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Digital, which has been a buzzword or over-used for a long time, has had a significant influence on the financial and banking industries. The restyling of financial services is what digitalization or digital transformation is all about.
From customer service to machine learning, artificial intelligence to mobility, the financial sector is evolving from complicated, time-consuming procedures to a more simple structure, and Revolutionary Financial Technology (or FinTech) Companies are at the forefront of this revolution.
In the "new normal," what does digital transformation imply?
Companies have always had to cope with shifting client needs in the past. But, in the midst of the COVID-19 pandemic catastrophe, contemporary civilization altered – and those changes are likely to continue well beyond the COVID-19 outbreak. While certain elements of our existence (such as mandatory lockdowns) may come to an end once a vaccination is available, others, like our use of digital technology, will continue.
The necessity of the hour is for an organization's digital environment to be redeveloped. From client acquisition and operations through post-sales support and customer service, companies will have to reimagine their operations across the full lifecycle.
In the present context, an organization's existence may be jeopardized if it does not digitally change to match the needs of the economic landscape. Rapid adaptation to the present scenario is also required for the effective distribution of goods and services to clients, bearing in mind the pandemic's safety concerns.
The Financial Impact of Digital Transformation
Digital disruption has had a significant influence on a range of professional routines and behaviors. The utilization of technology, such as telephones and the internet, benefits both customers and financial organizations. Because people were anxious about the transition from the manual to the digital world, the consequences of digital transformation were previously unknown. The situation, however, has abruptly changed. As a consequence of tighter limitations and evolving customer expectations, financial applications and systems have become more adaptable and advanced.
For financial institutions, digitization entails more than merely implementing cloud, big data, social media, and mobile technology. It is primarily focused on developing new business models in order to create an eco-system in which all markets and customers may participate.
As a result, companies place a greater emphasis on using new and emerging technologies that aid in positioning and converting teams into high performers.
Digital transformation allows for the use of digital technologies to improve productivity and efficiency, as well as the conversion of hard-copy documents to secure PDF or HTML versions. The days of filling out an application form and printing product sheets are long gone. Salespeople and field officers now have smartphones and other portable devices with which to display data. Many financial services companies have embraced digital transformation. Many companies, on the other hand, have taken a cautious approach, waiting to observe how things develop before choosing whether or not to go digital. Digitalization has had a favourable influence on economic growth and has hastened the development of new technologies. Many people are debating whether or not there is economic growth, but there is evidence of possible good influence; the finest examples are mobile banking applications, mobile money, and e-wallets.
The following are some of the benefits of digital transformation in the financial sector:
1. Top standardization: Finance departments are typically seen to be high performers. When they are combined with technology systems that have standardized procedures and data, a high level of standardization is achieved.
2. Highly automated functions: Using modern technological tools, services including money remittance, procurement orders, invoice production, and KYC verification become more automated.
3. Improved Efficiency: The use of big data and other machine learning techniques in finance has made it simpler to estimate and forecast budgets, enabling teams to complete month-end cycles ahead of schedule.
4. Insight-driven functions: As a result of digitalization, financial models have changed to the point where resources are focused more on extracting insights than transactions.
5. Improved customer and staff experience: Customers and workers have access to the same information, resulting in reduced confusion during transactions.
6. Improved Service Delivery: The financial operational model has altered as historical systems have been combined with modern technology. Service delivery has improved as a result of the established procedures.
Along with the high significance, the primary priorities and difficulties for financial services and banking institutions throughout the globe that will have an influence on their operations include the following strategies:
1. Acting in accordance with legal requirements
2. Lower expenses or higher profit margins in retail operations
3. Improved segmentation of customers
4. Improved services, product designs, and marketing channels
5. Conversion to a digital platform from physical or traditional media
6. Integrating old systems with new technology while adhering to all applicable regulations and rules
These tactics are currently being used by financial institutions, and they may digitally change and automate their procedures. The result has been a significant increase in completing client operations in a shorter amount of time. By investing in technology, financial businesses have been able to satisfy regulatory deadlines, achieve operational and transactional risks, and remain competitive.
Automating repetitive procedures, managing compliance, and accounting and operational services like accounts, reporting, and analyses have all benefited from digital transformation. Digitalization also lessens the danger of cyber-attacks and minimizes mistakes caused by the implementation of sound tactics.
The following major factors are included in services for banking's digital transformation.
Digital transformation is the transition from traditional working practices to entirely new ones based on current technological solutions. The elements of digital transformation may be classified into three groups:
1. Relationships with customers
The transformation's most evident effect is an improved customer experience. Not only are external communications eased with the advent of digital technology, but analytics, marketing, and sales also reach new heights.
This enables the business to know what is going on with their customers at all times, to reach them at the appropriate time, and to tailor their services. A better knowledge of the target market aids in the development of an efficient marketing plan and the adjustment of pricing in response to demand. All of this adds up to bettering client interactions on both a quantitative and qualitative level.
2. Internal organizational processes
New procedures are predicted to arise as a result of changes in the company's infrastructure. Exchanging data through email, for example, is not a novel procedure; rather, it is a more current manner of doing routine chores. Another modification is the implementation of an EDI system for digital data interchange.
The bank reaps enormous advantages as a result of this: faster communication with partners, better production, and less paperwork. All of this is attributable to a shift in the data interchange paradigm, i.e., workflow digitization.
The degree of awareness rises as a consequence of digitalization. The introduction of networking and knowledge exchange tools virtualizes the workflow, and can even simplify the transition to a home-office format, which is a modern must for any organisation. It changes the planning and decision-making process, allowing the company to allocate resources and delegate tasks smartly - saving on resources and budget.
The impact of changing customer interactions and internal procedures may be so significant that it can completely reshape an organization's life and market position.
3. The leadership's political will
According to BCG's analysis, digital transformation fails in 70% of situations. But why does this happen, and what can an organization do to improve its chances of success?
Management's fear of change is one of the key factors for failure. This takes us to the second factor: the leadership's political will.
The strategy of "let's try it and see what happens" is inherently flawed. The purpose should be stated clearly and concisely at all times.
The ability of the leadership team to rethink company management style and procedures, particularly the customer experience, determines the impact of innovation. The team will be able to develop a clear route to digital transformation and will be more willing to strive toward its success if they are self-aware.
The Reaction of Critics to Digital Transformation
Despite the benefits of digital transformation, some opponents say it is a great chance for tech companies to restyle their services and products and sell them under the banner of digital transformation.
Another important factor to keep in mind is that none of the techies spends their working hours digitally altering or inventing, but rather programming, coding, and developing. However, detractors fail to see that it is the coding, programming, and development that allows a system to function in a certain way. These systems, and therefore the transition, is driven by technology.
Final Thoughts
It will only be a matter of time until the technologies outlined destabilize the banking industry. Commercial establishments must undertake digital transformation to appeal to, capture, and keep the attention of customers as they become smarter and more demanding.