Data Science



A Comprehensive Guide to Fintech in Asset Management

If you are an ardent follower of the financial news and investment fundamentals, you would be quite aware that fintech has now been changing the landscape in terms of finance and investment management over the globe. 

With technological advancement and a new era in motion, the innovative delivery and design of financial services are all on a path to set new standards. Also, with the introduction of artificial intelligence and machine learning, the world is about to attend a lavish ceremony of optimization and opportunities in the financial world.

It would be fair to enunciate that fintech has changed the entire ecosystem when it comes to wealth and asset management. Now for a layman to understand, this jargon such as fintech, asset management, etc. might appear to be alienating. Therefore, let’s run through some basics before we dive into the nitty-gritty of the core discussion of the topic.

What is Fintech?

The emergence of online trading and e-facilities has smoothened the pathway for fintech to create a large space in the industry. Fintech, simply put, is the introduction of technology in financial services. 

The same old services with a better outlook and appeal. This has not only led to the attraction of viable tech-savvy investors but has taken the industry by storm by almost crushing the traditional methods and forcing the change in the system for the better. Believe it or not but fintech is the new normal of finance, and investment and portfolio management. 

What is Asset Management?

Asset management, or investment asset management, is simply the process of managing capital appreciation in terms of assets and investments in the long run. An investor acquires and maintains assets with growth potential with the intention to increase his wealth over some time. These investors can range from retail investors to huge corporations, and traditionally, the asset managers or professionals did the job of investment and portfolio management for such investors. 

Fintech trends in investment asset management

The fintech industry has now been witnessing a competitive atmosphere with growing customers. This automatically creates an unavoidable march of asset and investment management towards digitalization, especially to keep up with the emergence of new trends such as the Internet of Things (IoT), cryptocurrency, etc. 

Let us look at some of their brief details

  • IoT or the internet of things is known to connect “smart” devices to the internet and each other. This provides access to real-time data of the physical assets of the clients and this exquisite data can be highly used to improve current financial products and services and capitalize the user experiences.
  • Artificial Intelligence (AI), AI is certainly not new but with its defining uses, it never leaves space to bring about something new to the industry. For instance, Hedge fund companies are now injecting AI into their operations and trading strategies. Robo-advisors, virtual assistants, chatbots, and other automated processes are not only trendy but are highly efficient in retaining clients.
  • Blockchain- It shall not be new information that blockchain is the future of the investment market and for asset management firms, blockchain’s identified benefits are enabling improved data security as well as accelerating the speed of data transmission. This stands to be a critical element to keep the managers afloat and increase the much-required operational efficiency. 

Use of big data and optimization in asset management

The introduction of fintech in the world of investment is not an easy change, especially when it comes to data optimization. This is where the real struggle of the financial services firms starts. Asset management is again a largely data-driven concept and with the online scope, the data at the center is almost bombarding.

Now “Big Data ” refers to those data structures which tend to be large and complex. These cannot be easily manipulated and not with the traditionally available database tools. The use of Big data brings in line innovation, competition, and productivity well in terms of asset management. With big data in the picture, investors are now able to predict sales, recessions as well as future purchase intentions across categories. This has brought in a lot of innovation and changes in the investment management industry.

Innovation in the asset management space

Fintech has created a disruptive innovation in the field. With the activation of automation and service externalization, the client expectation and demand for custom-made services have increased and these have made the firms expedite their process of high‐quality execution and tailored advice. Investing firms compete for the next wave of growth in financial products. These include digital assets, custom indexing, and ESG. The client segments involve high-net-worth investors and uphold the service models that have holistic advice, digital engagement nuance, and, of course, fee modernization. 

Let us look at some of the innovative technologies currently used for wealth and asset management in detail:

  • Robo advisors: This is an interesting concept when talking about innovation in fintech. This online application replicates human advisors of the industry by using distinct algorithms in order to calculate and help the clients select the investment strategies as per the client’s investment objectives. 
  • Smart asset management: This is known to be a co-existence of digital and physical asset management solutions. This encompasses real-time visibility, dynamic modelling, and data intelligence. They provide smart and agile solutions to investment problems and create an ecosystem for both the users and the managers.
  • Mobile functionality: Now long gone are the days when one had to reach the long queues and hours to fill up a stringent form. With the decentralization of work through technology, everything can be done with a click. From finding an asset manager to understanding the best opportunities and filing those tedious forms, everything can be done at the convenience of our mobile devices. This has not only increased the efficiency and effectiveness of the industry but has also brought in a larger space for everyone to co-exist. 

The adaptation of innovation in the field be it data flexibility or artificial intelligence helping you with the utmost challenging tasks, the investment and portfolio management industry is on the verge of restructuring. 

Optimization problems in asset management businesses

This modernization however comes with a caveat, now that with the changing regulatory environment and this looming disruption from the ‘big tech’, must be balanced while the firms require to retain the existing assets with growth opportunities and simultaneously build up the gen-z conglomeration.

How is fintech disrupting this space?

With the proliferation of (AI) tools, fintech has almost transformed the way financial advisors now interact with clients and provide them with the required services. Reports suggest that a quite high percentage of affluent investors, especially those under the age of 40, generally like to do business with investment firms that have online collaboration and work with digital tools.

It can be understood that only those wealth management firms that shall be able to embrace these ideas of new fintech tools while simultaneously managing to navigate the investors under this increasingly complex financial fiasco, shall be the ones who are more likely to thrive.

Future and scope of fintech in asset management:

The covid-19 pandemic has made us realize the importance of contactless transactions, hence the reason why e-payment gateways are at their surging high and are here to stay. The emergence of fintech in the business is not just another shenanigans of the finance industry. Owing to this, we see a sharp rise in fintech investment and outlook.

Let us look at some statistics for example: 

  • Digital payment transactions have increased dramatically across the globe while taking the case of India alone, it has increased from Rs 2 trillion in 2019 to Rs 4 trillion in the 2020 pandemic.
  • From about January to August 2021, digital transactions have totaled Rs 6 trillion. 
  • The value of the Fintech transactions is now expected to rise from about US$ 66 billion in 2019 to US$ 138 billion in 2023, this shall be at a CAGR of 20%. 
  • While business is concerned, as of December 2021, India alone has over 17 Fintech businesses that have set a stage to achieve Unicorn Status.

Businesses with positive fintech investment are at their flourishing stage and for a reason. With the newer technologies and ideas as well as the ease of investment at a click, the industry is bound to see the light of a bright future. Well in terms of an emerging economy, both the investors and the ones in the business need to stay relevant with the times. 

The introduction of new-age digital currencies like crypto and blockchain may not be everyone’s cup of tea to understand but certainly is one of the most important requirements for future. 

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