Often enough, people aren't sure what is meant by the word "Fintech." Fintech is a short form for 'financial technology'—something that has actually been around for a very long time. Simply put, Fintech refers to the technology that is driving innovation in the financial services industry. The term has become far more widely used in the last five years, with new terminology associated with Fintech also springing up.
New Fintech buzzwords, jargon, acronyms, and other basic fintech terminology are commonplace when talking about the industry. So we hope to explain, in clear terms, precisely what some of them mean in this exhaustive Fintech dictionary, which is broken up into the following sections:
- Trending fintech terms for 2022
- Banking and Payments fintech terminology
- Sales fintech terms
- Software & technology
Trending Terms for 2022
These terms have become increasingly important in the modern Fintech landscape, so we have separated them so they can be found quickly for those looking to brush up on where the industry is moving. They may qualify for the categories below them, but their increasing relevance has landed them in this fintech buzzwords section.
Alternative Financing: Financing options that fall outside of the traditional product stack offered by big banks.
Application Programming Interface (API): An intermediary set of protocols that enables two applications to communicate, and allows the creation of applications that access data and features of third-party services.
API Banking: A set of protocols that allows access to banking services by a financial institution via API. These banks provide secured and restricted access of their central bank systems to third-party systems to carry out certain functions.
Blockchain: A decentralized ledger technology that collects information into digital “blocks” that allow for easier and cheaper sharing.
Buy Over Time: This term was historically known as layaway. A customer can pay for the purchase monthly until the balance is paid.
Decentralized Finance (DeFi): is a blockchain-based that allows products and services to be made available on a decentralized public network.
End-to-End Platform: A software platform that covers every step of a process.
Pay in 3: This POS Financing term refers to separating a cost into three equal, usually interest-free, installments.
Pay in 4: This POS Financing term refers to separating a cost into four equal, usually interest-free, installments.
Tokenization: the process of replacing cardholder data with a random string of characters called Tokens to move sensitive data while minimizing the threat of fraud or identity theft.
Virtual Card: An electronic card that doesn’t physically exist, but provides users with 24/7 access to online, contactless payments through their smartphone.
White-Label Platform: A software platform that can be rebranded by a third party, allowing a bank or lender to put their stamp on a platform developed by a third-party Fintech firm.
White-Label POS Financing: A POS Financing program is branded for the lender or merchant and not by the fintech provider.
Banking and Payment Fintech Terminology
Account-to-Account (A2A): Payments that involve the transfer of funds between two accounts owned by a single party.
Accounts Payable (AP): Amounts due to vendors or suppliers for goods or services received.
Accounts Receivable (AR): Amounts owed for goods or services delivered that have not yet been paid for.
Automated Clearing House (ACH): An electronic network that coordinates automated money transfers and electronic payments. It is a way to move money between banks without using wire transfers, paper checks, card networks, or cash.
ACH Authorization: A payment authorization that gives the lender permission to electronically take money from your bank, prepaid card account, or credit union when your payment is due.
ACH Credit: A transaction pushing funds into an account.
ACH Debit: A transaction pulling funds from an account.
ACH Return: A credit or debit entry initiated by a Receiving Depository Financial Institution (RDFI) or ACH Operator that returns a previously originated credit or debit entry to the Originating Depository Financial Institution (ODFI) within the time frames established by the National Automated Clearing House Association (NACHA) rules.
ACH Reversal: An entry, (credit or debit entry) that reverses an erroneous entry. It must be made available to the RDFI within five banking days following the settlement date of the erroneous entry.
Address Verification Service (AVS): A security system that works to verify that the billing address entered by the customer is the same as the one associated with the cardholder’s credit card account.
Business-to-Business (B2B): A model where a transaction or business is conducted between one business and another, such as a manufacturer and retailer.
Business-to-Business-to-Business (B2B2B): A model where a business indirectly sells to another business through a middleman, such as a manufacturer sells to a wholesaler who then sells to a retailer.
Business-to-Business-to-Consumer (B2B2C): This is an indirect distribution—it is a model where a business accesses the consumer market through another business, such as IT services to bank to bank’s customers.
Business-to-Consumer (B2C): Also known as direct-to-consumer—it is a model where a business sells products or services to customers without a middleman.
Bank Identification Number (BIN): The term bank identification number (BIN) refers to the initial four to six numbers that appear on a payment card. This number identifies the institution that issues the card and is key in the process of matching transactions to the issuer of the charge card. It may also be referred to as an Issuer Identification Number (IIN).
Consumer Lending: These loans come from various places, including lending platforms and financial institutions, and provide financing for personal, family, or household purposes.
Consumer Loans: Any kind of loan that is made by a creditor to a consumer, such as mortgages, credit cards, auto loans, personal loans, or student loans.
Consumer-to-Business (C2B): A model where consumers provide a product or service to businesses. This is a rapidly growing model and often takes the form of brand sponsorships on social media.
Consumer-to-Consumer (C2C): A model where payments take place between two different consumer accounts for goods or services. This is done often through an online marketplace like eBay, Etsy, or Craigslist.
Closed-Loop Payment System: A system that operates without intermediaries, where the end parties have a direct relationship with the payments system.
Credit Bureau: A company that collects, researches, and maintains credit information, and sells that data to lenders, creditors, and consumers in the form of credit reports. The most recognizable credit bureaus are Equifax, Experian, and TransUnion.
Credit Score: A three-digit number that represents how likely a person is to pay back a loan based on their payment history. A higher score is better.
Digital Wallet: A software application used with a mobile payment system to facilitate electronic payments for online transactions as well as purchases at physical stores.
Funding Source: Any financial institution, bank, or other funding entity providing liquidity to accommodate various payment flows.
Good Funds: Funds considered equivalent to cash and guaranteed to be available upon demand.
Installment Loan: Installment loans can be commercial loans or personal loans that borrowers will repay with regularly scheduled payments or installments.
Interchange Fee: Fees charged to a merchant on transactions the issuing bank processes to cover payment processing, fraud protection, and authorization.
Issuer/Issuing Bank: Any financial institution (a bank or credit union), which offers a payment card (credit or debit cards) directly to consumers (or organizations) and is liable for the use of the card. This financial institution is also responsible for the billing and collecting of funds for purchases that were made using that card.
Know Your Customer (KYC): A regulated process of verification of a customer’s identity, including the collection of customers’ Proof of Identity (POI) and Proof of Address (POA) to prevent illegal or fraudulent activities.
Ledger: A book in which the monetary transactions of a business are published in the form of debits and credits.
Merchant: A retailer, or any other person, firm, or corporation that agrees to accept credit cards, debit cards, or both.
Origination: The process by which a consumer applies for a new loan, and the lender or card issuer processes that application.
Originator (ACH): The entity that starts an ACH payment transaction. The originator is the consumer, business, or government organization that initiates the payment process and is authorized to do so.
Peer-to-Peer (P2P): A decentralized platform where two individuals interact directly with each other, without intermediation by a third party. Instead, the buyer and the seller transact directly with each other via the P2P service.
Personal Identification Number (PIN): A confidential individual code used by a cardholder to authenticate card ownership for ATM.
Point-of-Sale (POS): The specific time and place where a retail transaction is completed.
Same-Day ACH: Delivery of available funds within the same business day.
Settlement: The movement of funds from one financial institution to another, which ultimately completes a transaction.
Underwriter: A party that evaluates and assumes another party’s risk for a fee.
Sales Fintech Terms
Annual Percentage Rate (APR): Refers to the yearly interest generated by a sum charged to borrowers or paid to investors.
Checkout Financing: Similar to point-of-sale financing, which refers to installment loans that are available at the point of purchase. In-store financing refers to loans obtainable at the POS in-store, checkout financing refers to loans offered during the merchant’s online checkout process.
Close: The final step of a sale wherein documents are filled out to finalize a purchase.
Consumer Financing: When a retailer has an option for the customer to finance a product using either the retailer's funds or the funds of a bank or lending company. Consumer financing will allow the buyer to purchase an item they would otherwise not be able to afford.
Conversion Rate: The rate at which an entity or platform is able to turn leads into buyers.
Customer Relationship Management (CRM): One of the many different approaches that allow a company to manage and analyze its own interactions with its customers.
Disbursed Funds: These are simply funds that have been transfered from one party's bank to a different party's bank.
Horizontal Market: A non-specialized market that covers a wide range of industries.
Installment Loans: These are loans that are paid back on a fixed plan. The plan outlines how much each installment will be and how many installments total. These loans are fixed-rate loans.
Interest-Free Loans: The borrower will not be charged any interest for the life of the loan.
Last-Mile Disbursements: This is getting money to its final destination and is always the most challenging part of the distribution chain.
Lead: Any potential consumer from whom a business has contact information, or a confirmed site/profile interaction
Letter of Intent (LOI): A document declaring the preliminary commitment of one party to do business with another. The letter outlines the chief terms of a prospective deal.
Point-of-Sale Financing: When the merchant offers their customers a consumer financing solution when the purchase is made to aid the buyer in purchasing a service or product.
Qualification: The process of determining whether a lead is likely to make a purchase, and how likely they are.
Qualified Lead: A lead that has gone through the qualification process through a sales/marketing professional or software platform.
Real-Time Lending: When a bank or lender has the ability to receive an application, assess risk, and immediately approve or deny the loan. The applicant will know the result right away.
Subprime Financing: These are loans that are given at a below prime rate. These are typically given to applicants with credit ratings that do not score high enough to get a traditional loan.
Software and Technology
Application Programming Interface (API): A computing interface that defines interactions between multiple software intermediaries.
Banking as a Service (BaaS): The supplying of complete banking processes that allows brands to easily embed financial services into their products without having to worry about building banking infrastructure or obtaining a license.
Encryption: The technique of scrambling sensitive data automatically in a terminal or computer before transmission for security purposes using an algorithm and key.
Loan Origination Software: Software used by lenders to generate and service a loan in front of the borrower.
POP (Point-of-Purchase): occurs when a consumer check is received at a point of sale and converted into ACH immediately.
Point-of-Sale (POS): occurs when a consumer initiates a payment, typically via card, at a point of sale.
Point-of-Sale Lending: This Is a convenient lending option that allows consumers to make purchases with incremental payments over time. POS lending may be offered by traditional banks, credit unions, or online lenders.
Software as a Service (SaaS): A software licensing and delivery model in which software is licensed on a subscription basis and centrally hosted.
Fintech has been a buzzword in the world of finance, and the market is maturing. In case you want to know how the fintech industry is evolving, have a look at this infographic.
Getting Started With Skeps
There is no more comprehensive financing platform than Skeps’ POS financing platform. This integration allows consumers access to a full library of financing options, including:
- Store credit cards
- Consumer loans