Technology has pretty much evolved nonstop in the last hundred years in the financial industry.
From the invention of the first pocket-sized calculator in the early 70s to artificial intelligence today, technology has the power to drastically shape the financial industry.
This blog takes a closer look at five technological creations available today that are shaping the financial industry’s future.
Through its website and award-winning mobile app, Robinhood offers commission-free trading.
The online discount brokerage produces income through payments for order flow. It’s a practice wherein brokers receive direct orders to different parties for trade execution. For this service, they are compensated. Revenue earned through this method is viewed as rebates from market makers and trading venues. Companies directing billions in trades-to-market have the potential for significant profits.
Analysis from 2018 suggests that order flow resulted in $69 million In revenue for Robinhood. Compared to the previous year, this was a 227% increase.
Moreover, this profitable platform supports trading of 5,000-plus stocks. This list includes the majority of equities and exchange-traded funds (ETFs) listed on U.S. exchanges. Also involved are cryptocurrencies (e.g., Bitcoin and Etherium).
Expect the blockchain sphere to shift its retail focus toward institutional uses, as funding continues to surge.
Blockchains offer features (e.g., its public ledger) that will make itself pivotal to future operational infrastructures in FinTech. These platforms automate regulatory processes needed to meet any mandated criteria. The financial industry’s heavy focus on compliance will further encourage the move towards secure technology. This continual change in philosophy will stem from the need to better store, track, and retrieve data.
Cryptocurrency has grown into a $200 billion industry.
The digital currency is extracted from cryptographic encryption techniques designed to protect networks.
Here are just a few advantages crypto offers users:
- Its various payments (e.g., bitcoin, ethereum, dash, stellar) don’t require trusted third parties to purchase goods
- Similar to blockchains, transactions are highly privatized
- Crypto can allow people who can’t access banks to join a financial system
- There are similarities to gold in that crypto is seen as a safe-haven asset and a speculative investment
- The decentralized nature of crypto allows users to create apps without a need for governmental compliance
Furthermore, banks and financial institutions such as JP Morgan, Fidelity Investments, and Swissquote have invested considerable capital in cryptocurrencies.
Long gone are the days where customer intelligence (the ability to predict consumer trends and behaviors) was based on simple criteria.
Instead of centering around focus groups and surveys to obtain individualized data and rich insights about customers, today’s technology has taken it many steps further. Now, businesses can access more in-depth information about the user’s lives—be it their preferences, careers, purchasing activities, etc.
These analytics are undoubtedly lucrative for those who know how to leverage such tools for both customers and financial organizations.
Digital services have overtaken the brick-and-mortar methods of old. In 2020, people are far more likely to pay their bills on their mobile phones than by writing a check or visiting the bank.
Specific teams, budgets, and resources are allocated based on a digital agenda. This notion is reflected in customer experience, operational efficiency, big data collection, and analytics.
It’s an approach that’s manifested itself in payments, retail banking, insurance, and wealth management throughout the financial service industry. Within the next few years, expect more wide-sweeping digital migration in capital markets and commercial banking.
Industry disruptions and innovations should be viewed as the norm in 2020. It’s time for financial organizations to adapt to this shift and embrace the technologies shaping their future.
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