Fintech is full of buzzwords. Which ones live up to the hype? We explain new terms in plain English.
Mixing finance with technology has created a perfect storm when it comes to the English language. Technology is full of terms that are mysterious to most of us, and dozens of new ones appear every year.
Wall Street is notorious for using insider jargon. Some claim financiers invent these terms deliberately to keep outsiders on the wrong side of the proverbial wall. As Jason Zweig, author of The Devil’s Financial Dictionary, puts it:
“If investors are to be partners instead of pigeons, they must master the ways in which Wall Street uses language.”
The same holds for fintech. If we want to walk the fintech walk, we’ve got to learn the fintech talk. But how can we ever hope to learn a lexicon that not only fuses finance and technology, but also invents its own terms?
Fortunately, there’s hope. Technological terms might seem impenetrable, but over the years dozens of niche terms can find their way into popular culture. Maybe, one day, fintech terms will be so commonplace that we use gems like “blockchain” and “openbanking” as everyday slang.
Oh, wait. We already use fintech terminology as slang.
Anyway. Here is a small glossary of some of the main fintech buzzwords that haven’t yet made it into the mainstream (we think). If you’re still confused, we recommend you try The Sideways Dictionary, which uses analogies to explain tech jargon.
Application Programming Interface (API): A way for computers and web applications to share information with each other. In other words, it’s jargon that computers use to converse.
Bitcoin: The first public cryptocurrency and the most famous to date. Note that bitcoin has its own trading slang that you’ll need to pick up if you want to be a serious investor.
Blockchain: A digital ledger of transactions that is distributed across networked computers. “Blocks” of encrypted data are connected to other packages of data, thus forming a “chain.” Beware, the term “blockchain” is widely considered to be a misnomer.
Cryptocurrency: A digital currency that uses encryption to regulate how many units are generated and verify transactions. Cryptocurrencies are not backed by central banks.
Digital wallet: Software for making electronic transactions. They are intended to be as user-friendly as a physical wallet, and more functional than bank apps. Some of the most widely used are MasterPass, Visa Checkout, PayPal’s One Touch, Google Wallet, and Apple Wallet.
Finnovation: Financial innovation, such as making up new words to describe old financial services.
Fintech: Any technology used to manage finances. The term normally refers to recent technological developments, but in fact financial technology is not new. It’s thousands of years old.
Internet of Things (IoT): The connection of everyday things (your fridge, washing machine, car, lights) to the Internet. It’s not financial technology per se, but it is a fintech buzzword because of the potential of your things to make financial transactions on your behalf (such as your fridge ordering the groceries, or your FitBit doing your banking for you).
Machine learning: As with IoT, machine learning isn’t necessarily financial. It simply refers to the ability of computers to learn. In finance, machine learning has been used in high-volume transaction trading (sometimes disastrously).
Open banking: A way to use APIs to share customer data between third party service providers. Theoretically it is much more secure than methods used in the past. Open banking is meant to make it easier for consumers to get accurate and up-to-date account information and manage services from different providers in the one place. Here’s a short video explaining how it works.
P2P lending: Peer-to-peer lending, or, people getting into debt to each other, rather than to a bank or other loan provider. It’s probably the oldest form of lending, but these days, Internet-based platforms allow strangers to lend to each other. Examples for individuals and companies include Upstart, Funding Circle and Seedrs.
Smart contract: A digital contract that triggers automatically when certain conditions are met. Say I agree that I will pay you $5 if you read to the end of this article. When specialised software verifies that you have fulfilled your part of the agreement, the smart contract will automatically deduct $5 from my bank account. Sounds brilliant, doesn’t it? It could be a disaster, argues Professor David Yermak in this video interview.
So, now that you know how fintech jargon works, you can begin inventing your own. And if you come across any particularly entertaining terms, please do let us know in the comments below!
By Erin B. Taylor, Senior Researcher at Holland FinTech