What is finance? It refers to a field that is concerned with the investment of assets and liabilities over a given period and space. There will be investments at every stage, even if you plan to buy a business that is already set up, the Forex market, the transport and so on. It is the art of financial management that is usually characterized by risk and uncertainty. In case of manufacturing businesses such as multi tool blades, there is an involvement of Investment banks and other financial organizations to take care of the finance. Something else that is worth the mention is the fact that finance is one of the fields that is undergoing significant changes and evolution and it is not about to stop.
The following are some of the reasons why finance will keep changing.
- The emergence of finance technology
One of the primary reasons as to why finance is changing can be owed to technology. In this case, fintech. Technology keeps improving by the day; with that, new attitudes related to finance are also developed. The development of fintech has increased the bargaining power and choices of the customers by breaking the control that only a few financial institutions had.
The combination of financial start-ups and the emergence of new technologies, like blockchain, is radically shaking up the longstanding financial services industry. There will be continued availability of alternative banking with customers benefiting from low capital requirements and simpler processes of opening new banks. This will come with regulation which will bring more changes to the industry, such as the security of investors’ assets and so on.
2 The inclination to behavioral finance
With the rise of behavioral economics scholars, change will be seen in finance through the application of behavioral finance. Thanks to this, practitioners are making more rational decisions. Consequently, the overall performance of the financial market sees great improvement.
- ETFs
An exchange-traded fund holds assets like bonds, commodities, and stock. Statistics by Statista depict a growing trend of the ETFs over the years. It is something that is not about to stop. How will it change finance? Well, the exponential growth of ETFs like Vanguard VSMAX will encourage more investors to manage their investments, favor low-fee products and seek independent advice. Also, it will result in more regulatory scrutiny.
- Communication
The other reason for the change in finance is communication. In what ways will communication change finance? For one, how information regarding the financial markets is delivered to investors is a big determinant on the financial outcomes.
The presence of the media and digital platforms of communication like social media. Information can be presented as slanted, and that will spark different interpretations on the investors’ side hence action. Communication has influenced investment behavior and also triggered public attention. Communication will continue to catalyze the rate at which shares are bought the moment they are introduced into the market and so on. To summarize, the way information is shared will continue to affect investor decisions in the financial market.
- Politics
Change in the political climate will continue to change the financial markets. You need to understand that finance is never proof of politics. A good example is Brexit; the markets were affected. For instance, consumer confidence took a hit, and the stock markets plunged.
Elections to have an impact on the flow of the markets. This can be attributed to the fact that they are accompanied by uncertainty and instability. A change in government also brings about changes in fiscal policies, which are one of the significant changes that take place in finance. The hope that comes with new political leaders, for instance, better financial management may also change financial enthusiasm.
The five reasons above will be the cause of change in finance; this must be because the change in the above factors is also inevitable.
