Improved enterprise agility – the ability to innovate, adapt and respond quickly – is the mark of a successful digital transformation. This blog post will discuss the major opportunities for digital transformation within the financial sector.
What Is Digital Transformation?
Digital transformation involves the use of digital technologies to either create a new business process or modify existing business processes into something significantly better. The aim of a digital transformation is to effectively use technological tools to adopt new and innovative ways to conduct your business.
Why Do Financial Service Providers Undergo Digital Transformation?
In recent years, consumer demand has increased for personalized services, quick and intuitive interfaces, and robust security within financial services. To meet these consumer demands, there is an urgency to adopt evolving data and insight-driven approaches.
Whether it be the use of cloud services to improve security or leveraging the power of artificial intelligence for personalized services, the financial sector (composed of banks, insurers, brokers, payment processors, etc.) is exploring a plethora of technologies to undergo a sound digital transformation.
This widespread trend in the financial sector is responsible for reducing the risk inherent to performing any digital transaction while increasing the sector’s revenue and efficiency gains. As per a recent survey, a number of financial services firms stated that they expect that technology will improve customer loyalty by 40% and help generate a new revenue stream by 34% while growing their market share by 31%.
Digital Transformation Priorities Differ Between Sub-Sectors of the Finance Industry
User bases and user needs vary dramatically across the different sub-sectors of the finance industry. Whether it be consumer-facing, government-facing, business-to-business, or blended markets, digital transformation priorities have been shaped to fit every individual sector’s specific goals and needs.
Top Digital Transformation Priorities for Different Types of Financial Services
Let’s take you through digital transformation priorities by financial services sector in detail.
Top priorities: Improved operating efficiency, better transparency, simplified and elevated client experience, and reduced risks.
How technology can help: Commercial banks are moving beyond operational and CRM platforms while reinventing processes to become digitally efficient. Insights obtained through big data are now being leveraged to engage clients and add to customer satisfaction to thereby increase revenue.
Top priorities: Boosting weak returns, keeping up with fintech competition, and mitigating volatile revenues. As per a recent survey, the key reasons behind volatile revenues include “volatility in trading volumes, competitive advisory fees, falling revenues in merger and acquisition activities, and stringent capital and liquidity requirements with increased regulatory measures.”
How technology can help: To mitigate this, investment banking services are optimizing their businesses by automating internal processes using robotic process automation (RPA), machine learning (ML), artificial intelligence (AI), and data analytics. Automation of internal tasks can help in streamlining processes and decision-making abilities, while eliminating processes that are redundant and do not add value to business.
Top priorities: Focusing on long-term client relationships rather than basic transactions.
How technology can help: As the number of consumers in this sector increase, financial advisors have to resort to the latest technical developments to provide more personalized and relevant customer experiences. Consumers now have the ability to monitor their investments in real-time. Easy-to-use apps and platforms have made it easy for consumers to obtain more clarity on their portfolios and financial plans.
Top priorities: Technology to help with rapidly changing business models, increasing client expectations, infrastructure complexity, inefficient legacy processes, and revenue and fee compression pressures.
How technology can help: Technology can help provide an omni-channel experience to both advisors and clients, and will contribute to an overall operations transformation by redesigning legacy processes and eliminating inefficient and non-value-adding activities. The cloud can be adopted to improve flexibility and resilience of wealth management systems while reducing infrastructure complexity.
Top priorities: The companies that are being invested in should provide faster product development, introduce innovative products, and cater to customer satisfaction by means of personalization while gaining a competitive edge in the market.
How technology can help: Technology is a key criterion for venture capitalists or investors, especially if they actively mentor startups. A digital transformation can provide automated analysis to judge the feasibility and profitability of new products and business models. Technology can help in data analysis for real-time profit and client tracking, insights for business optimization, and automation for task efficiency.
Top priorities: Providing a digitized, omni-channel experience for customers and building environments that are “customer need”-driven.
How technology can help: An improvement over the days of printed application forms, technology can get a policy serviced digitally or a claim managed much more efficiently and effectively. Insurance can be powered by artificial intelligence, machine learning, predictive analytics, live chat, and other common tools to streamline operations and customer interactions, automate claims processing, and provide a seamless customer experience.
Top priorities: Eliminating time spent in repetitive tasks. A study by the IMA states that "one-third of accounting teams are spending anywhere from 51% to 75% of their time on repetitive, low-value tasks."
How technology can help: Automation can help accountants with their workloads. Audit processes can be digitized to help increase security by creating a digital trail of when and by whom each file was accessed. Chatbots can be used to efficiently solve common questions or queries from customers. AI-powered machines can interpret receipts and alert humans when a possible breach has occurred.
Key Digital Transformation Trends Across All Financial Sub-Sectors
Although specific priorities can vary, there are common trends throughout the financial services industry that are worth noting.
What is a common priority that many of these industries share?
All of the above-mentioned industries have 3 priorities in common: improving operating efficiency, enhancing customer service, and being digitally secure.
- AI/ML models can help the finance sector scale up in terms of automating repetitive processes that take up human time and the company’s capital. Human employees can thereby be used for performing value-added tasks.
- AI and customer-centric personalization go hand-in-hand. The insights obtained through data analysis can be used to create models that will treat each customer as a personal asset and provide services customized to their needs.
- In terms of digital security, blockchain, encrypted fund transfers, and cloud-based technologies for resilient infrastructure can help to support reliable transactions. The adoption of the cloud can improve the flexibility and scalability of systems, and make it easier to develop and launch new products and services.
- Using technology to standardize and automate processes can lead to increased productivity, reduced costs, and improved interaction with customers. A cohesive ecosystem of digital systems, applications, customer experience platforms, infrastructure, and tools will help in streamlining processes and encourage speed-to-market with increased ROI.
Which sub-sectors have a greater need for digital transformation?
The banking sub-sector has the most urgent need for digital transformation, specifically when it comes to technologies that can be leveraged to create a “safe and resilient” ecosystem for their customers.
Take the example of providing a mobile app-centric customer experience where transactions can be performed seamlessly with absolutely no downtime. This is of the utmost importance for reducing the possibility of cyber risks and minimizing errors that occur during the execution of a transaction (e.g. system downtime). These failures can create apprehension in the mind of the customer, and they may lose confidence in the services of the bank.
The other financial establishments mentioned in this article mostly seek to utilize technology like big data, AI, and ML for data analysis and automating redundant tasks.
We have seen the rise of a new era where financial services have become “technologically progressive.” Consumers and employees alike now understand the implications of digital transformation in the financial sector and are less apprehensive about this transition from manual process to the digital world.
Crowdbotics’ managed app development is a leading option for comprehensive digital transformation, and the developers at Crowdbotics have a deep understanding and good experience working for the financial services sector.
If you're planning a digital transformation initiative for your organization, get in touch with our experts today for a comprehensive quote and build timeline.