Fintech Glossary of Terms

What is Fintech?

Fintech is a combination of the words “financial” and “technology” and it refers to any software, app, hardware, or other digital tools that allow customers and businesses to digitally access, manage, or gain insights into their finances or make financial transactions. You utilize fintech services and tech whenever you use mobile payments, online banking, peer-to-peer lending, the blockchain, cryptocurrencies, robo-advisors, and more. The ultimate goal of fintech is to provide more efficient and accessible financial solutions to individuals and enterprises.

Below we have provided a list of common Fintech words and their definitions. The information provided here does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.

3D Secure

What is 3D Secure?

A security protocol that uses three distinct domains to address security vulnerabilities and fraud in online card transactions.

AML (Anti-money Laundering)

What is AML (Anti-money Laundering)?

Best practices followed by financial institutions to combat money laundering.

Application Programming Interface (API)

What is API?

The set of tools, procedures, and protocols for developing applications that allow fintech systems to interact. It defines the methods and data formats that applications can use to request and exchange information. In the context of fintech, APIs play a crucial role in enabling various financial systems to interact seamlessly.

API Banking

What is API Banking?

Allows financial institutions or third-party organizations to access banking services through an API.

Automated Clearing House (ACH)

What is ACH?

The electronic system for transferring funds.

Bitcoin

What is Bitcoin?

A digital currency you can send directly to others without needing banks.

Blockchain

What is Blockchain?

A blockchain is a distributed database that maintains a continuously growing list of ordered records, called blocks. Simply put, it is a secure digital record system. It’s the tech behind Bitcoin, but other digital currencies may use different systems.

Cryptocurrency

What is Cryptocurrency?

Digital money that’s managed by a decentralized system using cryptography, a type of encryption, to verify transactions, maintain records, and protect sensitive data. It has gained popularity partly due to the anonymity it offers to users. Bitcoin and Ether are examples.

Digital Asset

What is a Digital Asset?

A digital item of value. In the blockchain, this can be a cryptocurrency or a token.

Distributed Ledger

What is a Distributed Ledger?

A shared digital database that is held and updated independently by each user in a large network. Each user is a node and when the ledger is updated these nodes, or connection points, communicate via a decentralized system. Once a decision has been made the copy of the ledger is updated across all the nodes. It lets many people see transaction records.

DeFi (Decentralized Finance)

What is DeFi?

Financial activities without traditional middlemen like banks. It’s often based on blockchain.

Ether

What is Ether?

Digital currency used on the Ethereum network.

Fiat Currency

What is Fiat Currency?

Money issued by governments, like dollars or euros, not backed by physical goods.

Initial Coin Offerings (ICO)

What is ICO?

A way companies raise money by selling new digital currencies.

Mining or Bitcoin Mining

What is Mining or Bitcoin Mining?

How digital currencies like Bitcoin are made and added to the system.

Non-Fungible Token (NFT)

What is a NFT?

A unique digital certificate for online items. It’s often tracked on the Ethereum system.

Open Banking

What is Open Banking?

Open banking refers to the secure and standardized sharing of financial data by banks with third-party providers, facilitated by APIs, to promote enhanced financial services for consumers.

Peer-to-Peer

What is Peer-to-Peer?

Direct interactions between two people without a middleman. For example, sending money directly online.

Public Key

What is a Public Key?

The address you give others to receive digital money.

Private Key

What is a Private Key?

A secret code you need to access your digital money.

Smart Contracts

What are Smart Contracts?

Automated agreements on blockchain. They work when set conditions are met.

Stablecoin

What is Stablecoin?

Digital money tied to a real-world currency’s value, like the U.S. Dollar.

Tokens

What are Tokens?

Digital items of value made on existing blockchain systems. They’re different from the main currency of that system.

Tokenization

What is Tokenization?

The process of converting sensitive data, like credit card numbers, into non-sensitive tokens to enhance transaction security.

To read more about tokenization, check out our article Understanding Tokenization Basics.

Virtual Currency

What is Virtual Currency?

Digital money used for trade but isn’t official money like dollars or euros.

Digital Wallet

What is a Digital Wallet?

A digital place, often an app, where you keep your digital money. It handles your digital money addresses.

The glossary provided offers a foundational understanding of Fintech terms. At Clear Function, we are always happy to answer any questions you may have. Book a call with us today!

The information provided here does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.

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