How fintech infusion is enhancing the capital market experience

Until a few years ago, a majority of Indians could neither afford brokerage services nor find it convenient to trade on the markets remotely. But with the advent of mobile-app-based services, they can buy, sell, and trade stocks and commodities in a matter of a few minutes

How fintech infusion is enhancing the capital market experience

Friday April 09, 2021,

5 min Read

The stock markets across the world have been significantly influenced by the use of technology since the mid-80s to early 90s, as they went paper-less through the adoption of computerised and algorithm-based models.

The processing of large swathes of data changed how financial markets functioned, as it opened up digital trading platforms for retail investors worldwide. Being one of the first industries to integrate tech into everyday processes, it enabled easy access to stock market trading and other services that came with it. 

However, the most recognisable disruption started just a few years ago due to the proliferation of fintechs globally, with trends in India keeping pace with the best tech companies in the world. India’s sizable young population, the growing new investor base of many brokerage houses, and the government’s push to go digital and cashless created a conducive environment for startups and established fintechs to flourish.  

Innovations by fintechs and their impact on capital markets

India is now home to one of the largest smartphone and active internet users, thanks to advancements in mobile and communication technologies and a steadfast emphasis on improving the country’s digital infrastructure.

With an estimated 700 million active internet users as of 2021, India’s young users are widely recognised to be tech-savvy, with several million of them taking to mobile apps to perform online transactions through digital payment gateways.

Having observed the role of fintechs in forwarding the digital inclusion agenda, several BFSI players are invested in bringing these technologies into their services. Brokerage houses and trading platforms are also among the biggest beneficiaries of fintech innovation. The tech solutions, which are being integrated into their services, are bringing capital market access to investors from the remotest parts of India.

Until a few years ago, a majority of Indians could neither afford brokerage services nor find it convenient to trade on the markets remotely. With the advent of mobile-app-based services, they can buy, sell, and trade stocks and commodities in a matter of a few minutes.

Consequently, fintech apps and digital brokerage services have now become the norm, with millions joining every quarter, without having to visit any dealer or authorised brokers physically. 

The technology behind the process and its impact on the industry

The innovation is not just confined to mobile apps and a multitude of services for the customers. State-of-the-art technologies are being implemented through the integration of AI, Data Analytics, and machine learning-led processes, which is helping companies in many ways.

It is influencing the speed of operations, accuracy of data being presented publicly, and building security features against data theft and fraudulent activities. In addition to this, the remote onboarding of new customers is made possible with two-factor authentication, which is backed by AI and facial recognition software. 

Digital KYC procedures are replacing traditional authentication and verification methods, and agents are not required to conduct in-person checks anymore. Today, a prospective customer can sign up for services by presenting digital copies of documents, live tracking, etc. For such procedures, some BFSI players geotag the applicant’s location to check whether the place they declared matches with the data processed by the technology.

Moreover, facial recognition and document verification software allow service providers to skim through official records to verify the authenticity of the documents and information provided.

Understandably, the breakthrough in technology is impacting not just the stock markets ecosystem, but also BFSI players and other industries like insurance, D2C brands, ecommerce, etc., which are now actively using it to investigate customer profiles. 

Varied applications of fintech in the stock market space 

Within the wider world of capital markets, we are already witnessing the work of fintechs working wonders in aspects such as cybersecurity, algorithmic trading, trading, and advisory through mobile, etc. to name a few. Trading platforms can run sophisticated programmes through blockchain-run features, which are ensuring the safety and security of sensitive information.

It includes critical details such as transaction history of traded stocks, commodities, futures, etc. Fintech firms are building tools of high-utility while ensuring speedy transactions and error-free processing of requests from investors. 

Furthermore, since India’s 2016 move to demonetise, there has been a manifold increase in the usage of digital payment gateways. Interestingly, digital transactions have become so ubiquitous that anyone - ranging from a corner shop to millennial investors - is hooked onto the financial services apps.

Keeping their interests in mind, digital brokers and fintech companies are designing apps for a smartphone-frenzied generation, who are inclined to perform financial transactions digitally. The digital payment gateways and digital brokers are giving traditional trading platforms and discount brokers a run for their money in various ways.

Firstly, the scale has increased to such an extent that the commission rates have come down to almost zero, while intraday trades have been made inexpensive. Add to this the availability of various services all on a single platform. 

An investor can perform transactions with stores, invest in pension schemes and mutual funds, generate returns from IPO investments, trade on commodity exchanges, buy and sell on stock markets, learn about investing, and receive professional advice from experts among others, through just one mobile app.

Even traditional commodities like gold, which are popular mostly as physical commodities, are being traded with ease on payment gateway apps as Gold ETFs. This level of disruption of the Indian economy and the inclusion of the least common denominator into the financial markets is made possible by fintech innovation, which will only accelerate India further. 

Edited by Megha Reddy

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)