During the lockdown, more and more people turned to trading on online brokerage platforms. To respond to this unprecedented trading volume and provide enhanced trading experiences, brokers have adopted innovative technologies such as cloud-based systems and IT applications that form the backbone of the brokerage industry.
Brokers are increasingly migrating to cloud-based systems to respond to surging trading volumes and new account openings. Unlike legacy infrastructure, cloud computing offers easy scalability, cost-effective and fast services, and a level of flexibility never seen before in the industry.
The result? Today, one can enjoy high-value transactions seamlessly, even on a smartphone. Technology has become a critical differentiator in a highly competitive marketplace that helps brokers continuously create value for investors.
Let’s dive into the critical technology applications that have helped brokers stay competitive during the current Covid-19 crisis:
Enterprise in the cloud
A breakthrough in technology, cloud computing relieved brokers of the hassle of managing infrastructure, allowing them to focus on server-side code. This facilitates easy deployment of code at reduced costs by DevOps teams. They also offer the advantage of real-time, dynamic autoscaling. This is essential to serve a growing customer base, but lacks traditional legacy infrastructure with fixed server spaces.
Cloud architectures are designed to help businesses meet growing service demands without worrying about provisioning needs. They are different from legacy servers, where developers estimate and buy server capacity without knowing how much they will use or need later.
In addition to scalability, cloud architectures offer the flexibility to “pay as you go”; and allow businesses to be charged only for what is used, unlike traditional servers, which must be operational 24/7. The result? Greater efficiency at lower cost and without wasting server space.
Data lake and analytics platforms
The data-rich stock industry needs to leverage data and derive real-time insights from it to make critical strategic decisions. Data lakes can work as a secure one-stop-shop for different types of data from various sources, stored in raw or native format, in fully structured, semi-structured and unstructured ways. With data lakes, brokers can collect actionable data and take advantage of real-time analytics to uncover critical and relevant information for faster and more effective decision-making.
The same data lake makes it possible to run different types of analyzes without the need for separate systems. For example, trading desks can leverage the data to achieve a number of specific goals, such as determining which stocks have an abnormal spike in volume. Real-time statistical analysis allows traders to make more informed decisions.
Predictive modeling capabilities
An exceptional customer experience will be the most important competitive advantage for stockbrokers. By using machine learning algorithms to analyze historical data and predict likely outcomes, brokers can forecast investors’ needs and proactively offer personalized services at better prices.
As more sophisticated investors use digital assets such as websites and mobile apps for trading, predictive modeling can help brokers design a user interface that ensures an optimal user experience. For example, a friendly user interface allows the user to evaluate various options before making a buy/sell call. It can let you know if a stock has been labeled as illiquid, expecting corporate actions in the near future, or recent industry-focused news.
Artificial intelligence is finding tremendous application in the brokerage industry. From automating processes to increase efficiency to designing agile, client-centric solutions, AI helps brokers deliver an improved value proposition to investors. By investing in advanced cognitive automation technologies, brokers can reduce paperwork and automate processes, allowing professionals to spend more time on critical decision-making.
AI-powered chatbots can help deliver more personalized services to investors, like stock research, quick and personalized portfolio building, and answering client questions. With an increasingly young pool of investors, global AI spending is projected to grow 48% CAGR and is expected to reach $1.4 billion by 2021. Clearly, AI-powered commerce will be the new standard.
Improved risk management
Strict compliance with regulatory compliance fosters stakeholder confidence. Technology can be a catalyst for growth in an increasingly complex compliance and regulatory risk environment, helping investment dealers modernize and better manage compliance. Early adopters of the technology will gain a competitive advantage over others as they will be able to deliver more accuracy, convenience, and a top-notch customer experience through their services.
From video KYC to using natural language processing (NLP) and cognitive automation processes to facilitate customer onboarding, digitization offers a wealth of opportunities for more seamless compliance. Brokers need to invest in AI-ML models and technologies like big data analytics, biometric recognition to predict fraud risk, cybersecurity, data breach and to boost compliance in an industry plagued by challenges. fraudulent activities.
With the emergence of a digital economy, investor expectations, market trends and business ecosystems have rapidly changed. The only way for brokers to stay ahead is to redefine existing business models through digital transformation.
(Shrini Viswanath is the co-founder and CTO of Upstox. Opinions are her own)