How tech-savvy fintech startups are transforming investment management

By iTechArt, a one-stop source for custom software development.


Between uncannily smart algorithms, out-of-the-box blockchain solutions, and a world caught by surprise on NFTs, it is easy to get lost. Let’s dive into how the investment banking segment is leveraging technology to innovate in the fintech industry.

Enterprises can be notoriously bureaucratic whenever something — anything — within must be changed. Internal platforms, security protocols, workflow processes; the list is long and, invariably, also includes the moneymakers themselves: Their products and services.

Innovation in big corporations demands rounds upon rounds of planning and approval over years of development. Startups, on the other hand, are allowed — and even expected — to experiment at a faster pace. Failure, after all, is cheaper for smaller companies.

Smart technology adoption

For fintech startups, the smart adoption of emerging technologies is undoubtedly the main driver for innovation across the industry. Startup founders are always on the lookout for cutting-edge tech. And how it can be used to inspire the next unicorn-worthy idea. That’s given how no fintech startup gets funded without either a unique business idea or a noteworthy new approach to existing industry practices.

But while the eye-popping valuations of “decacorns” like Stripe, Revolut, and Klarna naturally nudge discussions on fintech towards its most wide-reaching areas such as payment processing or digital wallets. There’s hardly a field where new tech is so thoroughly explored and interconnected as investment banking. Pick any of the top investment banking startups in the market today. For sure, you’ll have AI, machine learning, data analytics, cloud computing, and blockchain all working in tandem to bring the idea to life.

Let’s see how.

The use cases of new tech in investment banking

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Artificial intelligence

Although somewhat baseline in successful fintech apps at this point, AI is leveraged by different industry segments in vastly different ways. Digital banking, for example, usually limits their AI use to chatbots and fraud detection/Know Your Customer systems.

Investment banks, however, marry AI with big data science to analyze huge amounts of both structured and unstructured data — market and customer-related. This enables startups to substantially increase their customer experience with hyper-personalized marketing offers that increase acquisition and retention.

Data science and analytics

In investment banking, when paired with tailor-made AI algorithms, data science can turn a traditional competitor’s offer on its head. Beyond simply preventing fraud, smart algorithms are also able to predict oddball market patterns and investor behaviour. That helps to further enhance risk management for both clients and companies.

With the right UI, all this generated data can be translated into accurate data visualization tools. That make it easier for customers to invest — remember how Robinhood’s greatest selling point is its clean-cut interface — and for established investors to grasp where the best opportunities lay.

Fintech data, of course, must be thoroughly protected. A fintech application’s main currency is trust, and breaches of trust can bury a nascent fintech startup overnight. Investment banks are aware, and increasingly employ multiple cybersecurity measures at their disposal.

Cloud computing

It can significantly bolster the infrastructure of investment banking platforms while reducing the costs to maintain it. Alongside not constantly requiring extra physical space for on-premises servers while scaling, embracing the cloud enhances the exchange of data within the company. That is including the efficiency of big data analytics algorithms. It also promotes an agile work environment.

Furthermore, the big players in cloud computing — Amazon, Google, Microsoft — all have a respected track record with regard to security standards and compliance. Investment banks need to be resilient. Not only to data breaches but to any sort of disruption ranging from power outages to server crashes. A cloud solution all but nullifies those risks.

Blockchain

It is so strongly associated with cryptocurrencies that it’s easy to believe that, for investment companies, being able to offer crypto exchange services on their platform is the go-to benefit the technology provides.

That’s just the front end. With the right tools and developers, a fintech app can embed blockchain in the system itself. That means leveraging the decentralization that made it famous to enhance the platform’s safety through encrypted ledgers managed by no one in particular.

Blockchain enables multiple stakeholders to verify the validity of an operation simultaneously. It means that it also saves costs and time through real-time verification of payments and transactions. Which in turns allows to eschew the traditional waiting period required by regular operations.

With the major use cases covered, how are fintech startups using all this technology? Let’s have a look at some lesser-explored examples.

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Innovative tech uses by investment management startups

Wealthfront is a Californian investment startup focused on helping users save now to buy big later. It lets customers set off medium and long-distance financial goals — take a sabbatical, buy property — and then defines possible automated investment strategies backed by AI. It constantly nudges users about how much money is being saved towards the chosen goal and how the overall process is evolving.

Acorns is a California-based savings and investment company. It allows users to invest spare change automatically based on user patterns and preferences fuelled by smart algorithms. Those same algorithms learn and evolve as the app is used, enabling increasingly efficient investments without the need for micromanagement.

Republic, headquartered in New York, is an investment platform that allows anyone to invest in startups, crypto, real estate, and video game development. To separate it from similar competitors such as GoFundMe or Patreon, it employs two policies that hugely boost the platform’s security and trust. First, it vets applications to its platform, with a reportedly 3% ever making it. Second, it uses blockchain-based code to instantly verify and validate all funding received, updating stakeholders in real-time.

Although not an investment platform, Mythical Games deserves an honourable mention. Because of how quickly non-fungible tokens (NFTs) are becoming a viable investment option, much like cryptocurrencies, and how the industry’s future may look like. The California/Seattle-based gaming startup focuses on infusing their games with blockchain technology. Not only entire in-game player economies powered by blockchains but also individual NFT digital assets. With this, any money invested into in-game digital assets is player-owned, secure against hacks, and doesn’t depreciate over time as long as there are existing players.

Fintech’s future are dozen-sized teams

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It’s no secret that fintech startups are the ones to consistently usher innovation within the industry. Necessity begets creativity. In a market so saturated with different established players, the only way to stand out is to offer something truly unique.

As such, the compass pointing towards the industry’s future is often found with freshly-scaled teams wanting to prove how technology can fulfill their vision. Those are the people that must attempt their hand at something revolutionary to thrive, and in thriving, to propel the industry forward.

Want to have a glimpse of what the future of fintech looks like? Keep an eye out for small groups of tech-savvy enthusiasts bundling together towards a single goal.