(Nov 13): Fintech has given rise to a host of new terms. It is impossible to list all of them, but the following are some that are widely used in the banking world.

Anti-money laundering and countering the financing of terrorism (AML/CFT) measures are defined by the Financial Action Task Force (FATF), the international standard setter in this area. The Basel Committee on Banking Supervision regularly issues guidance to facilitate banks’ compliance with their obligations in this area.

An application programming interface (API) is a set of rules and specifications followed by software programs to communicate with each other, and an interface between different software programs that facilitates their interaction.

Artificial intelligence (AI) is defined as IT systems that perform functions requiring human capabilities. AI can ask questions, discover and test hypotheses and make decisions automatically, based on advanced analytics operating on extensive data sets. Machine learning is one subcategory of AI.

Big data is the large volume of data that can be generated, analysed and increasingly used by digital tools and information systems. This capability is driven by the increased availability of structured data, the ability to process unstructured data, increased data storage capabilities and advances in computing power.

Big tech refers to large, globally active technology firms with a relative advantage in digital technology.

Cloud computing refers to the use of an online network (“cloud”) of hosting processors to increase the scale and flexibility of computing capacity. This model enables convenient on-demand network access to a shared pool of configurable computing resources (for example, networks, servers, storage facilities, applications and services) that can be rapidly released with minimal management effort or service provider interaction.

Copy trading refers to trading strategies on platforms that allow users to automatically copy positions taken by a selected investor. Copy trading links a portion of the copying trader’s funds to the account of the copied investor. These strategies evolved from “mirror trading”, and both are categories of a broader phenomenon known as “social trading”, or the use of social network platforms to compare trading strategies.

Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people. It is often performed today via internet-mediated registries that facilitate money collection for the borrower (lending) or issuer (equity).

Cybercrime is when a computer system or component is the object of a crime (hacking, phishing, spamming) or is the facilitator of a crime (such as theft of information or money).

Cyber-risk, according to the definition given by the CPMI-IOSCO 2016 Guidance, is the combination of the probability of an event occurring within the realm of an organisation’s information assets, computer and communication resources and the consequences of that event for the given organisation.

A digital currency (or non-fiat currency) is an asset that only exists electronically and that can be used as a currency (means of payment, store of value, unit of account) although it is not legal tender. Digital currencies are often underpinned by distributed ledger technology (see below) to record and verify transactions made using the digital currency. These can include private currencies and digital versions of national bank currencies. Because of the use of cryptography techniques, a (large) subset of digital currencies is referred to as “cryptocurrencies”.

Distributed ledger technologies (DLT) such as blockchain are a means of recording information through a distributed ledger, that is, a repeated digital copy of data at multiple locations. These technologies enable nodes in a network to securely propose, validate and record state changes (or updates) to a synchronised ledger that is distributed across the network’s nodes.

Innovation accelerator is a partnership arrangement between fintech providers and central banks/supervisory agencies to develop use cases that may involve funding support and/or authorities’ endorsement/approval for future use in central banking operations or in the conduct of supervisory tasks.

Innovation hub is an innovation facilitator set up by supervisory agencies that provides support, advice or guidance to regulated or unregulated firms in navigating the regulatory framework or identifying supervisory policy or legal issues and concerns.

Insurtech (insurance and technology) uses technology innovations to obtain savings and efficiency from the current insurance industry model.

The Internet of Things (IoT) is the networking of physical devices, vehicles, buildings and other items embedded with electronics, software, sensors, actuators and network connectivity that enable these objects to (a) collect and exchange data, and (b) send, receive and execute commands.

Machine learning (ML) is a method of designing problem-solving rules that improve automatically through experience. Machine-learning algorithms give computers the ability to learn without specifying all the knowledge a computer would need to perform the desired task, as well as study and build algorithms that can learn from and make predictions based on data and experience.

Online lending platforms intermediate loans online, and may be operated by banks or non-banks. Some online lenders keep all or some of the loans they originate, while others sell or securitise them. Funding for loans may come from traditional sources, such as deposits ‒ if the lender is a bank; securitisations; private investors and capital raisings; and loans from banks. Additionally, funding may come from “peer-to-peer” arrangements that directly match lenders with borrowers via online platforms. Together with non-loan forms of finance such as invoice trading, these models make up the “fintech credit” category.

Mobile wallets replicate a physical wallet in a digital interface on a mobile phone. Customers can add credit and debit cards, as well as prepaid cards, gift cards and rewards cards to be stored and carried. This use case not only replaces physical plastic cards, but also allows those cards to be enhanced by additional services.

Neo-banks are newly created banks that offer mobile-only banking products and services using smartphone applications that serve as an alternative to traditional banking with bricksand- mortar branch networks.

Regtech (regulatory technology) is defined as any range of fintech applications for regulatory reporting and compliance purposes by regulated financial institutions. This can also refer to firms that offer such applications.

A regulatory sandbox is a controlled testing environment, sometimes featuring regulatory forbearance and alleviation through the use of legally provided discretions by the supervisory agency. The testing environment may involve limits or parameters within which the firms must operate (such as restrictions on the time a firm may operate in the sandbox).

Robo-advisers are applications that combine digital interfaces and algorithms, and can also include machine learning, in order to provide services ranging from automated financial recommendations to contract brokering to portfolio management to their clients, with limited human intervention or none. Such advisers may be standalone firms and platforms, or can be the in-house applications of incumbent financial institutions.

Security biometric services provide a security mechanism used to identify, authenticate and provide access to a facility or system based on the automatic and instant verification of an individual’s physical characteristics, such as fingerprints and retina patterns.

Smart contracts are programmable applications that, in financial transactions, can trigger financial flows or changes of ownership if specific events occur. Some smart contracts are able to self-verify their own conditions and self-execute by releasing payments and/or carrying out others’ instructions.

An intro to fintech terminology

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