In the aftermath of this covid catastrophe, the finance economy, businesses, and services were forced to undergo significant transformations in order to stay afloat. This is how the wave of digital transformation gained tremendous momentum.
The word “digital transformation” in finance refers to the process through which industry, business, or service transforms, becomes more accessible, and evolves through the use of digital techniques.
Numerous IT companies with new technologies such as Insurance, Claims, Forex solutions and so forth are now providing custom solutions for finance to help other businesses stay afloat. The majority of industries have been forced to adopt digital technologies such as cloud computing to keep their services operational while still adhering to social distance standards.
Table of Content:
- How The Change Is Working For Finance Leaders?
- The Cornerstones Of Finance Digital Transformation
- The Future Of Finance
There are four primary areas in every business or industry that undergo a digital transformation: business processes, business models, domains, and cultural or organizational transformation. To be termed digitally transformed, an industry’s four operational segments must undergo change through the adoption of digital technologies. Six pillars underpin digital transformation: experience, people, change, leadership, innovation, and culture.
How The Change Is Working For Finance Leaders?
Change #1: Leverage Fintech To Transform The Finance Function
Business leaders of FinTech, or financial technology, encompass all of the current technology that banks and financial enterprises use to enhance the delivery of financial services. It encompasses all services, from the usage of ATMs and electronic cards to the establishment of digital banks and the use of blockchain technology. FinTech has altered the finance business by elevating the client experience through automation and machine learning approaches. The digital future of FinTech moneymakers includes the usage of automated chatbots that are available 24 hours a day, online budgeting tools that help you manage your money, and expenditure trackers that help you keep track of your income.
At every level, automating financial company operations through the use of automation technologies and machine learning alleviates all pain points. Fintech is mostly concerned with operational issues such as budgeting and customer service. Unusual financial transactions that previously required a phone call from a bank staff can now be verified by robocalls. Though this method is contentious, we cannot question its utility.
FinTech will no longer be an ephemeral presence in the financial business of the future. All financial institutions are actively adopting FinTech and regard it as an incredible investment.
FinTech is expected to increase by approximately 25% to 30% between 2019 and 2025, according to credible forecasts.
Change #2: Make Significant Advances In Cyber Security Through The Use Of Artificial Intelligence
Artificial intelligence (AI) is critical for detecting and forecasting fraud. Numerous credit card businesses and financial lending organizations utilize these services to conduct background checks and maintain a risk-averse attitude. Additionally, this advantageous technology enables banks to successfully comply with regulatory requirements.
Without a doubt, artificial intelligence minimizes cybercrime by safeguarding mobile banking, login passwords, and much more. Sophisticated artificial intelligence mitigates cybercrime damages, which totaled a stunning $600 billion in 2016. Apart from detecting financial fraud and avoiding cybercrime, AI also enhances the customer experience by offering useful insights into customer behavior that businesses can use to drive their operations.
If you’re still not convinced, the following statistical points can help you make your case: –
- According to Forbes, machine learning is used in the creation of 70% of all financial service organizations that participated in their research. Additionally, 60% of them make use of Natural Language Processing (NLP).
- Additionally, the same report indicated that leading financial service organizations attribute 19% of their monetary growth to their AI projects, compared to only 12% of other firms.
- According to TheFinancialBrand.com, financial institutions would be able to save 22% of their operational costs by 2030 as a result of AI.
Change #3: Utilize Disruptive Technology To Leverage Small Businesses
Markets are transformed by disruptive technologies, which create new industry verticals. PayPal, ApplePay, and Google Pay are all recent technology examples of market revolution and disruption. Customers are clearly shifting away from time-consuming traditional banking procedures and toward convenient digital banking services.
Following suit, suppliers such as Kabbage and Stripe provide significant services to small enterprises. Kabbage provides small business owners with loan services via an automated lending platform. Stripe, on the other hand, provides small business owners with high-quality online payment processing options, enabling them to compete more effectively in the marketplace. The public adores these FinTech disruptors since they are convenient and obviate the need for costly, time-consuming procedures.
PayPal is transforming businesses in the following ways: –
- It has 286 million active visitors on its website at the moment.
- According to the report, revenue will increase by $17.70 billion in 2019.
- PayPal is used by 87.5 % of internet purchasers.
- In 2016, it was the most well-known digital wallet.
Additionally, Statista.com estimates that the Internet of Things will be an $11.1 trillion business by 2025.
Disruptive technology has painted the coming years in vibrant and optimistic hues.
Change #4: Using Blockchain To Transform Financial Institutions
Often associated with cryptocurrency, Blockchain technology also has various opportunities in non-financial sectors. Indeed, IBM’s CEO sees enormous potential in Blockchain and believes it has the capacity to revolutionize the world if widely adopted. Its ledger system feature employs rigorous controls to ensure the integrity of data and facilitates the usage of smart contracts. Additionally, it results in increased user trust by increasing transparency and minimizing human error and risk. That is why stock exchanges, artificial intelligence businesses, and other financial institutions are investing heavily in this technology.
In the first half of 2017, a handful of Blockchain-centric startups raised a whopping $240 million in venture funding. Additionally, this investment has increased year after year since 2017. Blockchain and related technologies have the potential to expand and impact a variety of financial services in the future.
If you’re still not convinced, here are some blockchain statistics that will blow your mind:
- From 2018, about 90% of all western banks have begun studying their potential.
- Over twenty countries have either implemented or are considering implementing a national cryptocurrency.
- 74% of tech-savvy businesses believe blockchain technology has potential.
- Financial service firms have made a $552 million investment in blockchain technology alone.
The Cornerstones Of Finance Digital Transformation
Any industry, whether service- or product-based, places a premium on experience. In this context, the experience can refer to both employees and customers. There will always be a number of institutions working to find a solution to any existing problem. In these instances, it is critical to building a solution that satisfies customers and to ensure that the staff working on the solution remain committed to it for the long term, ensuring minimal disruptions.
With the amount of technology required to convert any company model, we frequently overlook the transformation’s most critical component: people. While technology is critical for transforming business models, it is ultimately the people who govern the technology – making them a critical component of digital transformation.
For a digital transformation to be effective, all stakeholders in the area or process being converted must be comfortable with the concept of change. No evolution in history occurs in the absence of change.
Thus, we arrive at the third pillar of digital transformation: leadership. To ensure the success of any endeavor, a leader is unavoidably required. With the industry evolving at such a rapid pace and new approaches being adopted daily, it is critical to have someone who can adapt rapidly and hold themselves accountable for all of these changes.
Any new technology requires considerable work to implement. It is possible only when creative minds collaborate. In this case, innovation is about more than just skills; it’s also about communication and collaboration. Innovation is founded on the concept of improvising on existing infrastructure.
Implementation Of The Financial Sector’s Digital Transition
Among all the businesses affected by the wave of digital transformation, the banking industry saw the most dramatic changes in its operations. Due to the industry’s historical reliance on manual labor and interpersonal touch, digital transformation has been a relatively new path in this sector. Artificial intelligence, the Internet of Things, blockchain, and machine learning have all left their influence on this market.
Anti-money Laundering/Counter-terrorist Financing Checks
From automating the client onboarding process used by banks and financial institutions to authenticate the customer’s identity to conducting anti-money laundering and counter-terrorist financing checks, manual processes are being replaced by digital ones. Banks are replacing human customer service representatives with AI-enabled bots. Additionally, with the use of frontier technologies, identity theft and anti-money laundering checks are completed virtually. In the cryptocurrency sector, blockchain technology, also known as distributed ledger technology, is utilized to validate transactions.
The process of documenting is gradually evolving into a digital one. Wet paper signatures are being phased out in favor of digital signatures. Even government-issued stamps are being phased out in favor of electronic stamping. The entire document signing process is conducted electronically. Even paper contracts are not as prevalent as they once were. Indeed, many organizations now prefer digital contracts.
Identity verification and security are becoming increasingly critical. This is why blockchain technology has been dubbed the “next big thing” in the banking sector. It is immutable, which enables its use in identification and verification processes. When integrated with AI and other cutting-edge technology, blockchain solutions can be advanced.
Identity In The Digital Age
Digital identity verification and biometrics are two of the most significant disruptions to the finance and banking sectors brought about by technology. Digital KYC (know-your-customer) for identity verification and authentication is critical to the customer onboarding process. Know Your Customer (KYC) is now required to conduct an online or digital transaction. To ensure security, biometrics are displacing traditional passwords/PINs and codes.
Finally, culture binds all of these five pillars together. The organization’s culture, environment, mission, and vision all have a significant impact on the type, pace, and amount of transformation that an organization can undertake. A company’s culture reveals a great deal about its ideals and how it operates. The more robust the culture, the greater the organization’s capacity for innovation and change.
The Future Of Finance
As all industries prepare for change, digital transformation is here to stay. Utilizing artificial intelligence, big data, and machine learning are only the first stages toward business transformation. According to a Deloitte survey, 45 % of businesses reported favorable growth following the adoption of digital technologies. According to research, the market for digital transformation is predicted to reach a massive $3.294 billion by 2025. With such lofty aspirations, it’s only a matter of time until we begin to see benefits in our daily lives as well.
This is particularly true in the fields of technology and business. Without adoption, you would perish in this brutal world. Finance teams recognize that change can be challenging, but it does not excuse you from remaining where you are. Indeed, development is a reassuring sign of success. Therefore, it should encourage you to stay current on all financial trends and to strive to stay ahead of the curve. Being sensitive to and accepting of these trend shifts provides you with a distinct advantage.
So, leverage the potential of emerging technology trends today to help you build your financial business!