Future Trends in Finance: Innovative Technologies to Consider
New Delhi (India), June 5: As technology permeates various sectors, the finance industry is no exception. In the upcoming years, technological advancements could significantly reshape this sector. Artificial intelligence (AI) is increasingly being integrated into financial services to streamline operations, including stock trading, customer service, and back-office processes. With the expert insights of Mr Hemat Sood, the Managing Director of Findoc, this article will delve into trends that will reshape the finance sector.
Algorithm Trading – The New Wave in the Stock Market
Algorithmic trading, or algo trading, is revolutionizing the stock market by providing swift and reliable solutions that execute numerous trades within seconds. In India, around 50-55% of trades are currently executed through algo trading, and this figure is expected to grow by 15% in the coming years. Globally, the market for algorithmic trading is projected to expand from $18.22 billion in 2023 to over $20.52 billion in 2024, driven by the demand for quick, reliable, and effective order execution.
“Since every microsecond is significant in the stock market, algo trading will help investors capitalise on profitable opportunities efficiently and on time. When leveraged judiciously, it could be the next revolutionising technology in trade execution.” – Mr Hemant Sood, Findoc.
Generative AI and Robo-Advisory Services
Generative AI and robo-advisory services are making significant strides in personalizing financial services. For instance, 13% of Microsoft’s digital infrastructure spending is dedicated to generative AI, with expectations for this to rise to between 15% and 22% by 2024.
These technologies can tailor investment recommendations based on client preferences, historical data, and market conditions. They can also summarize financial reports and critical news, generating economic forecasts for industries of interest to investors, says Mr Hemant Sood.
Robo-advisory services use algorithms to provide financial advice and manage portfolios with minimal human intervention, offering cost-effective and efficient financial planning solutions to a broader audience. The global market for robo-advisory services is expected to reach $41.07 billion by 2027.
Open Banking in India – The Future of Financial Transparency
Open Banking is a transformative innovation in the financial sector, allowing consumers to securely share their financial data with multiple financial institutions through APIs. This technology promotes financial transparency and gives customers greater control over their financial information.
“In India, Open Banking is gradually gaining traction as regulatory frameworks evolve to support it. The Reserve Bank of India’s account aggregator framework is a step towards enabling Open Banking, which facilitates the sharing of financial data across institutions with customer consent.” – Mr Hemant Sood.
Examples of Open Banking Use Cases in India:
- Account Aggregation: Services such as the RBI’s Account Aggregator framework enable users to view all their financial information from multiple banks in one place, enhancing financial management.
- Personal Financial Management (PFM):Apps like INDmoney use Open Banking to aggregate transactions from various bank accounts, helping users track expenses and manage budgets efficiently.
- Enhanced Credit Scoring:Financial institutions can use Open Banking data to assess applicants’ financial behavior more accurately, leading to better loan terms based on actual spending and income patterns.
- Automated Savings:Apps like Scripbox analyze spending patterns and automatically save small amounts into investments, aiding users in saving without active effort.
- Payment Initiation Services:Platforms like Razorpay leverage Open Banking to enable direct bank payments, reducing transaction costs and improving payment speed for merchants.
Sustainable Finance
Sustainability has become a crucial focus in financial decision-making. Financial institutions are prioritizing investments in eco-friendly initiatives such as renewable energy and reducing carbon footprints.
Mr Hemant Sood emphasises that the trend towards sustainable financial products is growing as consumers become more environmentally conscious. This alignment with ESG (Environmental, Social, and Governance) criteria ensures that investments support sustainability while providing financial returns.
Conclusion
The finance sector is on the cusp of a digital transformation, with operations increasingly going digital to minimize manual intervention and inefficiencies. Technologies like AI, robo-advisory services, and Open Banking are at the forefront of this shift, enhancing efficiency and personalization in financial services.
As mobile and e-banking become widespread, AI and automation are set to dominate, leading to an era where customer satisfaction and personalized financial offerings are paramount for both retail and institutional investors, states Mr Hemant Sood.
By integrating these trends and technologies, the finance sector can navigate the dynamic demands of the future, ensuring growth, efficiency, and sustainability.
Future Trends in Finance: Innovative Technologies
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