FinTech Industry Glossary. 21 Key Terms to Help You Understand Financial Technology

FinTech is reshaping how money moves, how institutions manage risk mitigation, and how people interact with their finances. At its core, it’s about using smart technology to make financial services faster, easier, and more efficient - from mobile banking and peer‑to‑peer lending to tools that help companies stay compliant.

The industry’s biggest leaps are happening in payments, lending, and insurance (InsurTech), powered by innovations like Open Banking and cloud‑native architecture. From challenger banks reinventing customer experience to DeFi and RegTech opening new models of finance, FinTech software development now sits at the heart of the global economy.

What is FinTech talking about? Essential terms

We’ve put together this glossary of 21 key terms; a quick guide to help you navigate the concepts driving today’s financial technology.

1. KYC (Know Your Customer)

Know Your Customer is the required process of verifying a client’s identity to make sure they are who they say they are. It’s designed to reduce the risk of fraud and identity theft.

Why it matters

Skipping strong KYC checks can lead to heavy fines, regulatory penalties (e.g., related to 5th AML Directive / MLR 2017), and reputational damage. For founders, the speed and simplicity of Digital KYC/eKYC directly affect how smoothly new customers sign up. Modern solutions, often using tools like facial recognition, turn compliance into a competitive edge, helping companies onboard faster while staying fully aligned with regulations.

2. AML (Anti-Money Laundering)

Anti-Money Laundering is the set of laws and procedures that stop financial institutions and FinTech platforms from being used to clean illegally obtained money.

Why it matters

AML goes well beyond the first KYC check; it means ongoing, real‑time monitoring of transactions and client behavior against risk profiles to spot anything suspicious. Missing or ignoring these signals can put your licenses, reputation, and investor trust at risk. Modern AML systems, often powered by AI and Machine Learning (ML) models, are essential for scaling safely and building credibility in regulated markets.

3. RegTech (Regulatory Technology)

RegTech uses modern tech, especially AI and cloud computing, to streamline and automate compliance.

Why it matters

With regulations piling up, RegTech can be a real competitive edge. It cuts the cost of compliance, speeds up reporting, and improves accuracy by automating tasks like transaction checks and data aggregation. The result? Your team spends less time on error‑prone paperwork and more time driving innovation and building products.

4. PSD2/Open banking

PSD2 is a European regulation that requires banks to share account data and enable payment initiation for authorized third‑party providers - but only with the customer’s consent.

Why it matters

Open banking has been a major driver of disruption, unlocking new revenue streams for innovators worldwide. It lets FinTechs build apps that pull data from multiple accounts, offer smarter money management tools, and initiate payments directly - all on top of traditional banking infrastructure. Meeting the required PSD2-compliant API standards (e.g., Berlin Group or STET) isn’t just about compliance; it’s the foundation for building modern financial services.

5. Biometrics (in FinTech)

Biometrics use unique biological data, like fingerprints, facial recognition, or voice patterns, to securely verify users and approve sensitive transactions.

Why it matters

By removing the hassle of passwords and security questions, biometrics make banking faster and more intuitive. At the same time, they add a powerful layer of protection, boosting customer trust and cutting the risk of fraud. For modern financial apps, that combination of convenience and security is a major selling point.

6. Tokenization

Tokenization replaces sensitive data, like credit card numbers or bank details, with a unique, non‑sensitive identifier called a token.

Why it matters

Tokens add a crucial layer of security by making stolen data useless outside the system. They’re also key for meeting global standards like PCI DSS, helping protect both your infrastructure and your customers. In practice, tokenization ensures you never store full sensitive data, specifically Primary Account Numbers (PANs), reducing the fallout from potential breaches and keeping trust intact.

7. BaaS (Banking as a Service)

BaaS is a model where licensed banks provide core services, like accounts, payments, and card issuing, to non‑bank tech companies through secure APIs.

Why it matters

BaaS lets FinTechs launch financial products quickly and legally, without the huge cost or wait of getting their own banking license. For software teams, it means focusing on sleek frontends and great user experiences, while the BaaS partner takes care of the complex, regulatory licensing and core processing infrastructure behind the scenes.

8. Embedded finance

Embedded finance is the integration of financial services directly into everyday customer journeys on non‑financial platforms. Picture an online store where you can add insurance or financing right at checkout - no extra steps, no leaving the site.

Why it matters

By meeting financial needs in the exact moment they arise, Embedded finance creates new ways to attract and retain customers. It opens high‑margin revenue streams across industries, from SaaS to retail, and positions almost any company handling transactions as a potential financial services provider. Implementing Embedded finance requires a modular architecture and dedicated, low-latency APIs.

9. InsurTech

It brings modern technology, from AI to advanced data science, into an industry long known for being slow and complex. Think of it as upgrading insurance from a paper‑heavy process to a digital, data‑driven system that adapts in real time.

Why it matters

InsurTech personalizes policies, speeds up claims, and uses data like telematics for sharper risk assessment. The result is insurance that’s more transparent, fair, and user‑friendly. For companies, it means lower costs and better margins; for customers, it means faster service and products that actually fit their needs.

10. LendingTech/P2P Lending

LendingTech platforms automate the entire lending cycle (from application to approval) making the process faster and more efficient.

Why it matters

These systems can connect borrowers directly with investors or use AI and alternative data for smarter credit scoring. The result is rapid portfolio growth, sharper risk models, and access to customer segments that traditional banks often miss. Lower overhead and data‑driven precision turn LendingTech into a powerful competitive advantage in the lending market.

11. Challenger banks (Neobanks)

Challenger banks are fully digital banking entities that operate without physical branches. Built on scalable, cloud‑native technology, they deliver sleek user experiences and highly competitive services without the legacy constraints of traditional institutions.

Why it matters

These banks are redefining competition in finance by focusing on speed, transparency, and customer-centric design. Their success shows how modern architecture, specifically a microservices approach, and UX can win market share against incumbents. For software teams, studying challenger banks offers a blueprint for building cutting-edge financial applications.

12. E-wallet (Electronic wallet)

E-wallets are software platforms that securely store payment information, loyalty cards, and digital currencies, allowing users to make seamless online and in-store transactions.

Why it matters

E-wallets are the cornerstone of digital convenience, driving high customer engagement and reducing friction at checkout. Developing a robust E-wallet requires strong security protocols, multi-factor authentication, and integration with diverse payment rails (e.g., cards, bank transfers, crypto), making it a complex but high-value software development project.

13. WealthTech

WealthTech uses technology, particularly AI and data analytics, to automate and enhance advisory, investment, and asset management services, often through "robo-advisors."

Why it matters

It democratizes access to sophisticated financial planning and investment strategies. For software development, WealthTech necessitates building high-security data pipelines, integrating with core brokerage APIs, and developing complex algorithms for automated portfolio rebalancing and personalized investment advice.

14. Buy Now Pay Later (BNPL)

It is a short-term financing option that allows consumers to make purchases and pay for them over a set period (e.g., four interest-free installments), typically integrating directly at the point of sale.

Why it matters

BNPL drives sales conversion for merchants and provides flexible financing for consumers. Its successful implementation requires developing proprietary, real-time ML-based credit scoring models, ensuring seamless API integration into e-commerce checkout flows, and meticulously managing the ledger for complex installment repayment logistics.

15. Trading platforms

These are software applications, either desktop or mobile, that allow users to buy, sell, and manage financial instruments (stocks, forex, crypto) by providing real-time market data and executing trades.

Why it matters

Trading platform success is defined by speed. It demands ultra-low latency architecture, high-performance matching engines, and robust security for sensitive transaction data. The engineering challenge is building a system that can handle massive transaction volumes while guaranteeing sub-millisecond execution times.

16. API (in FinTech)

APIs are sets of protocols and tools that let different software systems talk to each other securely, exchange data, and trigger actions. They’re the connectors that make complex financial ecosystems work together.

Why it matters

In FinTech, APIs form the hidden backbone behind services like Open Banking and BaaS. Well-designed APIs ensure platforms can scale quickly, integrate smoothly with partners, and meet strict security standards, typically leveraging OAuth 2.0 and mutual TLS (mTLS) for secure authentication. For any software team, building robust and well-documented APIs from day one is the key to long-term growth, compliance, and potential API monetization.

17. NFC (Near Field Communication)

NFC is a short-range wireless communication technology that enables two electronic devices (like a smartphone and a payment terminal) to communicate when held in close proximity, primarily used for contactless payments.

Why it matters

NFC is fundamental to modern, frictionless payment experiences. The software challenge lies in secure integration with tokenization platforms (Host Card Emulation - HCE), developing reliable Point of Sale (POS) communication protocols, and ensuring smooth interoperability across different mobile operating systems and banking applications.

18. DeFi (Decentralized Finance)

DeFi refers to financial services, lending, borrowing, and asset exchange, built on open blockchain networks. These systems run without central authorities or traditional intermediaries, relying instead on permissionless protocols and smart contracts.

Why it matters

Despite volatility and regulatory uncertainty, DeFi introduces entirely new business models rooted in transparency and automation. Smart contracts enable trustless transactions, while global accessibility opens markets far beyond the reach of legacy institutions. For founders, mastering the mechanics of Smart Contracts (especially on the EVM or similar platforms) is crucial to gauge how DeFi could disrupt, integrate, or inspire innovation in their own offerings.

19. Stablecoin

Stablecoins are cryptocurrencies designed to keep their value steady by being pegged to a reserve asset, most often a fiat currency like the US Dollar. This peg minimizes volatility and makes them far more predictable than traditional crypto tokens.

Why it matters

Stablecoins serve as critical infrastructure for digital asset adoption. They enable fast, low‑cost cross‑border payments and remittances, combining the efficiency of crypto with the reliability of fiat. For digital commerce, this stability turns them into a trustworthy medium of exchange; a practical bridge between the crypto world and everyday financial transactions.

20. Blockchain

Blockchain is a type of Distributed Ledger Technology (DLT) where records (blocks) are cryptographically linked, making the data immutable, transparent, and highly resistant to tampering.

Why it matters

Blockchain provides unmatched security and traceability for asset transfer, identity management, and record-keeping, eliminating the need for central authority. For enterprise software, it presents the challenge of selecting the correct protocol (public vs. private), developing interoperability solutions with legacy systems, and ensuring proper Smart Contract auditing.

21. DLT (Distributed Ledger Technology)

Distributed Ledger Technology is a framework where transaction records are replicated, shared, and synchronized across a network of computers. Unlike centralized systems, it relies on consensus to ensure accuracy and security. Blockchain is the most well‑known example of DLT.

Why it matters

DLT delivers immutability, transparency, and efficiency, and is designed to mitigate single points of failure. It strengthens trust in record-keeping, enables secure identity management, and supports highly resilient databases for asset transfers. For founders, understanding how to leverage DLT is key to driving operational efficiency, ensuring long-term data immutability, and evaluating its potential for market disruption.

Turning FinTech knowledge into action

FinTech is evolving at breakneck speed, making it essential to understand the core concepts shaping modern finance. From Open Banking and BaaS to WealthTech and BNPL, these innovations are transforming industries, automating processes, and streamlining decision-making.

Keeping up with FinTech terminology doesn’t just keep you informed - it equips you to apply advanced tools and data science in practice. As platforms grow more sophisticated, spanning personal finance to corporate treasury, a solid grasp of the language ensures clarity and confidence.

Ready to build your solution?

The real challenge is turning knowledge into scalable, compliant software. Knowing the term is only the beginning; implementation with precision is what drives success. If you have a strong vision for a financial product, the right technical partner can translate concepts and regulations into high-performing solutions, always prioritizing low latency and robust security.

Connect with our FinTech experts and transform your idea into a compliant, scalable product that delivers a significant ROI and competitive advantage.