Fintech is an amalgamation of “finance” and “tech.” It’s an umbrella term that covers a broad range of technology that improves and automates financial services.
Here are several basic terms to better understand Fintech:
Account Information Service Providers are authorized to connect with your bank and use your account information to provide you with a service, but they cannot instigate payments or transfer money on behalf of their customers. AISP services include money management tools, price comparisons, quick and accurate access to financial products, and speeding up mortgage applications and loan reviews.
Unlike Account Information Service Providers, Access to Account allows third-party service providers to access a client's banking information and use it to make payments instead of using a credit/debit card. However, a customer must give access to the said service provider.
Application Programming Interface is software that enables two applications to communicate with each other at the backend. Each time you use Facebook, Instagram, or send an instant message, you are using an API.
When you use any app on your phone, the app sends information to a server on the internet, which interprets the information and sends a reply back to your phone. The app then shows the reply in a legible way. APIs essentially make it easier for applications to share information in real time.
As the name suggests, challenger banks have entered into the finance market as a challenge to mainstream, traditional banks. Although they hold a bank license, they often function primarily online.
These are smaller banks that provide services through an app or website, allowing you to conduct all your banking digitally. According to a recent report from Cornerstone Advisors, 14.2 million Americans consider a digital bank to be their primary banking relationship. This is a 67% increase from January 2020. Banks like Chime, Dave, Varo, BankMobile, and Oxygen are some of the more popular challenger banks in the US.
Cloud banking allows banks to move their infrastructure to a virtual cloud environment. The move allows access to scalable technology that reduces IT hardware, maintenance and development costs. It also allows greater flexibility and the ability to store larger amounts of data with more ease, with faster integration into new applications, allowing services to be launched faster.
MFA, or “Multi-factor Authentication,” is a requirement for proof of authentication more than once. For example, when you walk into an ATM with MFA, you’ll need to swipe your debit card as your first form of authentication, then type in a 4-digit passcode as your second form of authentication. It’s a way of protecting against cybercrime.
Multi-factor authentications usually fall under 3 categories:
When a customer places an order through a PISP service provider, the provider will access the customer's online banking account and initiate the requested transaction. In addition, PISP is obligated to provide clear information on what the nature of their services are, how they will use your information, and if this data will be shared with any other third party. For example, Amazon uses PISP to make your payment experience as smooth as possible.
RegTech is technology that helps ensure regulatory compliance in the securities industry. It’s technology that helps prevent fraud and money laundering, and it helps automate due diligence.
RegTech cuts the cost of compliance processes and makes them more reliable, reducing hassle for customers and the risk of costly compliance failures.
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Aayush has worked 5 years in the digital advertising space with Bright Money, InMobi and YourStory.