Understanding Banking and Financial Services Digitization
The digital revolution is still affecting many aspects of society, including the financial industry. When one thinks about the financial industry nowadays, one does not immediately think of banks and traditional financial firms. The reason for this is that, as a result of digitization, new financial institution models have entered the market. Many of them even have an impact on the entire industry.
Banks and conventional financial institutions, on the other hand, must keep up with the digital shift to remain competitive.
What is Digital Transformation in Finance?
The reorganization and reshaping of finance and accounting functions using technology to rebuild efficient operating systems and procedures without replacing conventional systems is referred to as digital transformation in finance. While digitally-led financial transformation is critical for businesses, many financial institutions are still undergoing transition owing to a variety of issues.
Many people feel that personalised client experiences should be a top emphasis for BFSI institutions and insurance companies, for example. However, 41% of respondents in a poll claimed that insufficient ways to link technological silos impeded banks from fully using data.
Key Challenges in Implementing Digital Transformation
Legacy System: The move from legacy to new technology infrastructure and digital competence necessitates significant expenditures and transition expenses.
Compliance and security: Unlike fintech's and other new financial actors, banks and conventional face considerable security risks due to large amounts of personal data and transaction records, making it difficult to implement changes while maintaining compliance standards.
Customer user experience (UX) expectations: The goal of digital transformation is to provide customers with better efficiency and an uniform user experience across platforms. Traditional banks and businesses struggle to do this because it takes substantial study, effort, strategy, and marketing to provide clients with the proper options.
Workplace culture and workforce reskilling: Changes in workforce and workplace culture are significant as the talent model shifts and relies on data scientists and analytics, necessitating employee upskilling. Efforts in this area need time, strategy, and well defined objectives and communication. Efforts in this area need time, strategy, and well defined objectives and communication. Efforts in this area need time, strategy, and well defined objectives and communication.
Competition: Customers deal directly with FinTech's and emerging online financial companies such as Amazon, Google, and Facebook, leaving banks out of the process. Banks, on the other hand, are more secure and regulated, providing them an advantage if they go digital.
While addressing these issues in the early stages requires significant time and effort, digital transformation opens the door to stabilising and securing an enterprise's market position.
The advantages of digital transformation in the finance industry
Enhanced customer experience: According to a poll, 76 percent of financial industry executives feel the top goal for digital transformation is improving client experience. Customers nowadays are technologically aware and want firms to be one step ahead of them. Going digital allows banks and financial institutions to track, attract, and positively engage consumers, while also offering and delivering consistent and personalised goods and services.
Revenue generation and improved operational efficiency: By automating manual procedures and integrating data, deploying the correct set of digital transformation technologies accelerates operational processes. Such initiatives assist to save time and money, resulting in higher earnings.
Simple data access and management: Digital transformation activities aid in the collection, management, and storage of raw customer data that can be analysed to increase company intelligence and optimize growth.
Process agility and operational productivity: By removing human-caused mistakes, automation always boosts process agility and productivity. It enhances accuracy in repeated procedures and has the potential to significantly improve operational efficiency.
Choices based on insights: AI-based analysis allow for speedier trade decisions in capital markets. With a more customer-centric product or service, business choices and strategies may now be founded on calculative insights.
Together, the difficulties and advantages necessitate nothing less than paradigm shifts in finance and accounting. CFOs must collaborate with business transformation partners to proactively digitally empower financial departments.
Where Should Financial Institutions Start When It Comes to Digital Transformation?
Of course, this requires a comprehensive awareness of digital transformation, demands, and expectations. Digital transformation plans that are not well understood or are executed incorrectly by focusing on the wrong path can lead to considerably more difficult and complex procedures. To take their businesses ahead, financial institutions should first regard digitization as a cultural revolution. This is only achievable if their demands and procedures are properly aligned with their digital strategy.
As a result, 91 percent of CEOs feel that capturing tomorrow's market will need their company defining it.
How Signzy powers Financial Digital Transformation?
Signzy helps craft enterprises’ digital finance strategy to facilitate ‘real-time finance.’
With expertise in FinTech APIs, artificial intelligence, blockchain, and point solutions, we approach transformation with a holistic approach that covers:
> Front End- RM Assisted App
> Front End- DIY Journey
> Risk/Decision Engine
> Enterprise Grade Security
OR!!
Explore Our NotableTalks Series where we have a very intrigued conversation about Digitalization in Finance Sector explained with the industry leader Mr. Arghya Bhattacharya, VP of Partnership & Alliance at Signzy.
Digitalization in Finance Sector explained by Arghya Bhattacharya, VP of Partnership & Alliance at Signzy
Is the Finance Sector Prepared for Digital Transformation?
Some businesses still believe that becoming digital is exclusively about the end user. However, there are currently several values that digital tools and services may provide to the financial industry. And, surprisingly, many financial institutions are aware of this.
A digital transformation plan has already been devised by 68 percent of financial services firms. That's an encouragingly high figure. However, at this stage, it is critical to understand the digital tools and the benefits that these technologies may give.
What are the most significant lessons that banks have learned from recent financial start-ups?
The first FinTech lesson: Blockchain
The first lesson traditional banks have learnt from their interaction with Fintech is that digitization allows them to open new market doors, allowing them to provide creative and technologically sophisticated products and services to their consumers.
Blockchain, a data collecting and management system, is an intriguing example. It is the technology that enables the creation of a massive database, structured in blocks containing transactions and connected together in such a way that any transaction launched on the network must be confirmed by the network itself through block analysis. In other terms, blockchain functions as a peer-to-peer network-based shared public record that keeps assets and transactions.
Its purpose is to enable the administration of all collateral information to a transaction via cryptography amongst network members, who validate the bundle of information provided in each block.
In some ways, this makes them immutable.
The second FinTech lesson: Big Data
Another thing that banks may learn from Fintech is how to leverage Big Data to fully profit from digitalization. Despite not having the same technological expertise, the large financial organisations have a huge competitive edge due to the volume of information at their disposal. In this regard, digitalization and strategic alliances with select digital start-ups may be critical to market success.
If you can develop a certain analytical capacity, perhaps with software that allows you to read, collect, and manage large amounts of data, you can not only incorporate the data into your marketing strategies to anticipate customer needs, but the same data can also be used across the board in risk management or support for investment decisions.
FinTech's third lesson: Cloud Computing
Document digitization can potentially provide a significant competitive advantage.
In this respect, the use of cloud technology (yet another lesson taught by Fintech firms), which offers several advantages for conventional financial institutions, is important.
