It is no news that the finance industry is undergoing a complete overhaul due to the influence of digital transformation. Traditional systems put in place, including traditional brokerages which were once characterized by physical interaction and exclusiveness, are becoming obsolete. The finance industry is witnessing a new era— an era of digitized brokerages. Digitized brokerages are an emerging set of innovative brokerages leveraging technology to offer superior, more accessible, democratized, efficient, and personalized trading experiences. Truly, incorporating technology and digitalization is the best choice for emerging brokerages in 2024
In this article, we shall explore the role of digitalization in maximizing the growth of emerging brokerages as well as how traditional brokerages can leverage technology to compete in this new era.
Digitalization as a Tool for Propelling the Growth of Emerging Brokerages
Here are some of the ways digitalization has strongly influenced the growth of emerging brokerages:
Seamless Account Creation and Management Process: Unlike the traditional account creation process that takes several days with complex paperwork and verification processes, the digitized account creation process is quite seamless. Users can open accounts with brokerages seamlessly and in minutes.
Minimal Operational Cost: Emerging brokerages utilize technologies such as automation and cloud-based solutions to manage their operations. This results in a reduction in overhead costs that would normally be associated with manual routine tasks and physical infrastructure. This reduced operational cost further results in changes like lower investor fees, competitive commissions, and so on.
AI, Algorithmic, and Data-driven Marketing Solutions: These brokerages take advantage of big data analytics technology to curate personalized marketing efforts using user data. They also use algorithms to understand their users and deliver investment recommendations and educational resources tailored to cater to the users’ needs and preferences. AI-powered tools are integrated into platforms for portfolio optimization, personalized investment recommendations, market sentiment analysis, fraud detection, risk management tools, customer service chat boxes, and many others.
Improved Marketing and Outreach: With the aid of digital marketing, emerging brokerages can target their marketing to specific demographics. Target marketing is a very efficient form of marketing made efficient by digital marketing. Brokerages can utilize social media, ad campaigns, content marketing strategies, and so on efficiently and economically.
Global Accessibility: One of the main perks of digital brokerages is the global reach. These emerging brokerages can onboard users worldwide and provide their services to a global audience, even without physical International branches. This global accessibility is also complimented by their scalable infrastructure. Emerging brokerages use cloud-based infrastructure that can scale instantly to accommodate a rapidly growing clientele. This ensures successful and efficient expansion strategies without significant additional costs.
How Traditional Brokerages Can Leverage Technology to Survive in the Digital Era
For traditional brokerages to survive and compete effectively in the digital era, these brokerages must learn to embrace and leverage technology. Below are a few ways for traditional brokerages to bridge the technological gap:
- Adopting the Use of Mobile Platforms: The use of mobile platforms has become quite popular among investors and traders. Any brokerage institution prioritizing its digital transformation should invest heavily in amazing mobile apps. These mobile apps should offer full functionality and exact features as the desktop platform. These mobile apps will be the favorite for traders who want to manage their portfolios and execute trades on the move.
- Adopting Modern User Interface (UI): Brokerages should invest in user-friendly platforms with intuitive interfaces. Modern UI with good navigation features and a simplified and intuitive account creation process will help attract users to the platform.
- Partnerships and Acquisitions: Established brokerages can strategically partner with innovative fintech companies for new concepts and projects that can accelerate the digital transformation plan of the brokerage. The brokerages can also choose to acquire well-performing tech startups with huge potential to own a digital finance solution, have a digital unit, or have access to the digital community of emerging brokerages.
- Enhanced Security Measures: Established brokerages should invest heavily in cybersecurity and robust security features and protocols to ensure the safety of user assets and data.
- Adoption of AI and Robotics: Established brokerages can work towards leveraging AI and robotics for automating routine tasks like account management, report generation, and trade execution. This will help ensure that the staff can spend more time on providing better services for high-net-worth clients.
- Data Analytics: Brokerages should prioritize leveraging user data to offer personalized user experience. Data on user behavior, risk tolerance, and financial goals can be used to create personalized investment recommendations for users