Digital transformation (DT) in the finance industry is a concept which has now become part of a successful business strategy rather than just technology.
Digital transformation has made a positive impact on business operations in the finance industry. It has led to opportunities of faster, cost-effective operations, meeting regulatory deadlines, improved employee and customer experience and remaining competitive.
Consequently, it has now become a business strategy as opposed to a technology strategy. When you consider how far modern banking has come, you can understand how DT has grown to benefit everyone with greater convenience and experiences. From its humble origins of branch offices to ATMs and now mobile apps, the progress of banking has enabled digital technology to offer greater choice, convenience and experience.
2018 witnessed an evolution of digital transformation trends in financial services, some of which are highlighted below:
Refers to a company’s effective response to disruption, learned from the last economic crisis. Firms are looking at ways to improve and support innovation but through efficient means.
Increased collaborationAn increasing number of industry-wide businesses adopt team structure as an operational model, emphasising the need to work collaboratively and communicate effectively. They must do this by working according to regulations and standards
Risk assessmentFirms that place importance on large volumes of data pertaining to collection, storage and analysis are thereby improving their compliance management.
As digital technology and services revolutionise the financial industry, could this mean the end of traditional banking and financial products and services? We look at the impact of DT and explore the key changes taking place as well as the challenges.
Artificial Intelligence (AI)
AI plays a pivotal role for financial institutions and credit card companies in identifying and predicting the possibility of fraud. The technology is becoming more practical in order to help the bank customer in making their life easier and safer.
However, there is another side to the benefits of AI for financial services; it can support firms in keeping in line with regulatory and compliance changes. Also, from a customer perspective, AI can reveal interesting observations and trends in customer behaviour.
Blockchain Technology & Cryptocurrencies
The emergence of digital currencies or cryptocurrencies, such as Bitcoin, has enabled customers to take advantage of faster and cheaper ways to carry out transactions.
Blockchain, which enables the existence of cryptocurrencies, is viewed as technology with trust-building properties, minimising risk and human error – an ideal securities exchange trading platform. It is regarded as one of the most impressive innovations in financial services and logistic technologies that once widely adopted will transform the world.
Digital Banking Solutions
Previously, new customers were offered free gifts as an incentive when opening a bank account. We can say that still applies today, although this is now in an intangible form, in the way of an associated service, such as a mobile app offered with a bank or credit card, which, for example, allows customers to pay bills.
However, digital banking is not only restricted to online accounts. There are digital banks which operate online only with very few or no buildings or branches. Mobility has opened a whole new world with smartphones and increasingly sophisticated apps being introduced, culminating in the disappearance of many of the traditional buildings and branches.
Financial Technology (FinTech)
Financial technology, more commonly known as FinTech, refers to the use of modern technology adopted by banks and financial companies (as well as the systems themselves) to improve delivery of financial services. It has evolved from its early beginnings in the form of ATMs and credit cards to current technologies such as digital banks and blockchain technology.
The world of finance as we know it is changing thanks to FinTech through automated technology and machine learning algorithms. This is evident in new technologies such as customer service automated chatbots, online budgeting tools and spending tracking.
Here, we speak of an array of digital disruptors in FinTech – innovations which create new markets and disrupt existing ones. Recent innovations which we classify as digital disruptors include payment technologies such as PayPal and more recently, ApplePay, which is accelerating the disruption on payments, contributing significantly towards a digital transformation in financial services.
As new technologies evolve, so does the recruitment of specialised skills. Traditional customer-facing roles require different skills – the validity and usefulness of these roles are now being threatened by innovative technologies. As a result, the industry is looking towards the acquisition of new skills in order to replace those becoming irrelevant through this transformation.
It cannot be denied that technology has made such a huge impact in our lives and financial services is no exception. Digital transformation has created innovative technologies at a rapid pace, and it continues to grow.
In order to stay ahead, traditional financial services organisations will have to adopt new business models in order to maintain customer loyalty and remain competitive. Success will depend upon the ability of companies to facilitate business automation and integrate technologies with existing ones.
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