How to Create an Investment Platform: Costs, Terms, Pitfalls (2024)

In the face of digitalization and the pandemic’simpact on business workflows, the investment industry’sfocus has shifted to online platforms. They allow wealth to grow, and customers understand it.In Australiaalone, the investment platform market wasUS$680 billion in the first half of 2020, with positive growthof8percentin the quarter.

This trend is global and clear for fintech companies and startups. Today, competing platforms are activelybeingbuiltby independent providers.

Therefore, it is worth trying to develop your product, and we’ll tell you how to do it. This article willgive you anoverviewofthe principles of online systems, how theyfunction,thebasic features required, and how to create an investment platform and its development costs. 

ShortOverviewoftheOnlineInvestmentMarketStatistics

Online investments are growing strong. For instance, in UK, Statista notes the rise of digital banking and other services. The share of people using internet banking in Great Britain in 2020 has reached 76percent,compared with 30percentin 2007. 

Thedynamics of Great Britainprovidethe best illustrationfor what is happening all over the world:

The rest of Europe demonstrates the same widespread distribution of online investments, especially in Nordic countries, where online investment services penetration ratesareover 90percent.Thestatistics illustrate that digital banking isnowa primary method of payment in the EU; meanwhile, the use of physical cashhas reduced,a phenomenon thatis noticeable, for example,in Austria and Germany.  

There are numerous online systems for investors in the U.S.According to Forbes,they have54 million active users.Pew Research Center surveysshow that 51percentof U.S.adults bank online. It isexpectedthat the annual valueof digital paymentswill reachUS$726 billion at the end of 2020, and the volume of payment transactions via wearables will be worthUS$500 billion in 2021.

PrinciplesoftheInvestmentPlatforms

In fact, all investment platforms are similar intheirbuilding and working principles. All operations are carried out in a web environment or mobile application.

Such platforms are services that allowusers tomakeinvestments, sellinvestments,andhold funds. In the case oftraditionalbuying investments, you can’t cut out expenses for the qualified adviser. But with a platform, it is easy toconduct your investment activities in theonline environment, which essentially works as a one-stop-shop, saving you moneyonthe services ofmiddlemen.

Another advantage of such systems is easy–to–access investments. Wealth management platforms take the interaction between participants to a significantly higher level. Users can access investment management and consultations easily. The systems simplify the process of investing and may provide funds at a discounted rate.

Another advantage istheirsimple working principle. For a customer, it comes down to several stages:

There are two types of platforms: the first one allowsusers todecideon the specific investments, and the second one creates a portfolio or wrapsinvestments together. The systems usually offer several choices:

• Shares — investments made in enterprises and companies;
• Bonds and gilts— assets that prove lending to an organization orgovernment;and
• Funds that pool shares, bonds, or both.

It’s possible to invest via a D2C (direct to customer) platform orone with a financial adviser feature.In many cases, you can hold the investments purchased in the system.

BasicFeaturesRequiredforaSuccessfulInvestmentPlatform

Personal account

In most cases, thereareseveral types of accounts in the platform:admin, allocator, advisor, client,and other. Because such systems operate with finance, access must be secured with two-factor identification, passwords, or Touch ID. We are not limited to this and offer our clients reliable software protection with Face Recognition login.

In account, the client and, ifpermission isprovided, his adviser can view daily commentary,activity,andcurrency options. The system must maintain a trading history for analysis, and data should be available in a single environment. The personal profile account can include share dealing, fund dealing, and other sections.

Investment portfolio

The investment platform should allowfor thecreation ofas many portfolios as customers need,an aspectwhich is sometimes forgotten.Managementoptionsmust be available to the owner oranadvisor who works with the client and monitors, checks, and confirms his actions.

In most cases, before accessing a portfolio, the customer has to determine a target risk level. Separation helps to create a balanced ratio of venture capital to reliable assets to prevent financial losses. In modern online systems, indicators that require in-depth analysis are determined using datascience,artificial intelligence (AI), andmachine learning (ML) technologies that enhance decision-making and improve efficiency. 

If an advisor is provided, it is recommended to authorize his access to the client’s portfolio. ORIAS (Organization of theInsuranceIntermediariesRegister) code or similar identification will protect the client’s assets from outsiders.

Assets management and search

The assets management section must provide a filtered search using specific criteria to compare and select funds and review them in the results table. Recommended functions are the following:

• Performance reports creation to givecustomers real-time access to investment and visual statistics;
• Restricted investment portfolio usage to ensure that a certain amount of assets remains available in case of exchange rate changes or transfer fees;
• Notifications for the service and customers’ interactionso thatclients don’t need to check the market status regularly to take advantage of the opportunity to buyorsell assets profitably;
• Automated alerts that help usersrespondtomarket changes immediately to mitigate areas of potential risk;and
• Exclusive featuressuch asadvanced fund search, uniquely structured products,or equitiesandETFs accessthatwill favorably distinguish the platform from competitors.

Admin panel

Even the most advanced platform needs a“human touch,” which is why advisors are often operatingthesesystems. They have an admin panel to communicate with customers and manage the core functions, such as investment funds list updating, risk assessment, and customer’s score calculation.

Using the tool, advisors can determine the best way to invest and analyze the essential data like:

• Earnings targets and annual profitability for the year;
• Risks of capital loss and the average loss amount;

• Risky and non-risky assets;and
• Likelihood ofreachingthe goalby the stipulated deadline.

Investments’ placing on a ring-fenced custodian account

Investments made using the online system are usually placed in a ring-fenced dedicated account held with a custodian who is a separate entity (e.g.,abank).Thisis needed to prevent mixing customer and platform assets.

A custodian helpsprotectthe client’s assets from unauthorized use; therefore, it is necessary to provide safe transferoffunds to such an account when developing the system. We can use PCI DSS protocol, 3D Secure multistage data encryption, and similar technologies on your platform to help protectusers’savings from bank card fraud andphishing.

Datasecurity

With the rise of cybercrime, data protection tools and moneygo hand in hand. Whenbuildingaweb and mobileinvestment platform,we at CHI Software use advanced encryption algorithms and authentication servers. We also check the authorization framework to ensure that sensitive data is securedtoreducethe risks ofhackers’ attacks. For web, desktop apps, and mobile devices,we use reliable tools and protocols.

Here’s how, for example, the standard and widespread OAuth2 authorization flow is implemented:

The user sends a request to the web-server to get access to the database (directaccessis forbidden);

• The user follows the link to the provider, looks at the scope parameter, and activates the permission;
• The provider makes a redirect to the specifiedredirect_urion the application domain with the parameters: provider’s user identifier (code) and state value for protection against CSRF and convenience;
• The authentication server provides an access token to verify iton the web-server.

Theclient requests a specific endpoint to receive the token, sending theclient_id,client_secret, code,andredirect_urifor which the code was accepted. Neither the user nor the user-agent and client scripts see the real token for making API requests. Only theclient and the provider knowit, and safety is ensured. The authorization scheme allows third-party apps to access the information via an API and a one-time code that grants security.

Support

Investors, financial and trading companies, and startups highly appreciate quality support. That’s why, if youcreate an investment platform, you should ensure technical, trade, and administrative assistance is available on request instantly.

Phone and email support is a classic and mandatory format, butthat alone isnot enough. Toprovidehigh-quality and timely help, you have to provide a chatbot with a “smart assistant” based on AI. It is also worth providing a platform forum,traders’ social network, or other interactive tools for users to communicate with each other.

MostPopularOnlineInvestmentPlatformsList

Fidelity Investments

Fidelity isa trustworthy, well-rounded platform for research and long-term investments. It is a convenient tool for retirementplanning.

Key features:

• Consumers’ trust — the platform was the winner of Investor’s Business Daily’s 2020 survey for its usability, execution of trades, and attractive terms;
• Stocks, ETFs, mutual funds, fractional share, and more investment forms;
• Brokerage, retirement, and other accountsaresupported;
• No minimum deposit, commission fees on stock,oroptions trades required;
• A mobile application that works with Apple Watch and Google Assistant;
• Unique account security systemMyVoicedetects and verifies the user’s voiceprint.

E*Trade

The system is valued for quick execution, a high-end mobile platform, and many research tools. Users can learn on the go and participate inongoing education. The platform belongs to Morgan Stanley, which operates it as a separate unit.

Key features:

• An online platform that educates investors and provides webinars, news, and videos to users of all levels;
• Helpful customer service, 24/7 phone/online chat support,andprofessional analysts for crafting the trading strategy;
• No commissions for stock and ETF trades and USD 0.65 per options contract (USD0.50 if 30 or more transactions aremadeeach quarter);
• Advanced security measures such as encryption, two-factor authentication, and dedicated fraud protection teams.

TD Ameritrade

A large U.S.platform withanapp that fits newbies and experts. Charles Schwab bought the system in 2020, and it is expected to merge with their service.

Key features:

• Wide range of investments — stocks, options, ETFs, bonds, etc.;
• Standard, retirement, education, and other accounts;
• No minimum deposit, commission for online stock, ETF, and options trades,or additional feesrequired;
• Connection with Alexa-equipped devices that can be asked to operate stocks or get updates;
• Reliable security system, including anomaly/intrusion detection and secure website that uses 128-bit encryption on all data transmission;
• The educational content library — videos, webcasts, texts.

Robinhood

The famous mobile application that has earned its glowing reputation by offering free trades in almost any amount. The platformhas anamazingly friendly interface and fee perksthatbrought the service success with a young audience with limited funds for investment.Since 2013, the platform has collected 13 million customers.

Key features:

• A sleek and easy-to-use mobile app with accessible language and easy-to-use customer service chat;
• Commission-free trades in stocks and ETFs,andfree options and crypto trading;
• Customized news and notifications to control the investing flow;
• The ability to adjust the iOS speech controller and to turn on or change Android’s text-to-speech output.

Acorns

Like Robinhood, Acorns is an app gearedtowarda mobile-friendly audience and beginners. The platform is convenientforpassive investment with account contribution by recurring transfers, round-ups for purchases made with cards, and other creative options.

Key features:

• A gamified app that allows easy automated investing;
• No minimum deposit required, USD1–3 feespermonth (additional fees may apply);
• Stock and bond ETFs investments;
• Brokerage, retirement, and checking accounts;
• Bank-level security — 256-bit encryption and two-factor authentication;
• Investment recommendationsbased on user survey.

Want tocreate an investment platformthat will compete with these systems in a year? Schedule a free consultation with us:

WhatDoYouNeedtoKnowtoStarttheDevelopmentProcess?

Whenbuilding online investment platforms, it’s important to ensure the business’ legal and financial “purity” and study all the nuances of the regulations governing such activities in your chosen jurisdiction.

Often it isn’t clear at first glance that a certification or a license is required to work. The permissions can be difficult to obtain in one country but easy in another. So, while selecting the target country, consider local fintech regulations:

• The U.S.:The fintech industry’s regulation stipulates the need to follow the rules of the FTC and CFPB. These federal government agencies protect customers from deceptive fintech practices. If the wording in the rules for using the platform is vague or there are hidden conditions, the owner company will be fined, or its activities will be prohibited.
• The UK:All investment platforms are regulated by the FCA and have to be an authorized and FCA-registered company. The regulator makes sure that systems adhere to rules about financial promotions andthatbusiness is conducted to the required standards.
• The EU: Every fintech businessmust adhereto GDPR rules, even if there are no physical operations in the European Union. Companies must only work with personal data for a specific purpose and notify EU authorities about breaches within 72 hours.

Every jurisdiction also has Anti–Money Laundering (AML) laws. They help detect suspicious activity (terrorist financing, securities fraud, etc.) and deter criminals by making it harder to hide ill-gotten money.

It should be noted:Singapore, Australia,theUK, and some other countries have Regulatory Sandboxes. This is a testing space with temporarily adjusted regulations. With Regulatory Sandboxes,governments and banks help companies ensure they won’t become subject to rules. You can choose suchajurisdiction to trainyourskills.

HowtoCreateaSuccessfulOnlineInvestmentPlatform

When you’re building an investment platform, you must turn to a team with experienceindeveloping fintech solutions. Unlike many industries, this one requires a deep understanding of thecomplexities oftechnical implementationfor features likehow to make payments, protect money and personal data, manage the investment process,and more.

If you want to design a useful online platform and/or app, it is recommended to hire a software development company specializing in fintech. Its analysts, engineers, andproject managers are notintimidatedby finance-industryjargon andareable to translate complicated terms into the language of technical implementation. When you design a fintech system with people whoare already familiar with the process,you save timeandmoney,andavoid misunderstandings and errors.

Another benefit of a partnership with a professional investment platform development company is a streamlined workflow and attention to detail ofthesystem creation. Let’slook at anoverviewofall the stages.

Research and requirements defining

To develop a custom investment platform, wemustdeterminethe business requirements according to the MVP approach that best suits your project. To formulate the system’s concept, leading competitors, and functions, you will need professional research, market analysis, and technical expertise. At this stage, it is important to find communication channels that fit both sides — Skype, specifications, etc.

Platform’s architecture

An appropriate recommendations package helps to identify unique features. We build theappropriatearchitecture that takes into account all the crucialfactors, like:

• Platform type and target audience.Systems architecturecan widelydiffer, and as we at CHI Software know from experience, B2B solutionsareoften more complex and branched than B2C.So,if you don’t want to rebuild your platform, you firsthavetoidentifythe audience.
• Tools for advisors.Financial consultants are almost always involved and should be provided with an admin panel to communicate with customers.
• Bank integration.The partner structures for the system are selected depending on the business goals and characteristics. But the platform must provide tools for safe, fast transactions. The architecture largely depends on bank numbers and data (customer’s credit score, reliability, etc.).
• Time zones.The platform can be integrated with banks in different countries, and operating hours may vary. Due to the time gap, the data extracts from the actualupdates, but not always the most recentones. The customer makes a decision based on information providedduringworking hours, and it has to be stipulated in the platform rules and reflected inthearchitecture.
• Access for all customers.Ensure that deaf or hard–of–hearing individuals can communicate and use TTY/TDD machines for calls. If your platform is a multi-language website or app (recommended),keepdifferent text lengthsin mindso that there are no layout problems.

UI/UX design

The UI/UX is also genuinely significant: it enhances user experience and increases retention. Considering that financial information displays on the screen as statistics and summaries, you will have to facedesign challengeswhen it comes tobig guides and table sheets.

We use a responsive approach to scale huge amounts of data to thescreen size ofcustomers’ devices. To translate bulky lists into the web and mobile view, we:

• Define tables type —for example,F-shaped pattern (justified if the user needs to constantly read long lists) ormaterialdesignforvisual-spatial and hierarchical elements relationships;
• Fix the rules for data unification so that lists, cards, and other forms of data presentation are uniform;
• Think over filters and sorting —lists’ drop-down by click, lightboxes of settings, etc.;
• Work through all the custom visual elements that are needed in the system.

We also oftenincludesome user guides and hints with pop-ups and notifications, where end users may have advice about the meaning of forms or market fluctuations. But we never forget tostrike abalance between giving enough information and overloading the interface.

Product developmentflow: theminimumviableproduct andMVP with improvements

Every software development process goes through several stages: prototyping, MVP, product improvement, and release.

We create the blueprint prototype of our solutions, test it, and design an MVP with the necessary minimum features. It allows us to find out what users want, analyze the audience’s pain points, and gather useful feedback.

The minimum viable product has to include some importantfeatures. First, it is about code. Some programming languages fit for fintech development, like Python. It is considered as a right and flexiblechoice to adapt the product as you need. The server-side Python language is often used to developmachinelearning,artificialintelligence, andbigdata solutions.

But developers can choose JS, PHP, or other languages, depending on their needs. For instance, Java is platform-independent, while Python may not be suitable for specific mobile applications. JavaScript may be more convenient for IoT solutions, and Swiftcould be bestfor applications related to Apple.

It’s crucial toensurecode logging to be able todeterminewhat caused issues and prevent them. Errors would be shown in the log list, and technical experts will be ready to solve them.

Another core point is security,which isincredibly meaningful to financial and payment solutions. To provide safe transactions, you can use tunneling protocols (PPTP, L2TP/IPsec, IKEv2, SSTP, Open VPN, etc.) or tokenization, wherethe PAN is replaced with a surrogate token value.

One ofthe mosteffective ways to avoid fraud iswithAI and ML-based detection systems, and we at CHI Softwarehave a track record ofsuccessfully applying them. Artificial intelligence is also beneficial in:

• Preventing money laundering—for instance, HSBC usesAI to identify fraud patterns and links between accounts, users, and related parties;
• Analyzing the client’s behavior and buying habits — AI is complemented withbigdata and ML technologies;
• Telephony support services —withspeech recognition and synthesis, IVR voice menus reduce the call center load, and clients receive feedback quickly and resolve basic issues automatically.

Another key feature iscloud integration. Cloud solutions are flexible, customers’ data is stored securely, and platforms successfully process operations in real-time. With CHI Software, you can choose AWS, Google, Microsoft Azure services,and others. 

Fintech highly depends on traditional institutions, relies on their data, andrequires alot ofthird-partyintegration.Better safety and risk reduction must process credit scores analysis, property valuation, etc.Numerous providerscan be streamlined with athird-party API.This approach to investment platform development helps to ensure complete QA coverage and accessible providers adding.

A case study example:

We decided to usethird-party API, certain webprotocols to interact with providers (e. g., SOAP, REST, XML-RPS), and data access protocols(WASP, tokens,and others).

Thethird-party provider returns data in a specific format that (usually) differs fromthat in theproject. We standardizethis datasothe business layer can process it. It is also necessary to write a backend selector that works with certain data providers, depending on the environment.

We also check that thethirdparty has asandbox—an environment for transparent code development and avoiding accidental user information corruption or unwanted charges. A sandbox is a copy of thethird-party features set, and it connects to the code with no data risks. When the work is done,we can simplyreplace this URL withtheproper one.

When aninvestment platform’s MVPdevelopmentis done, we can analyze future steps or even change the principal direction, depending on the project, budget, or client’s reaction. Here we make sure thatcustomers’ actions to get results are clear, and we have covered all the possibilities. The MVP is a process, not a goal. You should search assumptions, find new ways to test them on customers, analyze the results, and make changes to the product if needed.

QA, release, and maintenance

Qualified QA services ensure that the entire lifecycle is covered with advanced testing. For defect tracking, test case management, costs and time reduction, the experts can use various manual and automated tools —for example,Test Rails,TestLink, Zephyr, Redmine, JMeter, SoapUI, Fiddler, Appium,andWireshark. 

When your investment platform is successfully delivered and released, you’ll need customer support for it. As a reliable development company, we offer this option to clients as our integrity guarantee. Technical support can cover various services, like:

• General system updates;
• Addingandreleasing new or updated system versions;
• Program code maintenance;
• Application security management;and
• Functional and API testing.

The online system has to evolve continuously, and new features must appear regularly. That’s why you need to add new demanded functionalities to the fullest extent and in the shortest time. Your platform’s website and mobile app should support the latest OS versions, function correctly across devices, and continually improve the user experience.

TheEstimatedCostofDevelopinganInvestmentPlatform

Thefulldevelopment and implementation costs depend on the complexity and scope of features,thetechnologies used, and the platform’s difficulties and capabilities. When budgeting, it is crucial to remember that investments in advanced technologies pay off many times over. The convenience, stability, and security of the platformwillattract and keep many users.

According to theOutsystems Survey, the development process timeline varies fromthree to sixmonths for an application withbasic featuresset toninemonthsor morefor a complex project, such as an investment platform. The employees’hourly ratesdepend on the location and specialization:

The volume of expenses affects additional factors like website domain registration (thecostof whichmay vary fromUS$20 toUS$100ormore). Website or app total prices may vary fromUS$20,000 toUS$200,000. They are higher in North America and Western Europe,and lower in Eastern Europe, Asia, and India. 

Conclusion

An investment platform is a large-scale system that requires the owner and the developer company to understand all internal processes and user needs. However, if you do everything right, your website and application will become a tool for generating meaningful income foryou andyour customers.

Take the time to select functions thoughtfully, form business requirements, anddevelop and test the platform. It’s worth the effort: the pandemic has fundamentally changed the usual economic mechanisms. Many investors increased theirshare of cash and assets in anticipation of a recession at the end of 2019 and 2020. Now they are ready to use them. Online financial management has become a priority investment area, and the trading data capacityis expectedto grow by 60percenteach year.

Therefore, if you startbuilding an investment platformnow, you will receive a product that will lead you to the top of thefieldand remain relevant and in demand for a long time.We at CHI Softwareare standing by tohelp you with this.