more attractive AND their business model depends on margin in those financial products and services|
|The TechFins let the banks deal with the compliance and regulation that come with the technology. Their interest lies in the distribution of the technology||The FinTechs have to deal with the compliance and the regulators themselves including the distribution of their innovations|
|TechFin is not after your money. It’s interested in your data. TechFins are considered data intermediaries||FinTech needs your data in order to make money. FinTechs are considered financial intermediaries|
|TechFins have the primary limitation of credit rist||FinTechs have the primary limitations of regulation, privacy and safety|
|Process first approach.||Technology first is the approach.|
|The incumbent, usually large banks participate.||The incumbent, usually large banks participate.|
|Improvise the existing process||Follow transformation in the process|
|Have generally a lower risk appetite||Do not hesitate in disrupting the existing process.|
|Amazon (US), Apple (US), Facebook (US), Google (US), Microsoft (US), Samsung (Korea), Baidu and Tencent (China), Vodafone (UK, India and Africa), and Uber (US)||Stripe (US), TransferWise (UK), Kaggage (US), N26 (DE), Revolut (UK), Credit Karma (US), Coinbase (US), Ripple (US)|
The state of FinTech during the corona pandemic
What impact has the Corona pandemic had on FinTech?
The corona pandemic has had a measurable impact on the digitization of banks and on developments in the FinTech sector.
- In the wake of the corona pandemic, customers of all ages who had not previously been digitally savvy suddenly learned how to use online banking, also because bank branches were suddenly closed.
- The pandemic has accelerated the transition to digital and contactless as companies have had to find new ways to serve and support customers. Commerce is rapidly shifting online, and cash is being shunned as a potential virus-spreader.
3 Reasons why the Corona pandemic exposes FinTechs to takeover dangers from Banks
- As a global economic slump looms, FinTechs could see reduced demand for consumer-facing innovations. Most FinTechs make a portion of their money on interchange fees.
- Digital banks that charge for their accounts will likely see a dip in subscription openings, especially amid a crackdown in travel. This will affect the likes of Monese, N26 and Revolut etc.
- If the looming global economic crisis spills into a recession, most investor expect B2C challenger banks to be an obvious target for opportunistic M&A, assuming valuations dip to a more affordable level.
The Corona pandemic will continue to weed out poorly run and structured FinTechs from the market
As the Corona pandemic drags on, the number of FinTech startups will decrease and in turn give momentum to the established companies able to cope up with the challenges.
The following are notable FinTechs that have not weathered the pandemic well.
|Kabbage||In April 2020, the small business lender Kabbage cut off credit to its small-business clients and laid off a huge number of its 500 US-based employees.|
|Revolut||Revolut lost eight executives between March and May 2020 in part due to the Corona pandemic and other systemic issues such as shady hiring practices, a toxic work culture, accusations of ad theft, fabricating data, money laundering, cultivating an exploitative workplace culture, and misplacing a £70,000 money transfer.|
|Robinhood||Trading outages on March 4, March 9, and May 18 2020 resulted in lawsuits over these crashes. Robinhood is accused of offering a “$75 goodwill credit” to customers in exchange of waiving their legal rights.|
|Lending Club||Lending Club announced that it was laying off 460 people, roughly 30% of its staff.|
|Monzo||Monzo customers registered 4.0 complaints per 1,000 banking/credit card accounts which is higher that traditional banks. This has led to a stagnation in growth.|
What does the Corona pandemic mean for FinTech funding?
Getting funding in the current market has proven difficult for startups. The Covid-19 pandemic has upended every industry resulting in a shrinking funding market.
As more investors opt to fund larger, more mature established players, early-stage FinTech startups will see fewer funding rounds winners. This trend has been going on since Q2 2020 as early-stage deals stated to show a crunch.
FinTech and the Cryptocurrency market
Alternative paymnts in FinTech also includes the development and use of cryptocurrencies such as Bitcoin. Over the years, cryptocurrencies have become a very popular alternative to traditional payment methods. However, they are yet to be used used in everyday life.
Reasons why a cryptocurrencies ecosystem has not been established:
- The biggest reason why cryptocurrencies are still far from being used in such a way is the fact that physical conditions are not adequate enough.
- The cryptocurrency industry still remains largely unregulated or poorly regulated. Their legal status differs from country to country.
- They are not widely known. Therefore, for them to become more accepted as a form of everyday payment, digital coins will require a change of mindset.
FinTech and Blockchain
Blockchain technology and Distributed Ledger Technology (DLT) enable transparency in transactions.
Although the terms “Blockchain” and “DLT” are often used interchangeably, there is a slight difference:
- DLT is a decentralized database managed by multiple participants, across multiple nodes.
- Blockchain is a type of DLT where transactions are recorded with an immutable cryptographic signature called a hash.
Top 4 Blockchain Startups that are disrupting the financial services industry in 2021
- Synaps – A joint venture between Symbiont and Ipreo. It focuses on automating and improving the global loan syndicate market using blockchain-based smart contracts.
- Bitpay – This US payment service provider allows businesses to accept and transact with Bitcoin and Bitcoin Cash as well as invest and exchange between cryptocurrencies and fiat currency.
- Request Network – A decentralized Ethereum-based network allowing users to perform transactions between each other, send or request payments, issue invoices, pay and receive money for online purchases and more.
- Ripple – A US payment solution that represents a distributed payment settlement system built on the blockchain and a shared public ledger called XRP ledger. The system serves both private users and organizations and banks, allowing them to settle money transfers and payments faster and cheaper.
An overview of the global FinTech Regulations
Below is a general look at global practices regarding the regulation and supervision of FinTech business models, products and services.
1. International bodies looking at the challenges that FinTec poses on traditional AML/CFT practices
International bodies such as the Financial Action Task Force (FATF) analyze the challenges posed by Fintech to the traditional AML/CFT practices and, then, adjusting their recommendation to address the perceived gaps.
Most Fintech activities outside the regulatory perimeter of financial supervisors are now subject to AML/CFT obligations by other authorities, which were helped by the broad range of activities covered by national AML/CFT legislation.
The FATF approach to Fintech identifies three areas of concern:
- Distributed Ledger Technology
- Digital Identification
2. Regulation of FinTech using existing frameworks
For regulators following a principles-based approach, extending the existing regulatory and supervisory framework to FinTech is consistent with the ‘same-services/activities, same risks, same rules’ or ‘technology-neutrality’ principle.
3. Banning FinTech products
Although very rare, the most common action taken by regulator has focused on these three types of FinTech products/firms:
- Cryptoassets (the asset class and the firms related to their creation and intermediation)
- Direct distribution of sophisticated financial products to retail users (binary options and contracts for differences)
- Screen, web or data scrapping (a technique to collect financial users’ transactional data)
4. Financial authorities have been implementing a variety of actions to assist those interested in implementing technological innovations in their markets, including developments by incumbent financial institutions, nonfinancial firms and start-ups.
Most of these actions can be classified into four sets:
- Setting up a dedicated Fintech unit or at least a direct channel for Fintech-related enquiries;
- Innovation hubs, conceived as a meeting place for authorities, financial institutions and entrepreneurs
- Setting up a dedicated Fintech unit or at least a direct channel for Fintech-related enquiries
- Innovation hubs, conceived as a meeting place for authorities, financial institutions and entrepreneurs
5. Regulatory Sandboxes
FinTech sandboxes are frameworks for testing new technologies in a controlled environment.
These regulatory sandboxes have become increasingly popular and are being actively promoted by some countries such as Singapore and the United Kingdom in particular, and the industry.
6. FinTech licensing
Some jurisdictions have introduced a new class of FinTech-related licenses. These licenses can fall within two large groups.
- A few jurisdictions have implemented their regulatory sandboxes by requiring unlicensed firms to apply for a specifically tailored license.
- Some authorities offer FinTech companies a permanent special license with less stringent regulatory requirements than those of standard financial licenses. The goal of these licenses is to allow new entrants to effectively compete with incumbent financial institutions while satisfying key elements of the standard licensing framework.
7. Cross-Border provision
Most jurisdictions forbid the cross-border provision of financial services if the provider is not authorized by a local supervisor.
- The European Union, including the EEA, which allows for full access in any of its members to financial institutions licensed in another, which is a feature known as ‘passporting rights’ and is consistent with the concept of a single EU-wide financial market.
- The Swiss banking and anti-money laundering regulations do not apply to FinTech companies that are domiciled abroad and offer their services into Switzerland on a pure cross-border basis.
Global Fintech Startup Ecosystem Rankings: Top Ecosystems
|#1||Silicon Valley||North America|
|#2||New York City||North America|
|#9 (tie)||Chicago||North America|
|#11||Los Angeles||North America|
|#15||Sao Paulo||South America|
|#17 (tie)||Jakarta||South-East Asia|
|#17 (tie)||Atlanta||North America|
|#19||Tel Aviv – Jerusalem||Europe|
|#21-25||Washington DC||North America|
The ranking above includes more than 100 metrics, which better capture the ecosystem factors that drive startup performance.
For the 2020 rankings specifically, Startup Genome’s broader Ecosystem Assessment Framework measured the following seven Success Factors:
- Market Reach
- Alternative Finance
- Alternative finance is a term used to describe financial products, instruments and tools that have been developed outside of the traditional financial services system. The best examples are peer-to-peer lending and crowdfunding.
- Angel investors
- An angel investor is an 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.
- Application programming interface (API)
- An application programming interface (API) is a set of routines, protocols, and tools for building software applications that essentially allows multiple systems or applications to ‘speak’ to one another which allows customisation of applications, depending on the needs of the user and can streamline day-to-day processes.
- Banking licence
- A banking license is the legal requirement for a FinTech company that wants to operate as 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.
- Big Data
- Big Data refers to both 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.
- Blockchain is a secure, always up-to-date directory in which digital transactions can be documented reliably and in a way that is understandable for the blockchain participants. 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
- Business incubators
- A business incubator is an existing company that offers support to new and startup companies to develop by providing services such as management training, mentoring, networking opportunities, or office space.
- Challenger banks
- Challenger banks are FinTech operations set up with the purpose of competing against other, larger and more established banking institutions. They 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.
- Cloud provider
- A cloud provider is a technology company that delivers a cloud computing service. This allows other companies to host their data remotely, accessing it only via the internet, as opposed to using a local server.
- Cloudsourcing is the combination of Cloud Computing and Outsourcing. It involves 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.
- Collaborative economy
- A collaborative economy (also known as a sharing economy) refers to a marketplace where consumers rely on each other instead of large companies to meet their wants and needs. Essentially, 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.
- Crowdfunding refers to a method of raising capital from the general public or through the collective effort of friends, family, customers, and individual investors. An individual or company submits a request, generally via the internet, for monetary donations from the general public. The money raised then goes towards funding a project or venture.
- Cryptocurrency is a virtual, decentralised currency, that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Its value is not controlled by a bank but is instead determined by supply and demand. It is considered a sub-class of crypto-assets e.g. Bitcoin.
- Data management platform (DMP)
- A single data management platform is 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.
- Data mining
- Data mining refers to the process going through data to find anomalies, patterns and correlations within large data sets and then using 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.
- Datafication is the technological process 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.
- Deep data
- Deep data refers to the collection and processing of data on a large-scale while retaining high quality and relevancy to come up with actionable information. Deep data is the relevant and actionable information that is gained when big data is analysed.
- Deep learning
- Deep learning refers to a part of machine learning dealing with algorithms inspired by the structure and function of the brain called artificial neural networks. It 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.
- Digital fingerprint
- A digital fingerprint is the condensed version of a larger data set that contains information about a user’s machine that has been collated to form a unique picture, or “fingerprint ,” of the user’s device 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.
- Digital identity
- A digital identity is 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.
- Digital wallet
- A digital wallet or E-wallet is a financial account that allow users to store funds, make transactions, and track payment histories on an electronic device. Some forms of digital wallet can also store other cards such as a driver’s licence and loyalty cards.
- 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 or a mobile app. It is used mostly for 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.
- Distributed Ledger Technology (DLT)
- Distributed Ledger Technology (DLT) is a network that offers a special form of electronic data processing and storage that utilizes a decentralized database where the participants in the network (called a distributed ledger) are allowed write and read authorization.
- Dual interface chip card
- A dual interface chip cards is a credit or debit card that is able to process transactions both through contact and contactless using a single embedded chip.
- 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.
- Electronic Identity Verification (eIDV)
- eIDV (Electronic Identity Verification) is the process of using computerized public and private databases in order to identify whether an individual is who they claim to be, in order to minimise fraud.
- Equity crowdfunding
- Equity crowdfunding refers to online offering of private company securities to a group of individuals to 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.
- An eCheck (or electronic check) is a form of electronic funds transfer that acts as a digital version of a paper check and is also known as an electronic check, online check, internet check, and direct debit.
- FinTech or Financial Technology refers to emerging companies and startups that develop innovations, software and infrastructure aimed at modernising, improving and automating the delivery of financial services while competing with traditional methods offered by legacy financial institutions.
- FinTech sandbox
- A FinTech Sandbox is testing programme tha enables banks and FinTech players to experiment with innovative financial products or services and new business models (that are not protected by existing regulations) within a well-defined space and duration. FinTech sandboxing allows companies to test their new offering before they can gain a full licence.
- Freemium (a combination of free and premium) is a strategy that offers a limited version of a product or service for free, with the option to access additional features for a fee.
- Gazelle company
- A Gazelle company refers to a high-growth company that has been increasing its revenues by at least 20% annually for four years or more, starting from a revenue base of at least $1 million. Gazelle companies are also commonly known for their fast employment expansion.
- A geolocation is the physical location of an individual or digital device.
- Hash code
- A hash code refers to the numeric value that aids in the identification of objects during equality testing. Hashing codes can also 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.
- An Initial Coin Offering os ICO is 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.
- Infrastructure as a Service or IaaS is an on-demand computing infrastructure, provisioned and managed over the internet whereby a company provisions hardware resources which are owned and managed by an external company. IaaS is often provided 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.
- Insurance Technology or InsurTech refers to 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.
- Internet of Things or IoT is a system of interconnected objects, devices, machines, gadgets, and more for the purpose of connecting and exchanging data with other devices and systems over the Internet. 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.
- KYC (Know Your Customer)
- Know Your Customer or KYC is the process whereby a business verifies the identity of the client or customer. 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.
- A ledger 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.
- MVP (Minimum Viable Product)
- The Minimum Viable Product (MVP) is an early stage version of a product 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.
- Machine learning
- Machine learning is part of artificial intelligence (AI) focused on building applications that learn from data and improve their accuracy without the need for explicit programming. Machine learning typically focuses on the development of computer programs which can access data, using it to learn.
- Micropayments are financial transactions that involve a very small amount of money.
- Multi-factor Authentication (MFA)
- Multi-factor Authentication or MFA refers to 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.
- 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 touching them together. NFC is secure due to the need to be within a few centimetres distance in order for the devices to communicate.
- A Neobank is a FinTech that operates exclusively online mostly through through mobile apps without traditional physical branch networks. Neobank 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 does not necessarily have its own banking licence but may instead be a partner of a traditional bank.
- Non-bank brands
- Non-bank brands are 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.
- Open banking
- Open Banking refers to practice of sharing financial information securely, and in a way in which the customer approves of 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.
- P2P platform lending
- P2P of Peer-to-peer platform lending is the practice of lending money to businesses or individuals over an online platform that matches lenders with borrowers without the involvement of financial institutions as middlemen.
- P2P transactions
- Peer-to-peer or P2P transactions are digital transfer of funds from one individual to another mostly via a mobile phone. The increased popularity and acceptance of online banking and e-commerce has meant increased use or person-to-person payments.
- P2P transfer apps
- P2P transfer app are mobile applications that allow users to send one another money from their mobile devices through a linked bank account or card.
- Platform as a Service or PaaS is 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.
- Proof of Concept (POC)
- Proof of Concept (POC) is 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.
- RegTech or Regulatory technology refers to 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.
- Robo advisor
- Robo advisors are digital platforms that provide automated, algorithm-driven financial assistance and advice or investment management with no human supervision.
- Seed accelerator
- A seed accelerator refers to a program that supports 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.
- Seed money
- Seed money or seed capital is 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.
- Series A funding
- Series A funding refers to the first round of funding after the seed stage of investment when a start-up business has developed a track record of consistent revenue, an established user base, and other performance indicators.It is usually the first time that ownership of a company is offered to external investors.
- Series B funding
- Series B funding refers to 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.
- Tokenisation is 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.
- Unicorn refers to a startup company with a valuation of over $1 billion. It refers to the rarity of a company reaching this valuation, similarly to the mythological creature.
- VC (Venture capital)
- Venture capital or VC refers to 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.
- A FinTech Zebra is a profit or non-profit startup that is focused on real-world problems, is socially responsible, articulates the value to the user, not just price. It strives to make an impact to the community, rather than the bottom-line.