The advent of free markets in a globalized world has meant increased opportunities for millions of people. The innovations in the financial sector, particularly in banking and investments, has removed some of the long-standing barriers to entry for a significant portion of the global population, leading to a more prosperous world economy.
But what specific financial breakthroughs enabled the fastest pace of economic growth in human history and what can we learn from this? – Let’s find out.
The rise of digital banking
The increasing accessibility of the internet has enabled commercial banks around the world to increase their reach and allow more and more consumers to have access to a bank account and financing for business ventures.
Online banking has played a significant role in this process, as the number of unbanked individuals has been steadily decreasing over the past decades.
The ability to take out loans and control their finances using a smartphone or laptop has meant that more and more people are able to escape abject poverty, driving economic growth in developing countries in the process.
Digital banking ecosystems also allow the integration of other financial services, such as insurance, tax reporting, utilities, and more. This gives consumers an overview of their finances and an ability to make more informed decisions based on their financial standing.
The democratization of financial markets
Another important trend of the past few years has been the democratization of finance, which has had great implications for a wide range of industries and the way individuals handle investments.
For example, individuals are now able to own shares in asset classes that were otherwise only accessible to the rich, such as commercial real estate, precious metals, collectibles, fine art, and more.
The democratization trend has also sweeped the brokerage industries as well. Forex trading has become particularly prevalent in developing countries – giving individuals the necessary access to opportunities to safeguard and grow their wealth.
Access to leverage in forex trading has further boosted the buying power of individual traders with modest capital, which has accelerated their returns, leading to greater prosperity.
Making money using forex trading has become incredibly popular. However, can you trade forex without leverage? – While such an approach is indeed possible, it does require significantly more capital on behalf of the traders in order to generate the same returns leveraged trading would.
Flexible regulations and oversight
The financial sector is notorious for stringent regulations and scrutiny. While this may be justified in order to deter illicit activity, it also creates barriers to entry for new institutions to form and clients to gain access to greater financial opportunities.
Luckily, developed economies around the world have been making strides in streamlining their regulatory and licensing regimes to avoid squashing competition with bloated bureaucracies.
This has been especially prevalent in the cryptocurrency market, where the issue of regulatory handling of crypto has been the hot topic of the past few years.
Some countries, such as Switzerland, have categorized crypto as an asset class, as opposed to a security, while others are still debating how to classify crypto investments.
Online trading and automatization
The rise of digitization of the financial sectors has directly affected how individuals and corporations interact with the financial markets.
Anyone can open a brokerage account and use a wide variety of software tools to help them sift through the market, choose which securities to trade and execute orders in a matter of seconds.
This is especially true for automated solutions, which allow market participants to take advantage of AI and machine learning algorithms to analyze markets and execute trades.
With low fees, user-friendly interfaces, and access to a wealth of market data and analysis tools, online trading platforms have made it easier for both seasoned investors and newcomers to participate in the financial markets and generate returns.
