The impact of technology on financial market. Would you trust robots with your money?

YEREVAN, February 21. /ARKA/. Investing is a way to effectively dispose of one's funds. The investor has a wide choice of tools and methods suitable for different needs. However, many people still do not see the financial market as an accessible field, considering it as something complicated, risky and requiring a lot of capital. The world of investing is responding to this by changing and improving. 

Technology is the key to making the market understandable and convenient for everyone. Today we will look at some popular solutions that are changing the way we approach investing.

Investment platforms

In recent years, the remote format of financial transactions has become a priority for many people. This applies to everyday transactions, such as paying for goods, and doing business. Among other things, there are online services that organize interaction between investors and companies that want to raise money for the development of projects.  Entrepreneurs place proposals on the website of a special platform and receive a loan on condition that they repay it and pay interest. This way of investing offers a number of advantages such as:

- getting a large profit in a relatively short period of time
- online transactions, without the need to execute documents at a bank branch
- small amounts can be invested
- the interest rate at which the investor lends money is higher than for bank deposits and savings accounts
- reliability of the platform and the borrower: platforms must obtain a license from the regulator, check the companies placing their offers and conclude a contract with them. 

The risks of investing through services are primarily related to the non-guarantee of income and the probability of losing money. In addition, the legislation does not offer a unified system for evaluating borrowers, and the platforms themselves determine the criteria. 

It is advantageous for companies to place an investment proposal in a service because it allows them to attract additional funds, receive an appraisal and a confirmed market value.



Automated investments

A solution that affects the entire investment process is the involvement of artificial intelligence. Here we will highlight a few key technologies gaining a foothold in the financial market.  

Robo-advisor - an automated solution based on the use of algorithms. When registering, the investor fills out a questionnaire that allows the software to determine his/her financial status, goals, and risk tolerance. Based on this data, the artificial intelligence selects assets and disposes of them.
There are many platforms with different functionality (Ellevest, Wealthfront, Personal Capital, SoFi, Axos). However, it is possible to highlight the main areas in which most robo-advisors work.
- Allocation of funds in order to diversify the portfolio and minimize risks
- Portfolio rebalancing: advisors adjust the mix of different types of assets based on market performance and the investor's financial goals
- Financial planning and tiered money management
- Some robo-advisors sell unprofitable investments in a tax-efficient manner. This allows for offsetting spending.
- Creating multiple account types to fit specific goals, such as saving or investing in education.

Using technology is often less expensive than going to see a financial advisor. At the same time, the speed of transactions is much faster. 

Algorithms

Investors have access to special software that uses complex mathematical algorithms to analyze huge amounts of data - news, reports, media - and make decisions based on patterns and trends. Thus, trades are made in microseconds and do not require human participation, which helps to avoid mistakes.

Blockchain

It is a technology for storing, verifying and transmitting data through decentralized networks. Information is recorded as a chain of blocks, each block containing a certain number of transactions. Blockchain allows for greater transparency than traditional bases. Any market participant can independently view the register and confirm transactions. The encryption and verification methods used by blockchain make it resistant to hacking and fraud.

This technology is used to create and store cryptocurrencies (Bitcoin, Ethereum, Litecoin and Ripple) and digital financial assets. The latter are similar to traditional instruments - stocks, bonds, bills of exchange - but are tokens (certificates) or digital rights. They are a kind of "shell". The most famous example is NFT: tokens that denote ownership of unique objects, such as art and collectibles. Thus, the development of blockchain opens up ways for investors to invest in alternative assets with great growth potential.

Automation is changing the transaction process in several ways:

- Simplifies investing and makes it more affordable
- Reduces costs by eliminating intermediaries
- Eliminates the risk of human error
- Offers optimal solutions for portfolio diversification and rebalancing
- Enables instant trading

Such technologies, for all their advantages, have not yet taken a leading role in the financial market. Firstly, they are also associated with certain risks:
- The threat of cyberattacks and the resulting loss of data and funds
- Introduction of new regulatory restrictions and requirements
- Technical failures, insufficiently reliable copying and monitoring systems 
- Limited customization 
- Incorrect interpretation of data by algorithms

Secondly, financial technologies seem unfamiliar to most investors. Often people do not want to understand how new instruments work and choose instead the familiar, and therefore seemingly safe way to turn to specialists.  Even with this in mind, the prospects for automated investing are very high, because in today's world there is a demand for faster processes and minimized use of resources.


Development of mobile applications

Brokerage organizations offer their clients various means for making transactions. While in the past terminals - special software or separate websites - were common, now the focus is more on the development and improvement of mobile applications.

This trend in Armenia can be traced by the example of one of the major companies- Freedom Broker, which is part of an international holding company. The broker provides both a web platform and a Tradernet mobile application. It is a single trading interface of its own development, used by more than 400,000 clients of the holding worldwide. It offers seamless access to trading on numerous exchange and OTC trading platforms on a global and local level. Tradernet's characteristic user-friendly interface, high speed and reliability of operation, and wide access to analytical information have recently been made available to Freedom Broker clients in Armenian.

The technological approach to market development attracts new participants and offers new solutions to experienced investors. Processes are becoming more transparent and financial instruments are becoming more diverse. However, it should be taken into account that the regulatory system is not yet fully developed. In addition, you cannot trust all companies and platforms offering online services. You need to make sure that they have sufficient technical capabilities and can ensure the safety of transactions. This can be done by studying the opinions of experts on forums and websites of business publications.

There is no doubt that the influence of digital solutions on the financial market will be growing. By tracking the changes and finding new services for yourself, you can make the investment process more convenient and profitable.   

The material was prepared within the framework of a joint project "The Year of Investing in Oneself " by ARKA, AMI Novosti-Armenia news agencies and Freedom Broker Armenia.

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10:00 02/21/2024