Digital transformation in the finance industry is a concept which has now become part of a successful business strategy rather than just technology.
The impact of digital transformation and automation leads to opportunities of faster, cost-effective operations, meeting regulatory deadlines, improved employee and customer experience and remaining competitive. It assists in compliance management and accounting whilst also minimising risk and error through the adoption of robust strategies.
Digital transformation, otherwise known as DT, has made a positive impact on business operations in the finance industry. Consequently, DT 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.
An 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.
Firms that place importance on large volumes of data pertaining to collection, storage and analysis are thereby improving their compliance management.
As digital technology and digital services revolutionise the financial industry, could this mean the end of traditional banking and financial products and services?
Here, we examine the impact of DT and explore the key changes taking place as well as the challenges.
Fintech, a broad term covering the use of software and modern technology by banks and financial companies as well as the systems themselves. FinTech has evolved from credit cards and ATMs in the 50s and 60s to current banking technologies such as digital banks and blockchain technology. With automated technology and machine learning algorithms, FinTech is changing the world of finance. Technologies such as customer service automated chatbots, online budgeting tools and spending tracking are moving the financial services industry in new directions rapidly.
Not long ago, banks used to offer incentives for opening a bank account in the way of a tangible product. But digital banking has given way to consumers expecting rather than being offered associated services, e.g. a mobile app with a bank or credit card to allow them to pay bills and check expenditure.
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 up a whole new world with smartphones and increasingly sophisticated apps being introduced. Mobile banking has shifted the focus from the traditional brick and mortar archetype, questioning the necessity of the physical branch in the transformative digital age.
Fintech has an array of digital disruptors – innovations creating new markets and disrupting existing ones. Recent innovations include payment technologies such as PayPal and ApplePay. They are among several new digital technologies which are progressively moving more transactions to a digital environment.
Machine learning and AI
Banks and credit card companies identifying fraudulent activity use complex algorithms to determine patterns and predict the possibility of fraud. AI and machine learning are technologies which are becoming more practical in order to benefit customers in making their lives easier and safer. However, fraud detection is not the only use for AI and machine learning; they are providing regulatory compliance as well as insights into consumer behavior and investment.
Cryptocurrencies such as Bitcoin are offering consumers faster and cheaper ways to carry out transactions. Blockchain’s ledger system uses strict controls allowing for smart contracts and auditable data. By building trust with users it minimises risk and human error, providing the ideal securities exchanges trading platform and a means of exploring its uses by AI companies and banks.
Blockchain is seen as technology that once widely adopted will transform the world – has the potential to become one of the most impressive innovations in financial services and logistic technologies.
New technologies give way to new specialties and so, as a result, the workforce within financial services is evolving. Top financial roles recruiters are looking for include those such as investment analysts, software engineers and paraplanners. Although different skills are required for more traditional jobs in customer-facing roles such as sales and customer services, technological advances, including AI systems, are threatening their validity and usefulness. This therefore gives rise to the development of new skills to replace those becoming irrelevant in an evolving industry. In order to meet industry demands and challenges, the progression towards digital technologies will mean hiring the right people to ensure a successful transition.
It cannot be denied that technology has changed how we view our world and never has there been a time of such change as in the financial services industry. The digital revolution has created new 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.
How can we help!