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FINANCE

5 Key Takeaways From the Finance Sector’s Digital Transformation Revolution

5 Key Takeaways From the Finance Sector's Digital Transformation Revolution 41

By Chintan Jain, the Director of Product Marketing at Kissflow

Cutthroat competition, complex regulations, and changing customer behavior are constantly driving reinvention and innovation in the financial sector. Digital technology and automation have created opportunities for cost-effective operations, innovation, agility, and improved customer and employee experiences.

Digital technology aids in financial management, compliance management, and accounting and minimizes human errors and risk by introducing robust digital strategies. It has had a significant impact on the financial sector and is used by many companies as a business growth strategy. According to research, 54% of financial companies have already undergone digital transformation. Those that have executed their digital transformation strategy successfully have seen a much higher ROI.

To see the positive impact of digital transformation, you only need to observe how far online banking has come. Digital strategies have created better and more convenient services. Mobile apps and other digital technologies enable consumers to easily access financial services. It’s become easier to seamlessly integrate new platforms and applications. Paper systems and physical banks are quickly getting replaced by robust networked digital ecosystems.

But the digital transformation journey can be challenging. Some organizations easily navigate the process because they have digital transformation in their DNA, while others need considerable foresight and planning. They must get rid of old habits, upskill employees, update cultural norms, and change their thought patterns to become digital businesses. They must also implement technology-driven initiatives to increase productivity.

What does digital transformation look like in the finance sector?

Digital transformation means using digital technologies to modernize financial services. Banks and other companies undergo digital transformation to make financial services more efficient, effective, and accessible. They automate manual processes,  increase transparency, and improve customer interactions.

Digital transformation helps companies that provide financial services to enhance the customer experience in multiple ways. They simplify banking processes and attract new customers. Technology is used to reorganize and reshape finance and accounting functions and to create efficient operating systems.

Digital transformation is vital in every industry

As technological advancements have increased, the world has moved to the global era of digitization. Today, many companies use innovative technologies to drive change in every sector. They use technology to automate daily processes, for data analysis, to gain a competitive edge, and for multiple use cases. The biggest drivers of digital transformation are increased cloud services adoption and the widespread use of mobile devices.

Digital transformation improves both internal and external business operations. It also helps financial companies to provide better customer service while reducing costs. It forces financial companies to change their business models to adapt to new market conditions. By using new technologies, they can optimize business operations and connect better with customers, unlocking new sales opportunities.

How is the finance industry leading by example?

1.   Adopting a Digital, Customer-Centric Approach

Some financial institutions use legacy systems. They are slow to adapt, slow to change, and still cling to practices that were established decades ago. But as they undergo digital transformation, they learn to listen to customers’ needs and cater to them.

To retain customers who have embraced online transactions, financial companies have moved all services online—from account creation to loan applications. The healthcare and insurance industries can learn from this approach. Even as they offer in-person services, they must develop a full-service digital experience and transform their main operational technology to serve their customers better. They will find it easier to adapt as customer preferences shift.

2.   Workflow Automation

This involves using technology instead of people to execute repetitive tasks. For example, a financial services company may use technology to automatically create invoices and then route them for approval. Employees don’t have to look at each invoice and code it manually.

Financial process automation helps financial institutions to eliminate manual processes. Employees can focus on more critical tasks, helping the firm to gain a competitive advantage.

3.   Data-Driven Decision-Making

Businesses that truly understand customer preferences and needs always rely on data. Numerous customer interactions happen every day on digital platforms, and not using data can make it difficult to gain insights and make sound business decisions. This is why most financial companies have integrated technology into their operations.

These tools offer a holistic view of the customer experience, analyze customer interactions, and send alerts on issues that need immediate attention. Employees can make good business decisions and fix technical errors before they significantly affect revenue. They can also identify revenue-boosting opportunities based on customer activity.

4.   Using the Right Technology

Technology plays a critical role in a company’s ability to evolve with the market and continually enhance the customer experience. This is why it’s important to choose the right technology.

For instance, some Fintech startups partner with larger companies to share data and create ecosystems that spark innovation. Financial services firms also use digital experience analytics technology to detect fraud and catch technical errors. The right solutions help businesses to make their customers happier and get more bang for their buck.

5.   Security and Privacy Are a Priority

When it comes to financial transactions, security and privacy can’t be an afterthought. Financial companies have developed digital platforms with a focus on privacy, consent, and security. According to Forrester, this is a key digital experience trend in 2022.

Most financial companies now use regulatory technology to facilitate regulation and compliance at a lower cost and with greater accuracy. They are also using AI-driven platforms to monitor fraudulent activity. Because data privacy concerns and tighter regulations impact all industries, even companies that have already undergone digital transformation should reassess their approach to privacy and security.

Case study: How Citibank used customer data to direct its digital transformation

Back in 2018, Citibank discovered that its customers loved using mobile banking apps. The company shifted its strategy and created a unique mobile banking experience, one that didn’t supplement the website and physical branches.

The bank surveyed over 50,000 customers to know which features to focus on first. Citibank prioritized the services its customers regularly used, like digital payments and investing. This shift to mobile and other digital banking transformation efforts saved the bank millions in 2020.

Continuous transformation is a must

The financial services sector has undergone a massive digital transformation over the last few years. Financial institutions are forward-thinking in their approach and continually adapt to market conditions to meet customer needs. Many legacy industries use the finance sector as a blueprint for digital transformation, and it’s easy to see why.

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