Technological advantages have paved the way for significant global societal, economic and cultural changes. A sector that has benefited tremendously from the advancement of technology is the financial industry. Digital platforms where traditional financial advisors have been replaced by algorithms and software applications have made economic planning a far more personalised experience.
This marriage of technology and finance is referred to as fintech. And when these tools are routed to improve the performance and scope of investments, it is known as investment technology or invest tech.
What is investment technology?
Investment technology leverages consumer and business data as well as various technologies to support the investor ecosystem. This can range from using technology to handle basic investment plans like pensions to more complex wealth management strategies
Some of the areas that investment technology touches upon are automation of investments, fund allocation strategies, financial decision analytics, monitoring of investments and wealth generation.
How investment technology works
Investment technology involves two primary building blocks: big data and artificial intelligence (AI). While big data enables the identification of financial patterns and relevant information, AI allows the application of this data for targeted results.
One such application of investment technology is robo-advisors. Robo-advisors are investment tools that offer automated solutions to a client’s investment needs. Robo-advisors use data from clients, markets and businesses to create customised plans that are free from human biases and focus on individual investment needs.
The numbers also support a growing interest in investment technology over the last few years. Data shows that in 2018, funding towards investment technology endeavours touched $2.8 billion, recording a 47 per cent rise in compound annual growth rate from 2008.
Benefits of investment technology
Investment technology has seen soaring growth among companies and investors due to its many benefits. Some of them are listed below:
Investment technology offers better access to financial services among consumers. Thanks to rapidly increasing digitalisation, these services are more inclusive, catering to seasoned and new investors alike. In addition to providing access to a broader range of investment options, they also act as tools of financial literacy that are available 24*7.
2. Better diversification
Investment technology hinges on accumulating and appropriately disseminating data to meet personalised investment goals. Using tools such as Big Data and AI, investment technology diversifies services and products of the financial sector efficiently.
3. Reduced human bias
Investment technology tools have reduced the finance sector’s dependency on human capital. Tools such as apps to monitor your stocks or more comprehensive setups such as robo-advisors reduce the amount of human intervention. Therefore, customers are not curtailed by factors such as time limitations, efficiency gaps and investor biases. A more automated system would mean lesser emotionally-charged investment choices.
4. Better efficiency
In addition to the abovementioned factors, investment technology can be a cost-effective option for investors and businesses. A trading app that monitors your funds constantly to provide tailored advice is likely to be cheaper than engaging a traditional financial advisor.
With the tremendous growth in cyber and data security, investment technology offers a more holistic and efficient security framework for finances compared to its traditional counterparts.
The rise of digitisation and continued technological advancements promises the scope of innovation in financial planning. This is being achieved through investment technology products and services. As a significant arm of the fintech ecosystem, investment technology offers a simplified and user-oriented approach to investments using tools that benefit both companies and consumers.