Tag: information technology

Robo-Advisors are Gaining Popularity in FinTech

June 13, 2017

Investing our hard-earned money is always risky. In fact, any sort of investment and asset allocation is complicated.  And with thousands of investment plans and advice openly floating in the market, we often end up spending a huge amount of time thinking where we should invest. We also worry constantly about how we should go about the financial planning depending on the market dynamics. The arrival of robo-advisors disrupted the traditional fintech sector and changed the way investment models worked so far. Though the term, robo-advisor nearly is nine-years-old, these so-called online wealth managers are increasingly becoming popular in the FinTech services and are building the portfolio for the investors according to their personal needs. What are robo-advisors?  In simplest terms, robo-advisors are computer programs who invest money for the clients in the market. Investors will be asked certain questions about their investment plans, time period and risk tolerance. Robo-advisors using machine learning, big data, and algorithms will manage an ETF (exchange-traded fund) portfolio that best suits the need of the investors online with little or no human intervention. Also, when and how the market moves, the robo-advisors will adjust the portfolio of the client. Interestingly, it was during 1998, the year of Great Recession, when Betterment unveiled to the world the financial innovation, called robo-advisor.  And within a few years, these automated investment platforms driven by artificial intelligence, are one of the developing innovations in the FinTech sector. As indicated by consulting firm AT Kearney, assets under management (AUM) by robo-advisors will take a leap by 68% annually to a gigantic 2.2 trillion in the coming five years.   Robo-advisors have evolved into three distinct models with all sharing the same goal. Fully delegated approach: This model involves standalone firms such as Betterment that use algorithms to recommend stocks and manage portfolios. Their advice is based on user profiles including investment goals and risk tolerance. Their target customers are new retail customers who are not habitual investors. Assisted advisor approach or hybrid robo-advisors: These combine computerized recommendations coupled with on-demand advice from a human being. Established companies like Vanguard’s Personal Advisor offer the hybrid approach for existing clientele. Advanced approach: This model uses complex algorithms to create and manage portfolios. Such companies use in-depth approach model to target HNI/ wealthy investors. Interestingly more firms, dealing with finance, insurance, wealth management and investment gradually understand the disruptive potential of this new innovation and are either buying, building or partnering with robo advisory firms. Now, for the online brokers, who were once-upon-a-time stock brokers, before the Internet revolution completely changed the way finance services were handled, robo advising looks more or less of an electronic service for them. Having said that, traditional companies shouldn’t rush and shift to digital technology suddenly. Reason? Well, let’s not forget they have a number of aging investors who prefer to take decisions from a human advisor till now. In short: at times, they prefer the human touch more than digital. Those firms need to educate the elderly clients about digital platforms and their advantages. This will reduce human liability to manage clients on a day-to-day basis and focus on expansion. Also, it’s important to understand that robo-advisors periodically review recommended portfolios. So, if there is any change in funds or new funds are added, robo-advisors provide relevant reasons for you to decide whether or not to make any changes in your portfolio.  It is important to note that most automated platforms are structured around long-term investments with little or no human intervention in recommended products. But what do you do in short-term investments? In short-term investments, market volatility or in cases of personal emergencies, the automated advisory platform at the most sends the clients’ reminders that he/she is deviating from the long-term goals. However, cash flow and behaviour management suggestions are only offered by full-service robo-advisors. Popular robo-advisors for your investment needs It all started with Betterment, the online investment company based in New York City. Today, they have over $7.3 billion in AUM. From automatic rebalancing, handling diversified portfolios, tax-loss harvesting to managing your IRA, the robo-advisors will be at your disposal for all your financial needs. We list a few companies who are offering customized computer-generated advice. Betterment Wealthfront Nutmeg WiseBanyan Schwab Intelligent Portfolios Vanguard Personal Capital Rebalance IRA Motif Investing Acorns FutureAdvisor Fidelity Go SigFig Blooom LearnVest Now, it is interesting to watch that robo-advisors, which started off in the US are now finding major support in different parts of the world. The market of automated investing is growing at an exponential pace and major players from different countries are increasingly becoming a part of this FinTech journey. From Switzerland, UK to Asia-Pacific (APAC) region, the rising popularity of robo-advisors can be felt in the financial space. As indicated by BI Intelligence, the APAC region will represent $2.4 trillion in robo advisor AUM by 2020.Also, clients across all asset classes are interested in robo-advisors, including the opulent class. According to BI Intelligence, 49% of high-net-worth individuals i.e. HNWIs across the world would consider having a robo advisor manage at least some portions of their money. BI also indicated that by 2020, 60% of these HNWIs would invest 20% of their assets in robo-advisors.In most cases, robo-advisors are considered to be the economical way to invest in contrast to traditional wealth management firms. Agreed, there are challenges for both robo-advisors and traditional firms, which rely on human advisors, to acquire customer base and modulate strategy respectively. So, let’s wait and watch how more investors respond to the new arrangement. Reference: Fox Business, CB Insights, USA Today,   Wall Street Journal, invstr, Forbes, Business Insider, Mint, Economic Times 

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What Is Green Information Technology?

July 22, 2015

There is no doubt that today’s environment is significantly different from the environment of 20 years ago. There are a lot more cars, industries and pollution from all kinds of sources. With developing countries consuming more than developed countries, it is becoming an unsustainable scenario where millions of tons of waste is generated on a continuous basis. Amid all this, there is also the problem of information technology. As IT grew, people and organizations began to buy more computers, devices, servers and other peripherals, leading to more electronic waste. Some of this waste is very hazardous and polluting to the environment. Moreover, computer peripherals tend to use a lot of energy and companies that make profits from the IT sector have a unique responsibility towards their environment. With this in mind, Green Information Technology is the practice of environmentally sustainable computing. Green IT, as a philosophy, came into being in 1992 when the Energy Star labeling system was unveiled by the U.S. Environmental Protection Agency. It is a labeling system that helps companies to reduce greenhouse emissions and save money as well. It does this by identifying superior and green products that reduce greenhouse emissions & energy consumptions. With this in mind, we can kind of gather where the philosophy of Green IT comes from. Now, in order to understand green IT in today’s context, let us take a look at some of the problems that are pulling us down as a society. 1. Electronic waste Today, companies generate a lot of electronic waste. This includes computers, laptops, batteries, chips, smartphones, silicon and a host of other waste products. All this pollute our environment greatly. Green IT involves safe disposal of electronic waste and dealing with companies who will also engage in safe disposal of their electronic waste. Adequate waste disposal methods need to be put in place in all IT departments and this actually needs to be a part of IT governance. 2. Increased energy consumption The more we consume energy, the scarcer coal, water and other products will be. Nuclear technology has its own risks. The best we can do is to reduce energy consumption. It order to do this, companies can adopt cloud computing, instead of buying their own personal infrastructure. Shared platforms and infrastructure help companies to reduce their greenhouse emissions & energy consumptions. It becomes our moral responsibility to choose products and services, which work towards reducing energy consumption. Cloud computing will definitely be one of the preferred options because of this. 3. Culture of replacing products, instead of repairing A number of companies continue to replace their devices and peripherals even when it is not required. These older devices can easily be fixed and used for a few more years. Companies need to actively encourage repairing devices rather than replacing them. This is an important part of green IT. When we repair existing products, waste generated by our companies will be lesser. 4. Using low quality products Low quality products consume more energy and emit more greenhouse gases. They might also be manufactured with unsafe and toxic materials, which do not degrade biologically. In order to avoid this, we will need to invest in high-quality and energy-efficient products, which are green and environmentally friendly. They might prove to be expensive in the beginning but you will save a lot of money in the long term. Low quality products do not go through the standard testing protocols and some of them fail emission level tests, hazardous materials test and other such tests miserably. They are also known to drain electricity more than high quality products. Looking ahead Green IT is only going to grow bigger. As global warming is becoming more important to tackle, we all will need to focus on green IT. This begins with doing business with companies that are green and sustainable. It becomes our responsibility to push green philosophy for the sake of environment. It becomes a moral responsibility not only for companies but also for end users and clients. Unless you go green, people might hesitate to conduct business with you. In the near future, we can see a growing awareness about environment-friendly behaviors and people will likely prefer to use products & services from companies that stand up to their green ideals.

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Differentiation: The Biggest Area for IT Investment in BFSI Sector

June 22, 2015

The Banking, Financial Services and Insurance (BFSI) sector is considered to be the 2nd largest consumer of technology in the world; the first being the Telecom sector. As a consequence, the entire sector, both globally and in India, is expected to witness an increased momentum for different kinds of cloud based solutions. In fact, this highly-regulated sector in the country of India is believed to bring in a lot of growth opportunities. Which is the best IT investment area in the BFSI sector of India? One of the prime areas, as Oracle, the computer technology giant, thinks it to be is “differentiation”, when it comes to IT investment in the BFSI sector. It is more relevant for the Indian BFSI sector for the following reasons: The big players would be concentrating more on digitalization of their products or services. They are more likely to adopt digital distribution of products and services than opening up new branches on different locations. Termed as “the retirement decade”, this decade is being anticipated to come up with about 3 lakhs vacancies in different banks of the public sector, which in turn would pave the way for a major IT spend towards capital and talent management. Finance and integrated risk is another big area for IT investment. Though, initially, it has never been an investment-worthy area, however, the introduction of IFRS, Basel III regulation and a number of other regulatory prescriptions by RBI (Reserve Bank of India) and BIS (Bank of International Settlements) has led to an increased IT investment in this arena. Does cloud feature in the portrayed IT investment trends? Research says that the conventional technologies are still attracting about 70% of the entire IT investment. However, big players like Oracle strongly believes that it’s not far when the IT investment trend would shift from the traditional back office data management to technologies related to customer interaction, mobility, on the fly analytics management etc. Even different studies by some of the famous research firms speak in favour of this. Let’s see how: McKinsey’s Research A recent study by McKinsey shows that the total number of customers opting digital banking is more likely to rise remarkably on a global level. In Asia, the number is expected to reach about 1.7 billion by the year 2020, out of which the country of India alone has been portrayed to have 450 million digital banking customers by the end of that year. Now, in such a scenario, banks looking forward towards acquiring new digital-minded customers need to explore cloud based technologies. In a nutshell, it is better for banks to deploy technologies that can help them glide into the digital banking era. Gartner’s Research According to this reputed IT research and advisory firm of America, more than 60% of the global banks would resort to the cloud based transaction processing. In fact, this is what is making the IT departments of those banks become increasingly bimodal. Coined by this IT research firm, the concept “Bimodal IT” refers to the IT departments of banks having the following two operational modes: Lights on mode Innovation mode However, in order to catch up with the continued changes in customer behaviours, banks based in different parts of the world would need to continue investing in the traditional technologies and simultaneously adopting cloud technologies. Now, this adoption of cloud technologies would not just be completely cost-driven and triggered by improvements in the efficiency level but would primarily be an effect of the major shift in banking behaviours of modern customers; and banks, which plan to stay ahead need to surely opt the emerging cloud technologies. After all, unless a bank cannot be differentiated from others in the positive sense, it can never stay ahead of its competitors. This is what would call for more IT investment in the BFSI sector. In fact, the sector has already started witnessing the growing IT investment opportunity for “differentiation”. The big technology players in the world like Oracle are thinking of introducing “Data-as-a-Service” in place of the traditional Platform-as-a-Service and Software-as-a-Service. This newly introduced notion would enable banks to build digital profiles for customers, based on customers’ daily banking behaviours and drive their revenue accordingly; and all of these just points to the increasing IT investment for differentiation in the BFSI sector.

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