Fintech terms and acronyms

Fintech mixes payments, banking, compliance and software vocabulary. These short definitions help engineers, operators and finance colleagues talk about the same thing.

ACH

Automated Clearing House: the US electronic network for batch bank transfers such as payroll and bill payments.

AML

Anti-money laundering: laws and controls designed to detect and prevent the disguising of illegally obtained funds.

API banking

Offering account and payment functions to other software through programmatic interfaces.

APR

Annual percentage rate: the yearly cost of borrowing, including interest and certain fees.

APY

Annual percentage yield: the yearly return on a deposit, including compounding.

Authorization

The step in a card payment where the issuer approves or declines the transaction and holds the funds.

BaaS

Banking as a service: a licensed bank exposing its infrastructure so other companies can offer financial products.

BIN

Bank identification number: the leading digits of a card number that identify the issuing institution.

BNPL

Buy now, pay later: short-term financing that splits a purchase into installments.

Capture

The step that turns an authorized card payment into a request to actually move the funds.

Chargeback

A forced reversal of a card payment initiated by the cardholder's bank, usually after a dispute.

Clearing

The exchange of transaction details between banks before settlement.

Core banking

The central system a bank uses to maintain accounts, balances and transactions.

CDD

Customer due diligence: verifying a customer's identity and assessing their risk.

Custodian

An institution that holds financial assets on behalf of their owners.

DeFi

Decentralized finance: financial services built on blockchains using smart contracts instead of intermediaries.

Double-entry ledger

A bookkeeping model in which each transaction is recorded as equal debits and credits across accounts.

EMI

Electronic money institution: a firm authorized in some jurisdictions to issue electronic money and provide payments.

FX

Foreign exchange: converting one currency into another.

Float

Money held temporarily by a company between receiving and paying it out.

Interchange

The fee paid by a merchant's bank to a card issuer on each card transaction.

Issuer

The bank or company that provides a payment card to the cardholder.

KYB

Know your business: verifying the identity, ownership and legitimacy of a business customer.

KYC

Know your customer: verifying who a customer is before and during a financial relationship.

Merchant acquirer

The bank or processor that accepts card payments on behalf of a merchant.

MCC

Merchant category code: a four-digit code describing the type of business a merchant operates.

Neobank

A digital-only bank that operates without physical branches.

Open banking

A framework in which customers can authorize third parties to access their bank data or initiate payments.

Payment facilitator

A company that lets many sub-merchants accept payments under its own master merchant account.

PCI DSS

Payment Card Industry Data Security Standard: security requirements for organizations that handle card data.

PSD2

The EU's second Payment Services Directive, which requires strong customer authentication and opened bank data to licensed third parties.

PSP

Payment service provider: a company that offers merchants the ability to accept various payment methods.

Reconciliation

Matching internal records against bank or processor statements to find and resolve differences.

RTP

Real-time payments: systems that move money between accounts within seconds at any time of day.

SCA

Strong customer authentication: a login or payment check using two or more independent factors.

Settlement

The final transfer of funds between parties after a transaction is cleared.

SWIFT

A messaging network banks use to send standardized instructions for cross-border payments.

Tokenization

Replacing sensitive data such as a card number with a non-sensitive substitute that is useless if stolen.

Underwriting

Assessing the risk of a loan, policy or account to decide whether and on what terms to accept it.

Wire transfer

A bank-to-bank electronic transfer, typically same-day and used for large or urgent amounts.