Fintech refers to the use of advanced technology to provide financial services to consumers and businesses — from buying and selling cryptocurrency, to authenticating electronic payments.
The fintech industry has grown quickly in the past several years. During the COVID-19 pandemic, fintech adoption skyrocketed. Estimates show that consumers and businesses advanced 5 years in the adoption of digital technologies in a matter of about 8 weeks. The industry is expected to continue growing in the coming years and is predicted to reach $332.5 billion by 2028. This represents an overall growth rate of 19.8% per year from 2022 through 2028. That growth is creating new opportunities for businesses while helping them to operate more effectively.
Traditional banks are generally focused on the interests of their shareholders, with customer service being a valuable but secondary concern. Conversely, fintech promotes the needs of its end user. This customer-centric value proposition raises the bar for traditional banks, while providing opportunities for them to streamline their operations.
Traditional banks are leveraging fintech to provide better services by investing in startups or partnering with them to provide innovative products and services to customers. According to a Business Insider survey, 89% of consumers said they used mobile banking. When surveying millennials, that number jumped to a whopping 97%. This is just one example of how fintech has disrupted traditional banking.
Fintech has advanced into several financial service sectors, including payments, lending, investing, insurance, and real estate. Common fintech startups can range from digital wallets to lending platforms, but in the past decade several companies have taken these technologies into the mainstream.
- Stripe – Payment processing for online retailers
- Klarna – Small purchase financing for consumers
- FTX – Cryptocurrency exchange services
- The American Deposit Management Co. [ADM] – Business deposit management
- Chime – Digital banking alternative
- Ripple – International payments and cryptocurrency
These are just a few examples of companies that are changing the landscape of finance with their innovative services. As fintech advances, expect more companies like these to become household names.
Like other types of technology, there is a wide variety of fintech providers who offer unique services to differing customer bases. Fintech services come in many different forms, but they generally fall into three main categories:
1. Business-to-business (B2B) fintech services
These tools are designed to help businesses work better together or to help businesses serve each other in a more efficient way. This technology is disrupting many different sectors, like cash management.
For example, ADM has developed a proprietary deposit management service, Marketplace Banking™, that gives businesses access to unlimited deposit protection.
2. Business-to-consumer (B2C) fintech services.
These are tools designed to help businesses provide expanded services to consumers and / or increase their bottom lines. B2C fintech has been disrupting banking and other B2C industries for years and is expected to continue to help businesses provide better service to their customers in the future.
Great examples of this type of technology are online banks, such as Ally, and even online banking portals offered by traditional brick-and-mortar banks. Technologies like PayPal and Robinhood can fall into this category as well.
3. Consumer-to-consumer (C2C) fintech services.
This type of service is designed to help consumers interact with each other. Some C2C fintech providers can replace traditional banking functions with peer-to-peer alternatives. Technologies like this are changing how consumers manage their finances by reducing their dependency on physical cash.
One of the best examples of these services is Venmo. This technology has revolutionized the way people exchange money. Rather than trading cash or checks, consumers can send money directly to each other, instantly and often with no charge. Even Google has experimented in this space by allowing Gmail users to attach cash directly to emails.
While fintech is sometimes seen as a disruptor to traditional banking, that is not always the case. In recent years, fintech has opened the door for non-bank service providers to add value to the banking process. From deposit management to business escrow, fintech powered financial services can make business processes more streamlined, secure, and efficient.
In the modern world, technology is no longer a nice-to-have – it’s a must. Which is why businesses should pay close attention to developments in the fintech industry and take advantage of the benefits of this new technology.
Fintech is at the heart of ADM
At the American Deposit Management Co. [ADM], we have developed proprietary fintech to manage business deposits and help firms maximize their returns while providing access to FDIC / NCUA insurance coverage for all their cash. Our company has also leveraged fintech to create a business escrow service that provides nationally competitive returns and the ultimate protection for escrow cash.
When businesses work with ADM, they get the latest technology and a financial partner they can trust. Our team is our secret sauce, and you’ll understand that when you work with us. To learn more about fintech and how ADM helps businesses with all of their cash management needs, contact one of our friendly associates today.