A lexicon to better understand FinTech

Fintech is a term resulting from the combination of the words "finance" and "technology". Appeared a few years ago, it describes a group of innovative activities aimed at using technology and digital to improve and / or revolutionize the finance sector. In this article, we help you familiarize yourself with some terms related to this ecosystem.

Electronic payments

Electronic payments are any type of payment that is made without paper (cash or check), for example by means of a credit or debit card in a store.

How it works?

You have probably made an electronic payment without realizing it beforehand. Your payments by bank cards, transfers, direct debits, by mobile phone, by QR code as well as your online payments all fall into this payment category. To find out more, do not hesitate to consult our article on the new payment methods.

What are the risks?

Electronic payments generally involve the transmission of personal information electronically to other organizations, such as financial institutions and payment processors. This type of payment is subject to increasingly prudential and strict rules and constraints to guarantee data security during these electronic transactions.

3DS

3DS (referring to “3 Domain Secure”) is a security protocol implemented by the European directive on payment services. This directive, in application since 2009, aims to protect consumers against fraudulent transactions and makes strong authentication (double authentication) with the 3D-Secure system mandatory for online payments. In order to respond to the evolution of this form of payment, the protocol has been revised, under the name of 3DS-2, to provide support for electronic wallets and contactless mobile payments.

How it works?

The 3DS-2 provides for integration with browsers and mobile banking applications as well as multi-factor authentication. By paying online or with your mobile, you may need to validate the transaction with your banking application.

What are the risks ?

Make sure you have installed your banking application correctly. Without it downloaded and updated, the payment may not go through. Also check that your mobile device is correctly registered and associated with your bank account within your bank's application.

ACPR

It is the Prudential Control and Resolution Authority, the French banking and insurance supervisory body. It is an institution integrated into the Banque de France, responsible for monitoring the activity of banks and insurance companies within the territory.

What there is to know:

The main mission of the ACPR is to ensure financial stability, supervise the banking and insurance sector, protect customers in the banking sector and provide a global view of the financial system. In addition, it acts as a tribunal by sanctioning breaches of laws and regulations at the national level and represents France in international banking and insurance bodies.

How it works:

The Authority carries out remote controls, as well as on-site controls carried out by the General Inspectorate of the Banque de France. The ACPR cooperates with the Financial Markets Authority (AMF) and TRACFIN - the intelligence service under the authority of the Ministry of the Economy.

Electronic currencies

Electronic money is monetary value stored in an electronic form (including magnetic). It represents a claim on the issuer, is issued against the remittance of funds, is used to carry out payment transactions and is accepted by a natural or legal person other than the issuer of electronic money.

How it works?

You can get electronic money through the organization that generates this currency and keep or accumulate the amount held in your digital wallet. This electronic money maintains a link with traditional currencies as long as it is expressed in the same unit of account (eg euro, dollar, etc.) and that it is accepted by people other than the issuer.

What are the risks?

You can get electronic money through the organization that generates this currency and keep or accumulate the amount held in your digital wallet. This electronic money maintains a link with traditional currencies as long as it is expressed in the same unit of account (eg euro, dollar, etc.) and that it is accepted by people other than the issuer.

Virtual currencies

Virtual currency is defined as a unit of account stored on an electronic medium created by a person (natural or legal) and intended to account for exchanges. There are 3 types of virtual currencies: closed virtual currency, virtual currency with one-way flow and virtual currency with two-way flow. Virtual currency differs from electronic money because it is not defined by a financial or economic law in force, is not regulated by a central bank and cannot be issued by financial institutions.

How it works?

  • Often used in video games (ex: World of warcraft), closed virtual currency can only be consumed within a virtual community for virtual goods or services. It cannot be converted into legal tender and has no connection with the real economy.
  • One-way flow virtual currency can be purchased directly with legal currency, at a set exchange rate, but cannot be converted back to legal tender. However, it allows you to buy virtual goods and services as much as real goods or services (eg: NikeFuel, AmazonCoin, Airlines Miles).
  • Bidirectional flow virtual currencies, or cryptocurrencies, are virtual currencies that can be converted into legal currencies. They are subject to a currency purchase rate as well as a resale rate (eg: Bitcoin). The cryptocurrency proxy is done through crypto platforms dedicated to this exchange. The storage of your cryptocurrencies is done in a digital wallet locked with a password that only you have in order to guarantee its security.

What are the risks?

Portfolios holding virtual currency with unidirectional flow are subject to derogatory rules resulting from European texts and only allow exchanges of a limited amount. These are essentially micro-payment systems. As for the regulation of cryptocurrency, it is set only by its community. All transactions associated with this currency (payment, transfer, storage) are done in a decentralized manner. User data remains private and no bank can interfere in the process. Their values remain very volatile and it is common for a user to lose the password that unlocks his wallet!

The "Neo-banks"

It's very simple, you download the application from the neo-bank, create your account and carry out the user verifications (KYC) by providing a copy of the required documents. Once your account is verified and validated, you can download your virtual card and install it in your smartphone wallet. You can also opt to receive a physical card by mail. Payments are made as for contactless mobile payments.

How it works?

It's very simple, you download the application from the neo-bank, create your account and carry out the user verifications (KYC) by providing a copy of the required documents. Once your account is verified and validated, you can download your virtual card and install it in your smartphone wallet. You can also opt to receive a physical card by mail. Payments are made as for contactless mobile payments.

What are the risks?

Some of these banks are not guaranteed by the ACPR. If a neo-bank without accreditations were to go bankrupt, the Deposit Guarantee and Resolution Fund (FGDR) could not compensate depositors for the guaranteed amount.