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What Improvements Has Foreign Exchange Seen Thanks to Fintech?

It’s hard to ignore the presence of fintech all around us these days, and it looks like the situation is only going to move further in that direction if current trends are to be of any indication. There is also a lot of speculation regarding the exact place that fintech has in our world at the moment, but one thing is clear – sectors like foreign exchange are seeing particularly significant changes. Those changes can be hard to pinpoint if one only looks at the separate components though, and it’s important to consider the multiple different effects of fintech in those areas.

The Difference Between Foreign Exchange and Forex

Many people confuse the terms “forex” and “foreign exchange” or ECN and use them interchangeably, but the reality is that the two concepts are quite different and separate from each other. Forex refers to speculative trading with foreign currency with leverage, which means that traders are allowed to take on major risks that are not always covered by their current finances. This can – and often does – result in significant losses for inexperienced traders, and even for some major players when they get hit in an unlucky way.

On the other hand, foreign exchange simply refers to converting between different currencies without any leverage, something which can be just as lucrative when one understands the intricacies of the financial market properly.

Modern Solutions for the Industry

Fintech has done a lot to reduce the costs associated with foreign exchange, and this applies to both customers as well as banks. Fees have gone down across the board, and many modern networks provide additional services that were not available before. The changes in fees, in particular, have had a very positive effect on the market, and many more people are drawn to this type of trading today as a result. This can only be a good thing in the long run as it contributes to the stability of the market.

Combating Fraud

Fraud has always been a major problem in the world of finances, especially when in the foreign exchange sector. Modern technology and fintech, in particular, has made many positive contributions to this problem, and we’re getting closer to a state where things like money laundering will be a remnant of the past. Of course, it’s not going to happen overnight, and it’s a gradual change that requires the involvement of everyone in the sector. This also includes collecting a lot of data and analyzing it thoroughly, something which might take a long time. We may not even have the technological capacity to do the full analysis required yet, but we’re getting there at a steady pace.

The best part is, we’re probably just seeing the tip of the iceberg here. It’s not unlikely that foreign exchange is going to continue evolving even more, and fintech is going to be in the center of those developments. Hopefully, the world as a whole manages to keep up with the rapid pace of development, as an imbalance in the way this technology is applied could be harmful. 

 

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