The days of calling a broker to order a stock trade are long behind us. Unsurprisingly, technology has become an integral aspect of investment across the world. Financial Technology, or “FinTech,” has led Wall Street’s pneumatic tubing system to be replaced by waves of advancing technologies, from the earliest electronic trading systems to online brokerage websites and mobile trading. Let’s take a look at some of the latest trends in technology across the global financial sector.
Mobile-First Finance Disrupts Investing
Over the past few years, a global trend has been the push towards brokers going mobile. In fact, 61 percent of institutional traders said they were extremely or somewhat likely to use a mobile trading app in 2018, up from 31 percent in 2017.
One example of a mobile-friendly financial institution is U.S.-based financial services company Robinhood. Considered as the darling of the FinTech industry, it has spent the past five years disrupting the brokerage status quo. Starting out with 100,000 pre-registered users in 2013, the company has grown to more than four million accounts, surpassing electronic trading giant E-Trade along the way. The company’s strategy is simple — offer clients an easy-to-use, well-designed trading platform, and make it free.
The global push towards mobile investing also has another universal beneficiary — the financial services industry itself. With transaction fees racing toward (or landing at) zero, the competition has forced companies to heavily invest in cutting-edge technology. As the industry is no longer predicated on brand loyalty, firms around the world are refocusing their efforts on both client-facing and back-office technology. Improved infrastructure and sleek designs can open doors to more clients in less active regions — especially those in emerging markets in Asia, Africa, and other regions.
Commission-Free Trading Grows Globally
From a global perspective, the concept of free trading has been trending. For example, plucked from a large list of hopeful countries, Australia was selected as Robinhood’s first expansion abroad, and Australians are anxiously awaiting free access to the Australian Securities Exchange (ASX). Other UK-based companies have also launched competing products and offerings similar to Robinhood including Freetrade, a London-based stock brokerage upstart, and Revolut, a popular, mobile-focused finance company.
Further, China has also been proactive about entering this market. Tiger Brokers markets its mobile-first trading platform to Chinese clients who are primarily seeking access to the U.S. and Hong Kong exchanges. Its largest competitor, Futu Holdings, has also experienced significant growth thanks to its mobile investing platform. Although neither company markets its services as free, the trading costs for investors are close to zero.
FinTech Expands Market Participation
The results of these low-cost, highly-accessible platforms are markedly beneficial to not only the investors, but to the industry. For example, Robinhood has expanded the market by attracting first-time investors with its new investment accounts. Likewise, E-Trade achieved new company records for both new brokerage accounts and assets in Fiscal Year (FY) 2019.
Back-Office Automation Improves Service and Lowers Costs
The race to the lowest costs has motivated back-office innovation across the globe. Futu Holdings’ IPO prospectus states, “Over the last eight years, we have made significant investments into our technology platform, which has evolved into a highly-automated, multi-product, multi-market, closed-loop technology infrastructure that drives every function of our business.” This full-scale automation allows for better service, faster settlement times, and universally lower transaction fees.
Additionally, a look into Interactive Brokers’ annual report may provide a hint of more benefits to come with this type of automation. After a record year for commission revenue, reported at US$777 million, the company’s management made special note to attribute most of the uptick to futures and options contract trading. Industrywide, the push towards a more liquid derivatives market has been underway since the 2008 crash, albeit less publicly in its early years, and as access to the stock market increases, so does its efficiency.
FinTech May Boost Investment Globally
A more inclusive, robust network of investors leads to more liquid markets. If free mobile trading continues in its current trajectory, the velocity of investment across all parts of the world may follow suit — perhaps even beyond just the swapping of stocks, and all with just a tap of a finger.
As technology continues to evolve at a rapid pace, the global financial sector will become even more complex. New FinTech tools will be introduced to the market, providing greater access and more options for the end user to conduct exchanges with ease. Ultimately, these advancements will expand the scale and efficiency of global trade and investment relations.