A beginner's guide to FinTech: navigating the jargon
18 April 2016
Do you know your Unicorns from your Gazelles? Your Blockchain from your Bitcoin? And what’s an accelerator when it’s not stuck to the floor of your car?
FinTech (or Finance Technology) is the topic storming the world of financial services, and is already changing the face of banking, insurance, asset management and regulation. But along with the excitement and enthusiasm it creates, there also comes a baffling array of terms and phrases.
If you’re new to the world of FinTech or struggling to keep up with its ever-changing terminology (and zoology) then check out our quick FinTech jargon buster below.
Let’s start with FinTech itself
FinTech encompasses a broad spectrum of companies, technologies and market participants. Startups, financial services companies, market infrastructure and technology companies are all changing the way financial services is done. In turn, they are being influenced by regulators, customers, investors and accelerators who are introducing new ideas and structure. FinTech describes the new technologies, services and companies which are changing financial services.
Accelerators and incubators
Accelerators and Incubators are very similar organisations which select entrepreneurs or startups to join them for a limited time period, often taking an equity stake in return for coaching, mentoring, and introductions to clients and investors. Incubators specialise in nurturing entrepreneurs with great ideas but no business plan to harness them, whilst accelerators take in early stage companies to help accelerate their growth.
PwC are corporate partners of Startupbootcamp FinTech London and Startupbootcamp InsurTech London. Startupbootcamp are one of the world’s foremost startup accelerator networks. They take on 10 promising early stage startups at a time, and work with them over 3 months to accelerate their businesses and launch them into the market.
Unicorns and gazelles
These terms are used to differentiate particularly successful startups. Unicorns are those companies with a valuation in excess of $1bn. But beware, there is a lot of controversy about the label, with allegations of inflated valuations and murky funding rounds. Gazelles are companies which grow at 20% a year for a minimum of four years, from a minimum base of $100,000.
Blockchain and Bitcoin
Blockchain is something you will have heard a lot about if you’re following FinTech in the news. At its most basic, blockchain is a record of data which instead of being held by one entity is distributed across many different entities. This distribution of information has many far-reaching potential consequences for financial services.
Bitcoin is the most famous example of blockchain technology - a cryptocurrency (a currency underpinned by technological surety as opposed to a central bank) whose distribution and ownership is recorded on the blockchain.
The automated provision of financial advice using artificial intelligence. This covers a broad range of services including investment advice, investment management, mortgage and credit advice – indeed any product which can be provided in an automated, digital channel and customers need to be advised on.
Cloud and Software As A Service (SaaS)
Many new technologies and companies are delivering their services ‘over the cloud’ as ‘Software as a Service’ (Saas). Instead of installing the software on site, the technology is accessed over the internet and is hosted on ‘cloud servers’ by a big technology company like Amazon Web Services or similar. This reduces implementation costs for the buyer and makes scaling a business very easy for the startup.
So, hopefully now you’re feeling pretty comfortable with FinTech as it stands in the industry today. You’ll no longer be baffled by blockchain or gazumped by a gazelle. Now you’re an aficionado of FinTech, you can let it surprise you and get involved in its exciting culture of innovation, due to turn the industry inside out.
If you want to start learning more check out our newly published results from the Global FinTech Survey ‘Blurred Lines’, and our report on London FinTech ‘Accelerating Change’.