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FinTech Glossary: Your FinTech Literacy Depends On Understanding These 10 Terminology

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Jul 12, 2018

The growth of digital financial technologies is sweeping across the world. Bangladesh is no exception. Online marketspaces like AjkerDeal and Daraz and mobile financial technologies like bKash are redefining how people do business at a pace never experienced before. At the same time, technologies like bitcoin, blockchain are taking the financial world by storm. Many experts predict the world of finance is going to be very different in the upcoming decades.

As a result, if you don’t want to lag behind, now is the best time to get your head around the fintech terminologies. To help you get started, here’s a list of 10 words related to fintech.

Marketspace

The fruit of digital technology. Marketspace refers to online markets that eliminate the distance between buyers and sellers in terms of how transactions take place. It is basically an exchange environment which is based on online information and communication. Here, only the exchange of the products happens in the physical world; but all transactions are processed electronically.

There are currently many businesses in Bangladesh that use online marketspaces to reach out to their customers including AjkerDeal, Daraz, and Chaldal.

P2P

Abbreviation for peer-to-peer. In computing, a P2P network is a distributed application where peers make a portion of their resource (e.g. network bandwidth) available to other participants without the intervention of servers.

In fintech, P2P is defined by direct transfers between two people instead of through an intermediating bank. When you send money through your Bkash app to a friend who also has a personal Bkash account, it is P2P money transfer.

Payment Gateway

A payment gateway is a service whereby payments made by a buyer to a seller is automated. Usually, payment gateway service is provided by third-party e-commerce application service providers that process, authenticate, and issue or reject card transactions on behalf of the merchant through secure internet connections.

Major international payment gateways supported in Bangladesh include BitPay, GoCoin, and Coinbase Commerce. SSL Wireless has also introduced the first-ever local payment gateway in the country called SSLCommerz.

SaaS

Software-as-a-service or SaaS are web applications that are centrally hosted in order to deliver services to users. Under a SaaS model, the software is cloud-based which allows the users to access it via the internet.

The software is usually licensed on a subscription basis and doesn't need to be downloaded or installed. Google apps, Dropbox, Salesforce are examples of SaaS.

Cryptocurrency

Cryptocurrency is a type of digital currency that uses cryptography and can be circulated on the web. It ensures the security of financial transactions.

Cryptocurrencies use decentralized control—unlike centralized electronic money—through distributed ledger technology like a blockchain.

Cryptocurrency Wallet

Crypto wallet is a piece of software that stores the public and private keys used to receive and spend the cryptocurrency.

These keys enable the holder to write on the distributed ledger which, in effect, means the spending of the associated cryptocurrencies. The wallet also shows the balance, spending and the acquisition of digital assets.

Bitcoin

Bitcoin is the world's first cryptocurrency. It is both a digital currency and a payment network. You can buy products online or transfer funds via mobile financial technology with bitcoin.

Unlike traditional currency, Bitcoin isn't regulated by any central bank or a single regulator. It is sent from peer-to-peer without intermediaries and the transactions are logged into a public distributed ledger system (e.g. blockchain).

The central bank has banned the use of bitcoin in Bangladesh in the fear of violation of existing money laundering and terrorist financing regulations.

Blockchain

The blockchain is a type of distributed ledger system where transactions in cryptocurrencies, such as—bitcoin, are registered and recorded. This technology was pioneered by the bitcoin community.

The records on a blockchain are publicly accessible. But data is structured by spreading it out across the network using cryptography, making it impossible for a single party to manipulate it.

Mining

Cryptocurrency mining is the process of verifying transactions encrypted in a cryptocurrency network. The distributed public ledger system (e.g. blockchain) that cryptocurrencies use are publicly available but not freely accessible.

To do that, tech-experts are needed. These experts are called miners who receive a fee for decoding each transaction and keep the process rolling.

Crowdfunding

When small amounts of money are raised from a large number of individuals in order to fund a business venture or a particular project, it's called crowdfunding. Although a relatively new way of fundraising, statistics show that there has been the estimated US $34 billion raised in 2015 by crowdfunding worldwide.

Crowdfunding is still not a very familiar concept in Bangladesh, but projects like Oculus Rift (virtual reality headset) and Tile (a mobile application for locating missing stuff via Bluetooth technology) collected millions of dollars by crowdfunding. Popular crowdfunding platforms include Kickstarter and Indiegogo.

Credit: Photo by Thought Catalog on Unsplash


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Rahatil Ashekan is an undergraduate student at the University of Dhaka studying Accounting and Information Systems. He works as a reporting intern at FS and writes about startup, travel, and e-commerce. You may reach him at rahatilrahat@gmail.com.

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