What is FinTech (or fintech)?  Most of us have heard about fintech but do we really understand what it is.

The Oxford English Dictionary has actually included the word “Fintech” onto its pages and defines it as “Computer programs and other technology used to support or enable banking and financial services.”

Wikipedia defines “Fintech” as “Financial technology, also known as FinTech, is a line of business based on using software to provide financial services. Financial technology companies are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software.”

Further explanations say ‘It is the new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. Fintech is a new industry that uses technology to improve activities in finance.”

Surprisingly, users are often unaware that the financial services applications they use count as “fintech”, or may not know what exactly fintech and its accompanying jargon means.

Fintech was explained in one US report on CNBC in June in the following way with some explanations of all the crucial terminology which may help us to understand the sector in more detail: –


It can be broadly defined as any technological innovation in financial services and is one way to describe fintech.

The fintech sector is there to develop new technologies to disrupt traditional financial markets.

Various start-ups have been involved in the process of creating these new technologies, but many of the world’s top banks including HSBC and Credit Suisse have been developing their own fintech ideas as well.

Fintech technologies, as widely available as payment apps to more complex software applications such as artificial intelligence and big data, are used by many fintech companies.


A cryptocurrency is a decentralised digital currency which uses encryption – the process of converting data into code – to generate units of currency and validate transactions independent of a central bank or government.

Bitcoin and ether are the most common form of digital currencies. But there are other forms of virtual cash, such as Litecoin, Ripple and Dash (i.e. “Digital Cash”).

‘Bitcoin’ is the one most people have heard off and the one mainstream finance are more used to hearing too.  It was the first and the most prominent of the cryptocurrencies used by traders in the world of fintech.

Bitcoin has an interesting history, veiled in secrecy, it all began with an unknown person or maybe more than one person, operating under the pseudonym Satoshi Nakamoto, designing bitcoin as a peer-to-peer (P2P) payment network without the need for governance by any central authority.

In an introductory white paper introducing the virtual currency, Nakamoto defined bitcoin as: “A purely peer-to-peer version of electronic cash (which) would allow online payments to be sent directly from one party to another without going through a financial institution.”


Blockchain is a form of distributed ledger technology (DLT). This means that it maintains records of all cryptocurrency transactions on a distributed network of computers, but has no central ledger.

It secures the data through encrypted ‘blocks’.

Various blockchain experts believe the technology can provide transparency for a multitude of different industries, not just the financial services.

The original blockchain network was created by bitcoin-founder Nakamoto to serve as the public ledger for all bitcoin transactions.


Ethereum is another type of blockchain network. It was proposed by a 19-year-old Russian-Canadian programmer, Vitalik Buterin, in 2013.

Ethereum differs to the original blockchain in that it is designed for people to build decentralized applications. “These are applications which allow users to interact with each other directly rather than having to go through any middlemen,” Buterin said, explaining the project in 2014.

Ether is the value token of the Ethereum blockchain. It is traded on cryptocurrency exchanges.

Disruptive innovation

Disruptive innovation happens whenever new technologies alter the way markets operate.

Though not exclusively a fintech term, it is often used to describe events in the financial services where technological developments force financial institutions to rethink their approach to the industry.

Financial services firms engaged in fintech can even “disrupt” themselves at times. “We continue to disrupt and challenge ourselves,” Christina Hamilton, head of partnerships and international expansion at remittance firm Western Union, told CNBC in an interview in July.


Regulatory technology (regtech) is technology which helps firms working in the financial services industry meet financial compliance rules.

One of the main priorities of regtech is automating and digitizing Anti-Money Laundering (AML) rules which aim to reduce illegally obtained income, and Know Your Customer (KYC) processes which identify and verify the clients of financial institutions to prevent fraud.

The U.K.’s Financial Conduct Authority was the first governmental regulator to promote the term.

Regulators like the FCA are working with regtech firms on a range of different applications, including AI and machine learning, to improve the efficiency of compliance in the financial services sector and cut costs.


Insurtech is a subset of fintech which relates to the use of technology to simplify and improve the efficiency of the insurance industry.

A report by consulting giant Capgemini and non-profit insurance industry body Efma last month found that traditional insurance firms are facing increasing competitive pressure due to the emergence of a number of insurtech start-ups.

Initial coin offering

An initial coin offering (ICO) is a crowdfunding measure for start-ups that use blockchain.

It involves the selling of a start-up’s cryptocurrency units in return for cash.

ICOs are similar to initial public offerings (IPOs), where the shares of a company are sold to investors for the first time.

But ICOs differ to IPOs in that they deal with supporters of a project rather than investors, making the investment more similar to a crowdfunding experiment.

Last month China banned ICOs over concerns that the practice is not regulated and can be opened up to fraudsters.

Open banking

Open banking refers to an emerging idea in the financial services and fintech which stipulates that banks should allow third party companies to build applications and services using the bank’s data.

It involves the use of application programming interfaces (APIs) – codes which allow different financial programs to communicate with each other – to create a connected network of financial institutions and third-party providers (TPPs).

Proponents of open banking believe that an “open API ecosystem” will allow fintech start-ups to develop new applications such as mobile apps to allow customers greater control over their bank data and financial decisions.


Robo-advisors are platforms that automate investment advice using financial algorithms.

They limit the need for human investment managers, thereby dramatically reducing the cost of managing a portfolio.


The “unbanked” or “underbanked” are those who do not have access to banks or mainstream financial services.

Various fintech companies have developed products aimed at addressing this portion of society, providing them with digital-only solutions to open up their access to the financial services.

The Federal Deposit Insurance Corporation (FDIC) estimates that there are 10 million unbanked or underbanked American households.

Financial inclusion

Financial inclusion refers to fintech solutions that provide more affordable finance alternatives to disadvantaged and low-income people who, like the unbanked/underbanked, may have little to no access to mainstream financial services.

This is one of the most important areas for fintech companies that operate in developing markets.

Smart contracts are computer programs that automatically execute contracts between buyers and sellers.

Smart contracts are often blockchain-based and can save huge amounts of time and costs involved in transactions which usually require a human to execute them.

In Ethereum for example, the contracts are treated as decentralized scripts stored in the blockchain network for later execution.


Accelerators, also known as “seed accelerators”, are programs enacted by financial organizations to mentor and work with fintech start-ups.

Fintech accelerators can be either privately or publicly funded, with several programs being run by big banks, from the U.K.’s central bank, the Bank of England, to the multinational private bank Barclays.

The UK has been leading the way in fintech but with ‘Oracle’ declaring it will be setting up a fintech headquarters in Brussels as opposed to London, which would have been the obvious destination prior to Brexit, Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, which is a network of entrepreneurs and tech experts that support the UK tech startup sector warned of dire consequences for tech startups, particularly in the fintech sector at a recent House of Lords committee meeting.

He stopped short of telling these firms to move their headquarters to an EU country, but recommended they set up a presence.

“If we go over this cliff edge, it will be immensely disruptive. The entrepreneurs that I meet say they will just get on with it and make the best of it, but it will be a very disruptive process for a number of them, particularly those in the fintech sector,” he said.

“That is one of the most vibrant aspects of the tech community in London, and many of the companies will need passporting rights.”

But David Bannister, financial services analyst at Ovum, was not so pessimistic.  He said, “Brexit is a bit of a side show in fintech, as open banking will internationalise everything.”