Top 50 Fintech Terms
by Pranita Jagtap
1. 3D Secure
3D Secure is a three-domain (3D) structure connecting the issuer, the acquirer, and the merchant page to prevent fraudulent transactions. It is a payment security system where the customer enters OTP on a secure page to validate their identity and complete the transaction.
2. Account Information Service Provider (AISP)
A very popular term in Open Banking, Account Information Service Provider (AISP), provides third-party access to account information with the customers’ consent. AISPs help customers reduce manual work by offering quick access to their financial information, savings, and approval of loans.
3. Acquiring bank/ Acquirer
Acquiring bank is a financial institution that links merchants with issuing banks. The merchants can quickly process card transactions by leveraging acquiring banks’ infrastructure and financial backing.
4. Advanced Encryption Standard (AES)
The Advanced Encryption Standard (AES), originally known as Rijndael, is one of the most secure encryption algorithms available. The symmetric-key block algorithm is the Fintech industry standard to encrypt and decrypt classified data.
Anti-money laundering (AML) is carried out by a financial institution that consists of laws, procedures, and regulations that aim to achieve legal requirements. AML monitors suspicious activities by preventing practices that involve disguising illegal funds as legit income.
API (Application Programming Interface) is an intermediary that enables two applications to communicate. APIs are a set of protocols that allows the creation of applications that access data and features of other services.
7. API Banking
API banking involves a set of regulated protocols, tools, or routines that allows access to banking services by a financial or third-party institution via API. These banks provide secured and restricted access of its central bank system to third-party systems to carry out functions.
8. Bank Identification Number (BIN)
Bank Identification Number (BIN) is the first 6 to 8 numbers present on the credit, debit, and prepaid cards. BIN is used to identify the card issuer and helps merchants validate transactions using credit/debit/prepaid cards.
Blockchain is a distributed ledger technology that’s secure, immutable, and unanimous. Futuristic and versatile, blockchain powers cryptocurrencies, smart contracts, healthcare, supply chain, and energy trading, among several other use cases.
10. Buy Now Pay Later (BNPL)
BNPL is a modernized version of retail finance where the customers enjoy no-cost EMI and easy repayments. BNPL services are growing over 39% a year because it masks the feeling of a loan by offering credit at the point of sale.
11. Card on File transactions
Card on File or Subscription transactions are the stored card credentials available with a Merchant, Payment Gateway, or Aggregator. Used for future transactions, the card on file will have all the relevant details stored in the encrypted format except its CVV. A customer’s explicit consent is needed to store the card details.
12. Card Not Present (CNP) Transactions
Card-not-present (CNP) are the transactions that are processed without the cardholder and the card not physically present at POS. These transactions are facilitated virtually or by mobile wallets by entering the card details with a security code.
13. Charge cards
Charge cards are electronic credit cards by which the cardholder can make purchases that the card issuer pays. These cards have no spending limits and interests, but the cardholder is entitled to repay the debt within the due date.
A chargeback is the refund amount returned to the cardholder for a dispute raised by him. It is a consumer protection tool and the easiest way for cardholders to request payment reversal from the issuing bank.
15. Cross-border payments
Cross-border payments include wholesale, retail, or recurring transactions involving individuals, banks, companies, etc., in which the payee and the recipient operate from different countries.
Crowdfunding occurs when money is raised from many individuals that provide funds for a new business venture. It aims to draw more investors with a small amount of capital from a large mass of people through social media and crowdfunding websites.
17. Decentralized Finance
Decentralized Finance (DeFi) is a blockchain-based system making products and services available on a decentralized public network. DeFi enables transparent transactions using peer-to-peer interaction by a software-based mediator.
18. Digital credit
Digital credit refers to loans accessed through a digital channel, via a mobile device, or a third-party agent. It is an emerging way of accessing electronic money with backend customer evaluation and automated customer interactions.
19. Digital financial inclusion
Digital Financial Inclusion offers the underbanked and the unbanked cost-affordable and sustainable services by ensuring digital access.
20. Disposable Virtual Card
Customers can create disposable virtual cards for instant online transactions. These one-time payment cards are generated every time with new card details to protect users from online fraud.
Electronic money is a form of currency used for electronic transactions by storing in banking computer systems, digital databases, etc. These are highly accessible in international transactions and are backed by a central authority as fiat currency.
A digital wallet securely stores users’ payment information, passwords for numerous payment methods and websites on an electronic device. This software-based e-wallet system enables users to purchase and transact easily. For example, M2P’s forex cards can hold up to 24 currencies, allowing customers to make payments easily.
23. Embedded credit
Embedded credit involves using a familiar interface that allows the customer to apply, acquire and repay loans within the platform, avoiding the need for a third-party site.
24. Embedded Finance
Embedded finance enables customer-facing non-financial platforms to offer financial services. Customers can access in-app, contextual financial offerings via apps and services right at the point of sale.
25. Embedded lending
Embedded lending integrates Lending-as-a-Feature in digital platforms. Companies work with Fintechs to offer credit as an in-app experience to increase LTV (Life Time Value) of customers and average order value.
26. EMV Chip
EMV is the tiny computer chip that makes you dip your credit card instead of the regular old swipe. EMV stands for Europay, MasterCard, and Visa. The EMV chip creates a unique transaction code for every dip to prevent fraud.
27. FinTech Sandbox
FinTech or API sandbox is a regulated environment for innovators to test their products in real-time. Sandbox helps reduce systemic risks before entering the market and facilitates fintechs to innovate better services and products.
28. Forex cards
Forex cards are secure and convenient prepaid travel cards with worldwide acceptance. Capable of holding multiple currencies in a single card, it is the best way to carry and spend foreign currencies while travelling.
29. Ghost cards
A ghost credit or debit card allows businesses to generate random card and CVV numbers codes for their purchases. These virtual ghost cards help track expenditures effectively as they have preset limits and are used only with specific vendors.
30. Infrastructure as a service (IaaS)
Infrastructure as a Service (IaaS) refers to a cloud computing service where businesses rent or lease servers for computing, storage, and networking instead of a traditional data center. IaaS gives its customers access to servers in locations close to their end-users and eliminates the need for physical servers.
Insurtech (Insurance + Technology) aims to improve efficiency and reduce costs for customers and companies by offering online services to research, compare policies, etc., without needing a physical visit.
32. Interchange Fee
Interchange is a fee reimbursed to the issuing bank out of the MDR collected by the acquiring bank from the merchant. The fees cover accepting, processing, fraud protection, and authorizing card transaction costs for merchants to provide a convenient buying experience for the end customers.
33. Issuing Bank/Issuer
The issuing bank is an intermediary or financial institution that issues branded payment cards to the customer on behalf of card networks. An issuer verifies the customer’s sufficient funds before a transaction takes place.
Know Your Customer (KYC) is a mandatory process that verifies and authenticates a customer’s identity. All legal and financial institutions must validate their customers’ Proof of Identity (POI) and Proof of Address (POA) to prevent illegal or fraudulent activities as per Reserve Bank of India’s norms.
Lending tech or lending technology is a platform that utilizes data to offer lending at a digital level. It combines primary information, loan structures, and monitoring strategies to provide a unique lending experience. It uses AI and other tech strategies to evaluate the borrower’s repaying capacity.
36. Neo Bank
Neo banks are user-friendly fintech firms providing traditional banking services sans physical branches. A mobile-first virtual bank that offers a seamless digital banking experience and targets the digital-savvy millennials of today.
37. NFC Payments
Near Field Communication (NFC) powers contactless payments through mobile wallets and contactless cards. NFC allows seamless checkouts by just placing the smartphone/ wearable within four inches from the NFC reader.
38. Ongoing monitoring
Ongoing monitoring is a process taken up by every financial institution to ensure that their customer information is up to date. The overall risk-based assessment provides better financial health and reduces potential risks and economic losses.
39. Open banking
Open banking lets third-party providers access customer-approved banking data securely via APIs. Open banking enables Fintech’s to access and leverage financial data for building customized and user-centric applications and products aimed at their target segment.
40. Payment gateway
A payment gateway acts as an interface between the merchants’ website and the acquirer to accept credit/debit transactions that a customer makes. The technology validates card details, ensures sufficient funds, and then enables merchants to get paid.
41. Payment Switch
Payment Switch is an independent tool that communicates with different entities in a transaction process. It facilitates the trouble-free processing of real-time payments by connecting the merchant’s gateway with the right processor.
42. PCI DSS
PCI DSS stands for Payment Card Industry Data Security Standard that protects consumers’ sensitive data. PCI DSS is applicable for organizations that store/process/transmit the cardholder data either as clear or in an encrypted manner.
43. POP (Point-of-Purchase)
POP (Point-of-Purchase) is the physical location in which the in-store interaction between the customer and the product happens and the customer decides whether they purchase the product or not.
44. POS (point of sale system)
POS (Point of Sale) is where the customer-product interaction happens, and the customer initiates a transaction. The POS system allows a retailer to check out the goods that a customer buys.
PSD2 is the second Payment Services Directive implemented by the European Union to unify payments in a single market space. It is the improved version of PSD that enforces strong consumer authentication by providing TPSPs secured access to consumer information.
Regtech as a service facilitates compliance, reports, and monitoring of the financial process to avoid any regulatory mishap. It enables FIs to have accountability, constant compliance assessment, and effective policy management.
47. Strong Customer Authentication (SCA)
Strong Customer Authentication (SCA) is a two-factor authentication process in which the institutions add a layer of security for online payments. The customers are authenticated with two of three elements that are knowledge (PIN, password), possession (hardware token, phone), and inherence (facial recognition, fingerprints).
Tokenization makes cardholder data by replacing it with a random string of characters called Tokens. With the help of tokenization, the merchants and networks can move sensitive data without the hovering threat of payments fraud or identity theft.
49. Velocity Controls
Velocity controls help in monitoring and tracking repeated card-not-present transactions to prevent fraud. It triggers an alert when many transactions happen through a single card. The issuer can verify the transaction authenticity via email or call with the cardholder.
50. Virtual Cards
Virtual cards are electronic cards that don’t have a plastic existence and are highly secure and easy to use. These electronic cards provide a user with 24/7 access to online, contactless payments with only a smartphone.
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