Digital transformation can mean a lot of different things for different industries. For instance, for the manufacturing industry, digitalization might mean embracing systems that improve shop floor throughput. For healthcare, it might mean adopting technologies that streamline healthcare delivery.
However, for the financial services industry, going digital is not just about implementing a handful of modern systems. So, what is it about the financial services industry that makes the digital transformation so different?
Has the current Covid scenario has further expedited the digital transformation?
Let’s find out!
The exclusivity of the financial services sector
In today’s technology-driven era, digital is at the heart of every organization’s core operating model. Whether it is retail, healthcare, or automotive – modernizing existing systems and implementing new-age solutions is the only way organizations can survive and thrive. However, when it comes to the financial services sector, transformation is not straightforward; several aspects make adopting digital technologies a challenge for the industry:
- The stringent industry and government guidelines and the constantly growing regulatory barriers to entry.
- Establishing the trust of customers and guaranteeing a superior customer experience – without compromising on safety or confidentiality of personal data.
- The high costs associated with data breaches and non-compliance to regulations that can impact brand value.
- The growing expectations of customers that require embracing modern technology while still meeting in-person customer service demands.
- The increasing pressure from startups and other new-age companies that more easily take risks to boost productivity and efficiency.
For the financial services sector, going digital comprises two critical aspects: 1) digitalization of the retail facing segment which means enabling digital interaction with customers via mobile and web and 2) digitalization of the institution-facing organization that includes digitizing internal systems and applications to optimize processes, enhance productivity, personalize offerings, and engage with customers better.
What companies need to do
When it comes to financial services companies, there is no one-size-fits-all digital adoption mantra. Every company needs to understand what digital means for its business and take steps in the right direction.
That said, here are some recommendations:
- Begin modernizing legacy systems: If there is one aspect of business that holds financial services companies from driving real value, it is the inability and incompetence of legacy systems to keep pace with the demands of the modern world. Modernizing legacy systems and making them integratable with modern applications can help incorporate disruptive technologies at a rapid pace – to drive innovation and competitiveness. It can help them meet customer demand for omnichannel banking while meeting regulatory compliance, opening new streams of revenue, and reducing operational costs.
- Adopt the cloud: For financial services companies, the costs and complexities of operating businesses through on-premises models are massive. Moving to the cloud can enable financial services companies to provide unique types of services to customers, quickly respond to changes in the marketplace, and enhance efficiency and innovation to generate competitive advantage. As customer expectations get increasingly sophisticated, the cloud can help companies deliver cutting-edge digital and mobile interactions while leveraging modern capabilities to serve as both a catalyst and a reason for digital change.
- Leverage technology to know your customers better: In an industry where established players are struggling to outdo competition from innovative, risk-taking newbies, clearly understanding customer needs and offering services that precisely meet those needs is the only way to achieve success. As data is the foundation for any KYC program, how companies handle this data has a significant impact on overall performance. Embracing modern technology to capture data can enable companies to ensure customer records are complete, accurate, and compliant with the latest requirements.
- Pay close attention to cybersecurity: As cyber-attacks continue to become more frequent and widespread, financial services companies on the road to digital transformation need to pay close attention to cybersecurity. They must invest in tools and systems that help keep up with increasingly sophisticated cyber-attacks. Technologies such as machine learning and AI can help detect suspicious transactions and anomalies, allowing companies to proactively take action before any damage is done.
- Automate mundane, repetitive tasks: Keeping pace with customer expectations can be a Herculean task. But not if companies have tools and processes in place to automate tasks. Since mundane, repetitive tasks take up a lot of precious time, which in turn delays value, deploying the latest automation technologies can help deliver the next wave of productivity, cost savings, and improvement in customer experiences.
- Start capturing, processing, and analyzing data: Digital transformation in the financial services industry begins and ends with data – data about processes, customers, market trends, and more. Hence, implementing the right technology to capture, process, and analyze data can unearth a lot of critical insight to optimize processes, reduce operational costs, generate cross-selling and up-selling opportunities, and transform the business into a customer-centric one.
- Improve Work From Home Capabilities: Provide tools to employees and customers to effectively communicate and execute tasks while maintaining social distancing and working from remote locations. This may include video conferencing tools, chatting tools, AI based chatbots, remote onboarding etc.
With financial services companies expected to spend $500 billion on IT by 2021, “Going digital” has become the most critical agenda item for financial services CXOs.
Are you ready for the transformation?