Home Markets Five technologies driving financial inclusion in capital markets

Five technologies driving financial inclusion in capital markets

by Prabhakar Tiwari (Chief Growth Officer, Angel One Ltd)
Nov 30, 2021
Five technologies driving financial inclusion in capital markets, Market, KonexioNetwork.com

Various technologies have emerged in the past few decades to ensure that goods and services are available and accessible for every section of society on digital platforms. Similarly, financial inclusion refers to the efforts made by different bodies to ensure that financial services are available for everyone and not just for individuals/corporations having high net worth. There could be barriers and restrictions that might affect people's participation in capital markets (such as lack of funds or knowledge). However, financial inclusion helps in eliminating such barriers to ensure that people can freely access capital markets.

The role of technology in driving financial inclusion in the context of capital markets cannot be ignored. As per a report, the country's total number of individual investors increased by almost 142 lakhs in FY 21, most of whom accessed the market from mobile applications. However, the five technologies that are driving financial inclusion in capital markets include the following:

Evolution of handheld devices, fast internet, and brokerage apps

In the past few years, especially in the past decade, mobile technologies have driven financial inclusion. As mentioned before, there is a massive influx of investors in the stock markets, which could be attributed to mobile applications which are simple and effective in operation. Investors do not have to worry about the lack of transparency in the stock market operations, as everything happens in real-time. Furthermore, the emergence of fast internet and efficient smartphones mean that technology is accessible for all. Hence, any improvement by capital market intermediaries to reach the end-user would be reciprocated. These apps are often integrated, giving a chance to the traders to deal in multiple securities such as stocks, debentures, and derivatives.

Biometric Devices

The role of due diligence in the capital market is quite crucial. Due to many regulators such as SEBI, RBI and stock markets, it is essential for the depository participants and brokerage houses to keep track of users' details. Biometric devices help in enabling KYC through digital means and reduce paperwork significantly. In the context of India, UIDAI has ensured that the time undertaken to verify documents and process an entire Demat account has gone down drastically. Therefore, a brokerage account could be ready to trade within a few minutes.

Data Analytics

Data analytics is the science of analysing data and drawing patterns by using mechanical processes and algorithms. The information provided by such methods improves overall decision-making. In the context of capital and financial markets, data analytics helps in improving client servicing. It can help in mimicking investment styles and facilitate future trades. The data analysis and reporting process has also become quicker. Data analytics has also given rise to predictive learning, providing investment advice based on historical trades and market information.

Robotic Process Automation

RPA (Robotic Process Automation) is a software technology that helps build bots that analyse human actions and emulate them through interacting with digital systems and programs.  Many jobs such as data identification and extraction could be carried out through such bots faster without the probability of human errors. RPA helps in introducing automation in different functional areas of an enterprise. Since monotonous tasks are eliminated, employees get a chance to be more innovative. Further, RPA improves the profitability and efficiency of organisations.

Regarding capital market organisations, RPA helps reduce transaction time and can be used in many areas, including transaction reporting, reconciliations, and settlements and payments processes. The process saves a lot of time and ensures the elimination of human error in crucial aspects such as client onboarding, reconciliation and reporting. It is easier for users to open a new trading account, add funds, and withdraw profits which took a lot of time earlier. Further, this aspect makes the entire trading experience more reliable and transparent.

Artificial Intelligence and Machine Learning

Artificial Intelligence and Machine Learning are the latest developments in the field of computer science and are correlated. From the perspective of scope, AI is a broader concept that aims to create intelligent machines that simulate human thinking capability and behaviour. On the other hand, machine learning is a subset of AI wherein machines mimic human actions or other procedures without being programmed explicitly for that purpose. Both these technologies help in ensuring that software applications are more accurate and predictions are improved without any such programming.

With AI and Machine Learning, customer relationship management has improved drastically. Advisory services and risk management are two other areas that are improved through these two technologies. Hybrid robot advisors enable one-to-one interaction with human financial advisors and portfolio managers to carry more complex tasks.

Summing up

The role of technology in driving financial inclusiveness is evident by the significant increase in the participation of retail investors in capital markets. These technologies have worked together to improve transparency and address the legacy issues in capital markets. With further improvements in these technologies expected, the level of financial inclusiveness shall also increase.