Glossary of financial terms

An account holder is an individual or entity that owns and manages a financial account.

Alternative banking refers to financial services outside traditional banks, like fintech or digital platforms.

An API (Application Programming Interface) enables software applications to interact and exchange data.

The arithmetic mean is the sum of numbers divided by the count; a common average.

Bacs processes electronic payments in the UK, including direct debits and credits.

A banking partner is a financial institution that collaborates with another company to offer banking services.

The base rate is the central bank's interest rate, influencing lending costs.

Beta measures a stock's volatility relative to the overall market.

Blockchain is a decentralized, digital ledger recording transactions across many computers.

Capital refers to financial assets, such as money, used to start or run a business.

A challenger bank is a newer, often digital-first bank competing with traditional institutions.

A collective investment scheme pools money from multiple investors to invest in a portfolio of assets.

Costs and charges are the expenses associated with a financial product or service.

A custodian bank holds and safeguards financial assets on behalf of clients.

Cryptography is the practice of securing communication and data using codes.

A depository holds securities and facilitates their transfer.

Diversification is spreading investments across various assets to reduce risk.

eKYC (Electronic Know Your Customer) electronically verifies a customer's identity.

Equity represents ownership in a company, usually in the form of shares.

Fintech is technology used to improve and automate financial services.

Forex (FX) is the market where currencies are traded.

Free trade is the exchange of goods and services between countries without tariffs or barriers.

GDPR is a regulation in EU law on data protection and privacy.

GIPS are ethical standards for calculating and reporting investment performance.

A hedge fund is a pooled investment fund that uses complex strategies to maximize returns.

Holding period return is the total return earned on an investment over the period it was held.

An income statement reports a company's financial performance over a specific period.

Inflation is the rate at which the general level of prices for goods and services rises.

An intermediary is a party that facilitates transactions between others.

An international payment is a transfer of funds between parties in different countries.

An investment trust is a UK public limited company that invests in a portfolio of shares.

A landing fee is a charge imposed for accessing a service or facility.

Liquidity is the ease with which an asset can be converted into cash.

The LSE (London Stock Exchange) is a major stock exchange located in London, England.

A margin call demands additional funds when an investor's margin account falls below the required level.

NASDAQ is a US stock exchange known for listing technology companies.

Net income is a company's total revenue minus all expenses.

A non-resident is an individual or entity that does not reside in a particular jurisdiction for tax or legal purposes.

Open banking allows third parties to access bank data to provide new financial services.

PSD2 is an EU directive regulating electronic payment services.

A personalised IBAN is an IBAN specifically assigned to an individual customer.

A professional client is a client with the experience and knowledge to understand financial risks.

A P&L (Profit and Loss) statement, also known as an income statement, reports a company's financial performance over a period.

Quote currency is the second currency in a currency pair, expressing the price of the base currency.

A REIT (Real Estate Investment Trust) is a company that owns, operates, or finances income-producing real estate.

RegTech is technology used to facilitate regulatory compliance.

Safeguarding is protecting client assets and funds.

The S&P 500 is a stock market index tracking 500 large US companies.

A smart contract is a self-executing contract with the terms written into code.

The spot rate is the current price of an asset for immediate delivery.

Accounting standards are rules that govern how financial statements are prepared, ensuring consistency and transparency.

AML (Anti-Money Laundering) comprises regulations and procedures to prevent illegal money from being disguised.

Arbitrage is profiting from price differences of an asset in different markets.

ACH (Automated Clearing House) is an electronic network for US interbank payments.

A balance sheet is a financial statement showing a company's assets, liabilities, and equity at a specific point.

Base currency is the first currency listed in a currency pair, against which the quote currency is valued.

A batch payment involves processing multiple transactions simultaneously, often for efficiency.

The bid-ask spread is the difference between the highest price a buyer will pay and the lowest a seller will accept.

A bull market is a period of rising stock prices.

CBDC (Central Bank Digital Currency) is a digital form of a country's national currency, issued directly by the central bank.

CHAPS is a UK system for high-value, same-day electronic payments.

Compound interest is interest calculated on the initial principal and accumulated interest.

Cross currency refers to a currency pair that does not include the US dollar.

CDD (Customer Due Diligence) involves verifying a customer's identity to prevent financial crimes.

Debanking is when a bank closes or restricts a customer's account.

A derivative is a financial contract whose value is based on an underlying asset.

An ECN (Electronic Communication Network) matches buy and sell orders electronically outside traditional exchanges.

An EMI (Electronic Money Institution) is authorized to issue electronic money.

The FCA (Financial Conduct Authority) regulates financial services in the UK.

Fixed income refers to investments that provide a return in the form of fixed payments, like bonds.

A forward contract is an agreement to buy or sell an asset at a future date at a predetermined price.

Fundamentals are the financial factors that influence a company's or market's value.

A gilt is a UK government bond.

Gross margin is a company's revenue minus the cost of goods sold, expressed as a percentage.

Hedging is a strategy to reduce the risk of adverse price movements.

IBAN (International Bank Account Number) is a standardized format for bank accounts across countries.

An ISA (Individual Savings Account) is a tax-efficient savings or investment account in the UK.

An interest rate is the cost of borrowing money or the return on an investment.

IRR (Internal Rate of Return) is the discount rate that makes the net present value of all cash flows from a project equal to 1 zero.

Investment return is the profit or loss from an investment.

KYC (Know Your Customer) involves verifying a customer's identity to assess risk.

Leverage is the use of borrowed capital to increase potential returns (and risk).

A local IBAN is an IBAN issued by a bank within a specific country.

Margin is the amount of funds required to open or maintain a leveraged trading position.

Money laundering is the process of disguising the proceeds of illegal activity.

Net asset value (NAV) is the total value of a fund's assets minus its liabilities, divided by the number of outstanding shares.

The NYSE (New York Stock Exchange) is a major US stock exchange located in New York City.

An oligopoly is a market structure with a small number of dominant firms.

A payment is the transfer of money in exchange for goods or services.

A PIP (Percentage in Point) is the smallest unit of price change in a currency pair.

A Ponzi scheme is a fraudulent investment scam that pays returns to earlier investors with funds from new investors.

A professional services company provides specialized services to businesses or individuals.

Quantitative easing (QE) is a monetary policy where a central bank buys government bonds to increase the money supply.

Rate of return is the gain or loss on an investment over a period, expressed as a percentage.

RTGS (Real-Time Gross Settlement) is a system for high-value, immediate fund transfers between banks.

A safeguarded account holds client funds separately from a financial institution's own funds.

A sandbox is a controlled environment for testing financial innovations.

Securities are financial instruments representing ownership (equity) or debt.

A spot market is where financial instruments are traded for immediate delivery.

A stablecoin is a cryptocurrency designed to have a stable value, often pegged to a currency or commodity.