Alternative finance refers to financial channels, processes, and instruments that have emerged outside of the traditional finance system like regulated banks and capital markets.
Alternative lending refers to the various loan options beyond a traditional bank loan. Generally, these forms of loan are more flexible in terms of repayment and approval, but often have higher interested rates. Alternative lending may be necessary for either an established business or start-up as they can exceed the maximum loan amount of a bank and do not necessarily require an established credit history.
Anti-Money Laundering (AML)
Anti-money laundering (AML) refers to the web of laws, regulations, and procedures aimed at uncovering efforts to disguise illicit funds as legitimate income. Money laundering seeks to conceal crimes ranging from small-time tax evasion and drug trafficking to public corruption and the financing of groups designated as terrorist organizations.
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.
API integration is the connection between two or more applications via their APIs (application programming interfaces) to allow systems to exchange data sources. API integrations power processes throughout many sectors and layers of an organization to keep data in sync, enhance productivity and drive revenue.
Automated Clearing House (ACH)
An automated clearing house (ACH) is a computer-based electronic network for processing transactions, usually domestic low value payments such as automated money transfers, between participating financial institutions. It is a way to move money between banks without using wire transfers, paper checks, card networks, or cash; and may support both credit transfers and direct debits.
Banking as a Service (BaaS)
The provision of banking processes that allows companies to embed financial services into their products and services without needing to build banking infrastructure or worry about regulatory compliance such as obtaining licenses.
A blockchain is a distributed database shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format. Blockchains are best known for their crucial role maintaining a secure and decentralized record of transactions in cryptocurrency systems, such as Bitcoin. The main advancement of the blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.
Business-to-business is a type of electronic commerce exchange between two businesses, in which one business makes a commercial transaction with another.
In B2B2C models, two businesses deliver products or services to customers together through an integrated supply chain. The first business in the supply chain offers the second business access to a service that can increase their revenue, provide access to more customers or increase efficiency, while the second business sells products or services directly to customers using the second business’s service.
Direct-to-consumer or business-to-consumer is the business model of selling products directly to customers and thereby bypassing any third-party retailers, wholesalers, or any other middlemen.
A chargeback is the refund amount returned to the cardholder for a dispute raised by them. It is a consumer protection tool and the easiest way for cardholders to request payment reversal from the issuing bank.
Closed-Loop Payment System
A system that operates without intermediaries, whereby the end parties have a direct relationship with the payments system.
Consumer lending involves various types of lenders, including lending platforms and financial institutions, providing financing for personal, family, or household purposes.
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.
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 risk modeling is a technique used by lenders to determine the level of credit risk associated with extending credit to a borrower.
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.
A credit union is a type of financial cooperative that provides traditional banking services. Ranging in size from small, volunteer-only operations to large entities with thousands of participants spanning the country, credit unions can be formed by large corporations, organizations, and other entities for their employees and members. Credit unions are created, owned, and operated by their participants. As such, they are not-for-profit enterprises that enjoy tax-exempt status.
Cross-Border Money Transfer
The transfer of funds between peers or entities operating from different countries.
The transfer of funds internationally between entities for the purpose of business transactions. 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.
The transfer of funds internationally between peers. A remittance is a payment of money that is transferred to another party. Broadly speaking, any payment of an invoice or a bill can be called a remittance. However, the term is most often used nowadays to describe a sum of money sent by someone working abroad to his or her family back home.
A cryptocurrency, crypto-currency, crypto, or coin is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.
A cryptocurrency is a tradable digital asset or digital form of money, built on blockchain technology that only exists online. Cryptocurrencies use encryption to authenticate and protect transactions, hence their name. There are currently over a thousand different cryptocurrencies in the world.
Altcoin refers to any type of cryptocurrency other than Bitcoin.
A cryptocurrency coin is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. The first cryptocurrency coin was Bitcoin.
A crypto token is a virtual currency token or a denomination of a cryptocurrency. It represents a tradable asset or utility that resides on its own blockchain and allows the holder to use it for investment or economic purposes.
The code or acronym for a fiat or crypto currency (e.g., US Dollar (USD), Bitcoin (BTC).
Generally refers to the service of safekeeping of securities or currencies (“custody fiat”) and other administrative services related to securities.
Decentralized Finance (DeFi)
Decentralized finance (DeFi) is an emerging financial system based on secure distributed ledgers. The open system offers new opportunities to innovate, while extending access to financial products and services without intermediaries to everyone beyond traditional banks and institutions.
Digital Currency / Virtual Currency
Digital currency is any currency, money, or money-like asset that is primarily managed, stored or exchanged on digital computer systems, especially over the internet. Types of digital currencies include cryptocurrency, virtual currency and central bank digital currency.
Digital Currency Exchange/Cryptocurrency Exchange
A cryptocurrency exchange, or a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies. Exchanges may accept credit card payments, wire transfers or other forms of payment in exchange for digital currencies or cryptocurrencies. A cryptocurrency exchange can be a market maker that typically takes the bid-ask spreads as a transaction commission for its service or, as a matching platform, simply charges fees.
Some brokerages which also focus on other assets such as stocks, like Robinhood and eToro, let users purchase but not withdraw cryptocurrencies to cryptocurrency wallets. Dedicated cryptocurrency exchanges such as Binance and Coinbase do allow cryptocurrency withdrawals, however.
Digital Financial Inclusion
Digital financial inclusion involves providing financially excluded and underserved populations with digital access to a range of formal financial services suited to their needs that are responsibly delivered at a cost affordable to customers and sustainable for providers.
A digital identity is a faster, safer and more private way of authenticating an external agent: a person, organization, application, or device. Digital identities allow automated access to electronic services and make it possible for computers to mediate relationships.
Distributed Ledger Technology (DLT)
Distributed Ledger Technology (DLT) refers to the technological infrastructure and protocols that allow simultaneous access, validation, and record updating in an immutable manner across a network that’s spread across multiple entities or locations. More commonly known as blockchain technology, since DLT was introduced by Bitcoin its potential has been demonstrated across industries and sectors. DLT as a “decentralized” versus “centralized” technology has far-reaching implications on sectors and entities that have long relied upon a trusted third-party.
Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party.
Electronic money (e-money) is broadly defined as an electronic store of monetary value in digital format (e.g., cards, e-wallet, distributed ledger) that may be widely used for making payments to entities other than the e-money issuer. The device acts as a prepaid bearer instrument which does not necessarily involve bank account transactions.
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.
Embedded lending integrates Lending-as-a-Feature in digital platforms. Companies work with fintechs to offer credit as an in-app experience to increase the LTV (Life Time Value) of customers and average order value.
The technique of scrambling sensitive data automatically in a terminal or computer before transmission for security purposes using an algorithm and key.
A platform solution that covers all relevant processes.
The rate at which the funds you transfer will be exchanged into the target currency.
“Real money”. Fiat money is a type of currency that is not backed by any commodity such as gold or silver, and typically declared by a decree from the government to be legal tender. In modern times, fiat money is generally established by government regulation.
Financial Institution (FI)
A financial institution (FI) is a company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange.
Financial services are a broad range of specific financial activities provided by financial service firms and their professionals such as banking, investing, loans, and insurance.
Financial Technology (FinTech)
FinTech, short for Financial Technology, refers to the emerging industry that aims to modernize, improve and automate the delivery of financial services. Through the use of modern software and infrastructure, FinTech solutions aim to compete with traditional methods to deliver more efficient financial solutions.
A sandbox is a term used to describe a testing program for new business models that are not protected by existing regulations. This allows companies to test their new offering prior to becoming fully licenced, within a representative environment.
A Forex fee charged for the conversion of currencies (the difference between the two exchange rates, divided by the market exchange rate).
Installment loans can be commercial loans or personal loans that borrowers repay with regularly scheduled payments or installments.
Fees charged to a merchant on transactions the issuing bank processes to cover payment processing, fraud protection, and authorization.
International Transfer Fee
A fee charged by a financial services provider for transferring money internationally.
Interoperable Financial Services
Interoperability is the ability for different systems and products to interact. In traditional banking, some payment systems are interoperable. In decentralized finance, interoperable blockchains allow data and digital assets to interact permissionlessly, opening the way for innovation in financial products and services.
Know Your Business (KYB)
Know Your Business (KYB) verification is a company’s Anti-Money Laundering compliance. Companies must protect their interests before doing business with another business. Companies need to know if their income is misused by corrupt business owners, shareholders, or money launderers.
Know Your Customer (KYC)
Know Your Customer, otherwise known as KYC, is the process whereby a business verifies the identity of the client. 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 traditionally a book for recording economic transactions. With the rise of digital account keeping, the distributed or shared ledger has emerged, through which digital data is verified through consensus, replicated, shared, and synchronized geographically across multiple parties, including institutions, websites, and countries.
Loan Origination Software
Software used by lenders to generate and service a loan in front of the borrower.
A merchant aggregator, sometimes called a payment aggregator or simply known as an aggregator, is a service provider that allows merchants to take payments without having to set up a merchant account. Essentially, aggregators accept payments on behalf of merchants.
Microfinance refers to the financial services provided to low-income individuals or small businesses who are typically excluded from traditional banking. Most microfinance institutions focus on offering credit in the form of small working capital loans, sometimes called microloans or microcredit.
A mobile wallet is a virtual wallet that stores payment card information on a mobile device. Mobile wallets are a convenient way for a user to make in-store payments and can be used at merchants listed with the mobile wallet service provider.
Money Services Business (MSB)
A legal term used by regulators to describe businesses that transmit or convert money.
Money Transfer Operator (MTO)
Money transfer operators (MTOs) are financial companies (but usually not banks) engaged in the cross border transfer of funds using either their internal system or access to another cross-border banking network.
Or money transfer service, a business entity providing money transfer services or payment instruments, such as money orders or travelers’ checks
Neo Banks (aka Challenger Banks, Digital Banks)
Neobanks, sometimes referred to as “challenger banks,” are fintech firms that offer apps, software and other technologies to streamline mobile and online banking. These fintechs generally specialize in particular financial products, like checking and savings accounts. They also tend to be more nimble and transparent than their megabank counterparts, even though many of them partner with such institutions to insure their financial products.
Non-bank brands are organizations 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 that have strong brand authority.
Open Banking is a term that references the practice of sharing financial information securely, and in a way in which the customer approves. This is achieved through the 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 authorized providers such as budgeting apps, other banks and challenger banks.
A payment gateway is a platform or service that protects and identifies fraud for an online or offline business. A payment gateway sends payment information securely from a website or application to the payment network for processing and authentication, before returning the response to the website.
A 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.
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.
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.
A psychometric assessment is used to measures a person’s suitability for a purpose based on their intellectual capabilities and personality traits. Organisations that use psychometric assessments believe that giving candidates a standardized test can provide an objective assessment of who the most suitable candidates are. In Finance, this is used to determine an individuals eligibility for a loan.
Real-time Information Discovery
Real-time information discovery refers to the sifting through of the ever-growing mass of real-time public data with the purpose of identifying and determining the significance of breaking events through the digital signatures of parties as they happen.
Transfers without lag or delay.
A license acquired from a country’s government or governing body for the purpose of legally conducting money transfer-related business in the country.
Sanctions screening is a control used in the detection, prevention and disruption of financial crime and, in particular, sanctions risk.
Service availability is a measure of a service being available and accessible to customers.
The movement of funds from one financial institution to another, which ultimately completes a transaction.
A shared platform is an emerging technological model whereby organisations strategically collaborate on a digital project to reduce costs, improve compliance, and improve the customer experience. Examples of shared platforms include fraud, trade finance, and regulatory reporting.
A smart contract is a self-executing contract with the terms of the agreement between buyer and seller directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network.
Software as a Service (SaaS )
Software as a Service (SaaS) is a cloud-based technology that uses the internet to deliver an application which is owned, managed and developed by an external party. Normally run on a subscription basis, the software is usually not installed on the user’s device.
Stablecoins are cryptocurrencies that are collateralized by pegging their value to that of another currency, commodity or financial instrument; or algorithmically pegged to a real-world asset but not backed by one. Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies including Bitcoin (BTC), which has made such investments less suitable for wide use in transactions.
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).
The Society for Worldwide Interbank Financial Telecommunication, legally S.W.I.F.T. SC, is a Belgian cooperative society providing services related to the execution of financial transactions and payments between banks worldwide.
Technology Enabled Service (TES)
A business can be defined as a ‘technology enabled service’ if it is one which uses technology to better deliver the service it provides.
Traditional banking refers to banks with a physical presence and domestic banking license.
Traditional Currency Exchange
A currency exchange is a licensed business that allows customers to exchange one currency for another. The exchange of physical money (coins and paper bills) is usually done over the counter at a teller station, which can be found in various places such as airports, banks, hotels, and resorts. Currency exchanges make money by charging a nominal fee and through the bid-ask spread in a currency.
A product or service produced by one company for the purpose of rebranding by other companies.