Why Does Finance Need so Much Technology?

A lot of what technology is used for in finance is to provide security for clients, principally in relation to the storage of funds and the process of making transactions.

A woman holding a smart phone running a trading or forex app with charts and data. Dario Lo Presti / Shutterstock.,com
A woman holding a smart phone running a trading or forex app with charts and data. Dario Lo Presti / Shutterstock.,com

If you’re new to investing and are just beginning to dip your toes into the world of finance, you may be wondering why there’s so much technology involved.

Aren’t most financial processes fairly simple? While in theory, that’s true, issues of scale complicate everything and there are many different sets of circumstances that the industry has to cater for. It’s also fighting an ongoing battle against criminals who continually probe for weaknesses in every system.

With these things in mind, as well as internal competition, financial institutions of all kinds need not only an extensive range of technologies but also constantly updated ones that will keep them ahead.

Outreach

In the old days, most financial services were accessible only to a relatively small number of people. Even at the turn of the millennium, people who wanted to trade stocks had to go through an agent and have that person physically present in one of a handful of stock exchanges around the world.

Middle-men did nicely out of this but a lot of potential investors were shut out altogether.

Now, thanks to the expansion of the internet and the spread of smartphone access even in remote areas, over a billion people are able to manage their finances online and millions are engaging in trading directly, using online platforms which brokers have been quick to develop in response to demand.

Technologies need to be accessible across a wide range of devices and take into account the needs of different language speakers as well as people with disabilities.

Security

A lot of what technology is used for in finance is to provide security for clients, principally in relation to the storage of funds and the process of making transactions.

The best brokers in South Africa invest heavily in this area and it’s worth paying a little more in fees to have that extra security because even if your trading funds are insured or kept in a secure account, it could take you a significant amount of time to retrieve them if your broker was successfully hacked.

The bulk of work being done around security hinges on encryption technologies for use during transactions but specific workaround site authentication is also in constant demand.

It’s less necessary for clients to worry about these technologies as most of the time they have little effect on the user experience. This is most often impacted where clients go through the process of authenticating themselves.

Speed

The more additional complexity that is added to any system, the more drag is created, and financial transactions need to be fast. This means that increased processing power is needed and other aspects of the system need to become more efficient. With brokers competing to give their clients the edge, there’s a lot of pressure on developers to outdo each other.

This is a hardware issue as much as a software one and it’s additionally complex because to get the best results, there needs to be high-quality hardware at both ends – with the broker and with the client.

In highly competitive markets where a few seconds can make a big difference to profit or loss margins, it is very worthwhile for individual traders to invest in the best equipment they can afford.

Information

The other big thing that can give a trader the edge is information, and new ways to package this are constantly being developed.

At the heart of it is a balancing act: clients need access to as much information as possible but it needs to be presented in a way that makes it reasonably possible for them to process it, even if they have very little experience.

Essentially, they need to be able to zoom in and out from it to look at the details or to see the big picture without getting overwhelmed. Because intuition doesn’t work the same way for everyone, it’s also useful for brokers to be able to present data in different formats. Software for doing all this needs to be fast and responsive and compatible with as wide a range of browsers and operating systems as possible.

With blockchain now playing an increasingly significant role and the markets continuing to expand and diversify, technology is developing faster than ever. There are more and more opportunities opening up for talented developers and customers are enjoying an increasing variety of options. Now is the time to work on getting to grips with technology in finance, not try to avoid it, because there’s going to be a lot more.

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