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Trading and Fintech: A Match Made in Success

As we live in an increasingly digital world, it makes sense that our finances also move toward digital processes.

Today, banking and trading can be done from the comforts of our smartphones or computers. In 2022, the global fintech market was valued at £‎157.7 billion. By 2028, it's expected to reach over £‎400.4 billion as governments worldwide support fintech adoption to boost financial inclusion and increase the efficiency of real-time payments or blockchains.

With constant developments in line among fintech companies and financial institutions, it's no wonder that fintech has come to play a significant role for traders and investors. Below, we'll look at how fintech impacts trading.

What is fintech?

Fintech (financial technology) is the use of technology to enhance or automate the delivery and use of financial services and processes. Using specialised software and algorithms, fintech has slowly become a standard among business owners, companies, and consumers to manage their finances digitally. Although physical money and traditional financial services still exist, processes such as stock trading, P2P payments, e-Commerce, wealth management, and standard business payments are all impacted by developments in fintech.

Among the most common types of fintech we engage with daily are card payment machines, which are necessary for conducting business anywhere in the world. In an age of online and mobile payments, card payment machines offer a fast, secure, and reliable way for consumers to pay for products and services. Additionally, most card payment machines today will support other contactless payments, including Apple Pay, Google Pay, and Samsung Pay.

Today, card payment machines are just one of many forms of fintech. Technologies such as artificial intelligence and blockchains are used increasingly in fintech with the rise of cryptocurrencies and branchless banking. Aside from banking and payments, the use of fintech in our daily lives, as mentioned above, extends to lending and trading.

Fintech and trading

One of the prominent uses of fintech among traders and investors is the rise of investment-as-a-service platforms. Investment-as-a-service platforms allow fintech companies, traditional banks, and online sites to offer trading, investing, and custody services across stocks and ETFs.

Alternative forms of currency, such as cryptocurrencies, precious metals, and other commodities, are also included. Today, Europe's leading trading apps, such as UK fintech Plum, Italy's Hype, and French money app Lydia, rely on investment-as-a-service platforms to deliver their services to traders and investors. The convenience of these platforms allows financial institutions to cater to growing consumer and investor demands without a high startup cost for complex software development.

Another popular use of fintech in trading is the robo-advisor. For traders and investors, robo-advisors are digital platforms that rely on automation and algorithms to offer digital investing advice, and can do so for a more affordable price than a traditional, full-service financial advisor.

One of the reasons robo-advisors have become popular among investors is their lower fees and low — or even nonexistent — investment minimums. UK trading news site Morningstar surveyed more than a dozen robo-advisors and found the median advisory fee stood at 0.30% of assets per year.

The site noted that “a traditional financial advisor typically charges 1%. So, if you have a £500,000 portfolio you will pay £5,000 a year with a traditional advisor, while a robo-advisor will cost you £1,500 a year”. This has made them a popular go-to for younger investors or those new to stocks and investments. Of course, traders can also opt to use a combination of robo-advising and traditional advisors to guide their investment journeys for more personalised financial planning.

Ultimately, the rise of fintech in trading and investing has made it more appealing and relatable to younger clients and those who may have a small balance and want to start their investment journey. In our previous article about trader activities in lockdown, it's clear that trading and investing have become more accessible than it used to be.

The ability to trade and invest from smartphones and computers saves us the time and resources to spend on other enriching activities, such as back-testing potentially profitable strategies or starting a trading journal to keep track of our investment journey.