The financial services sector is often considered one of the most traditional industries. However, it is also one of the fastest moving, making it a perfect candidate for digital transformation. In fact, companies in the finance sector are among the earliest adopters of a wide range of digital transformation trends.
According to a report by Cornerstone Advisor titled, “2022 What’s Going On in Banking,” 3 in 4 banks and credit unions have embarked on a digital transformation initiative. Another 15% are planning to implement a digital transformation strategy by 2022.
Stiffer competition and tight profit margins are among the significant challenges financial service providers face. All of these have necessitated the need to evolve in order to keep up. Archaic systems and inefficient manual practices can no longer support businesses operating in the financial ecosystem.
How exactly is digital transformation changing the way businesses operate in the finance sector and what are the major trends to look out for? Read on to find out.
Digital transformation in the finance sector: How, What, and Why?
Digital transformation in the finance sector involves taking a holistic approach to financial management that relies on innovative digital technology. When executed effectively, a digital transformation initiative offers loads of benefits, including an overall improvement in efficiency, reduced errors, optimized workforce and resources allocation, and a tangible improvement in a company’s bottom line.
Considering all of these benefits, it is no surprise that forward-thinking finance companies are adopting digital transformation strategies to optimize their processes. Financial service providers are undoubtedly among the most critical institutions in every society. However, if they must keep up with the changing times, they need to modernize their processes.
Digital transformation in the finance sector involves an end-to-end augmentation of processes, business practices, and methodologies in financial service delivery. Doing this effectively can be quite challenging. Even though the scale of work required to execute a company-wide digital transformation initiative may seem daunting, the consequences of not doing so can be equally costly. Failing to take the next step in your digital transformation drive may cause your company to lose valuable grounds in today’s fiercely competitive markets.
5 Digital Transformation Trends to Monitor Closely in 2022
Now that we have established that digital transformation is the future of financial services, what exactly will this makeover entail for your organization? What sort of digital technology initiatives will you need to deploy, and how will these benefit your organization?
The following are some of the digital transformation trends you’ll need to watch for as you look to upgrade your financial service practices.
1. Paperless transactions
Traditional manual processes are slow, cumbersome, and typically expensive. A lot of an organization’s digital transformation efforts are aimed at upgrading these internal systems with more efficient paperless alternatives. Not only are paperless transactions more seamless, but they’re also easier to manage. Putting all of your processes in one place and maintaining a digital trail for financial transactions will do wonders for your process efficiency and record keeping. It is easier to deliver services that are bespoke to customers’ unique needs rather than taking a one-size-fits-all approach.
Workflow Automation as part of a digital transformation drive involves implementing a system where software robots execute mundane and repetitive tasks instead of relying on people. Several everyday processes can be optimized by implementing a workflow management system for your organization. Doing this ensures better allocation of resources and allows you to utilize talents in more dynamic capacities where human intelligence is the topmost priority.
In recent years, digital banking has become quite a big deal. In the past, it used to be more appealing to a generation of young, tech-savvy users. These days, people of all ages have adopted the digitization of banking services. The digitization of your processes will make them safer, quicker, and more convenient. Transactions can be executed quickly and are completed with greater accuracy than ever.
Artificial Intelligence and machine learning have been at the top of the list of digital trends in various industries because they serve several important purposes. Trained AI systems can help financial service providers identify patterns and automatically implement measures to eliminate unfavorable conditions. For instance, an AI system can help identify unsavory elements trying to open a fraudulent bank account or execute a fake transaction. AI tools can also be valuable for a broad range of other uses within the finance sector.
5. Cloud services
More and more financial service providers are beginning to migrate their services and processes to the cloud. This offers more scalability, making it easier to keep up with increasing demand by customers. They are also more secure and cheaper to implement than existing systems. In addition to these direct benefits, many organizations in the finance sector also see cloud services as a way to meet their environmental and social governance commitment, especially in terms of decarbonization and sustainability.
The Digital Transformation Effects
Undoubtedly, implementing a digital transformation strategy holds plenty of benefits for organizations in the finance sector. It has also impacted the entire landscape, allowing the disruption of the status quo. Fintech startups have been able to compete effectively with traditional players in the finance sector thanks to the leveling field that digital transformation provides.
It is essential to note that adopting a digital transformation strategy won’t replace human effort. A more efficient approach to digital transformation is to think of it as a synergy between relevant technology and a skilled team. An efficient digital transformation initiative will only work for an organization with an experienced team and forward-looking goals interested in identifying and implementing the most effective digital technology trends.
Organizations within the financial service industry are growing increasingly dependent on digital technology to gain an edge over the competition. As a player within this industry, it makes total sense to join the digital transformation revolution and implement forward-looking changes that will drive better results and greater efficiency within your organization.