For all users with an interest in fintech- here is a definitive dictionary of some of the more obscure terms.
Rules of computation to be followed in calculations and in other problem solving. It sets the process to be followed.
Trading in financial instruments where a computer algorithm determines the individual parameters of orders (when to order, timing, price or quality of the order and how to manage the order after its submission). If you set a fund to auto-rebalance on the first of every month, that is algorithmic trading.
Artificial intelligence (AI)
Information technology systems that perform functions and tasks normally requiring human intelligence. If you use speech recognition then you use AI
BoE FinTech accelerator
Bank of England BoE initiative to partner with firms working with new technology and explore how FinTech innovations can be used in central banking.
A database that is decentralised, distributed, and self-proving, which provides a shared record of information that is maintained and updated by a network of computers rather than a central authority. EG - Bitcoin digital currency. Blockchain is aslo a generic term for all distributed ledger technology projects.
Storing and accessing data and programs over the internet, instead of via the computer's hard drive.
A means to raise money from the public to support a business, project, campaign or individual, usually through online platforms. The business or individual seeking financing explains the project being financed in a pitch to attract loans and investment from as many parties as possible. The FCA gives four types of crowdfunding:
- Loan-based crowdfunding. People lend money in return for interest payments and repayment of capital over time. This is also known as peer-to-peer lending. (Some business-to-business loans are excluded from the FCA's definition.)
- Investment-based crowdfunding. People invest either directly in new or established business by buying shares or debt securities, or indirectly by buying units in an investment scheme.
- Donation-based crowdfunding. People give money to individuals, enterprises or organisations whose causes, activities or purchases they want to support.
- Pre-payment/Rewards-based crowdfunding. People give money in return for a reward, service or product.
As of July 18 only loan-based crowdfunding and investment-based crowdfunding are regulated by the FCA in the UK
A term used by regulators and governments to describe digital assets that are recorded on a distributed ledger used for investment purposes, which are traded on exchanges currently outside the regulatory perimeter in the UK. The term is also used more generally to distinguish digital currency and assets from fiat currency.
A type of digital currency that uses cryptographic encryption to validate and secure transactions. Examples include Bitcoin, Ethereum, Litecoin and Ripple.
A virtual currency. A digital representation of value that functions as a medium of exchange, a unit of account and a store of value. They are not issued or backed by government or other public authority but are issued and usually controlled by their developers, and are used and accepted among the members of a specific virtual community. It becomes a means of payment that can be transferred, stored or traded electronically. YOu could almost call tokens and tickets as used in car washes as a virtual currency. A digital currency is virtual such as credits for computer games. Many are now held as speculative assets by investors who hope their value will rise.
Novel and more radical innovations in technology that aim to disrupt established financial services markets and the business models of entities operating in these markets, or establish new markets for financial products and services.
Distributed ledger technology (DLT)
Any publicly available electronic medium of exchange that features a permissionless distributed ledger (that is, a shared database where all participants can read everything, but no single user controls the ability to write) and a decentralised system for exchanging value. Information is saved on a decentralised, distributed database (ledger) available in multiple copies on multiple locations that are constantly synchronised and available to all members of the network supporting the ledger. Blockchain is one type of distributed ledger that organises data into blocks that are chained together in an append only mode.
Also known as fiat money. Money that a government has issued and declared to be legal tender, but which is not backed by a physical commodity such as gold (which means that its value is not derived from the material from which it is made).
The use of innovation and technologies specific to the insurance sector to improve the efficiency and effectiveness of traditional insurance processes and models across the industry through the life cycle of the product (from development to modelling, underwriting, and to claims and administration processes).
The ability of computers to learn without being explicitly programmed, instead learning patterns from experience - EG speech recognition.
Natural language processing
An interdisciplinary field of computer science, artificial intelligence (AI), and computation linguistics that focuses on programming computers and algorithms to analyse, process, and understand human language.
Also known as P2P agreement. An agreement where a lender (an individual or relevant person) provides credit to a borrower (an individual or relevant person) for an amount less than or equal to £25,000, and the agreement is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.
The adoption and use of technology by regulated financial services firms and other market participants to help them to follow and meet regulatory and compliance requirements (including reporting) more efficiently or effectively than established legacy systems.
A self-executing contract (created using blockchain or other distributed ledger technology) where the terms of the agreement between the parties are written into code that exists across a distributed, decentralised blockchain network. The terms of the contract are then executed on the occurrence of specified events in the contract, which can trigger financial flows or changes of ownership, without the need for further action by the parties.
The use of technologically enabled innovation by regulatory authorities in their role as supervisor of financial services firms.
Also known as digital wallet. A virtual currency account (equivalent to a bank or payment institution offering a payment account) from which payment in virtual currencies can be made or received to and from other wallets.