“Go Digital or Go Dark” - Companies, irrespective of their sectors, run a great risk in the age of the technological revolution. Consumers prioritise convenience and often will not see the need to step out of their houses to use a service that could be achieved with a few taps on their phone. Add to that a pandemic that has led to even further restrictions and the picture becomes clearer.
Digital transformation typically happens over the course of several years but it’s been accelerated due to COVID-19. Companies were forced to adapt in order to survive but financial services hold a much bigger stake in all of these than we realise. This is since every business relies on payments and if financial services companies do not accelerate digitally in 2021, they will not be able to compete.
It’s crucial to recognise that digital transformation has become a necessity for a good business strategy. In this article, we explore the reasons why financial services need to be digitalised as well as tips to help with the transition.
Reasons Why Financial Services Need To Accelerate Digital
1. Meet Evolving Customer Expectations
With customers increasingly expecting convenience and on-demand services, going digital is essential if businesses are to thrive and meet expectations.
It’s crucial for businesses to prioritise providing a superior customer experience - which we’ll dive into later in this article - but the key focus on delivering on-demand services is simply to be available for your customers when they need it. But why is this so important?
While prospects or customers may have a positive opinion of your brand or company based on their first impressions or initial experiences, what really matters is the ability for your business to continue to stand out from the competition. With the rise of fintech startups and other financial organisations embracing digital transformation, a key differentiating factor is to meet customers where they are and continue to be present as an option for future services within the financial industry.
2. Adapt to Increasing Regulatory Complexities
Regulation of the financial services industry has undergone dramatic changes. What started as a response to the global financial crisis, bank failures, government bailouts, and investor losses, has now increased compliance spending at banks by over 60%.
One of the primary goals behind these changes is to promote financial stability by increasing financial transparency and de-risking financial systems. Additionally, by introducing strict capital requirements and restrictions on certain business activities, this offers increased consumer protection and prevents market abuse.
These increasing regulatory complexities highlight the need for financial services companies to accelerate digitally in order to monitor risks and adapt more efficiently.
3. Meet Requirements for Cyber Security and Data Privacy
Many governments have started to implement initiatives to ensure consumers’ protection. Open banking in Australia is an example of a shift driven by regulatory changes and changing consumer preferences. It gives customers greater control of their data, providing the liberty of choosing which approved third parties get to access their banking and financial data. In addition, users are able to choose how their data is used under the open banking framework.
Financial service providers like banks need to be accountable in the digital space and are witnessing a revolution in terms of data privacy and cyber security. In order to stay ahead of new requirements, it’s crucial for financial institutions to undergo digital transformation.
Tips for Undergoing Digital Transformation
Getting Started With Digital Transformation
Here are a few trends to get you started in the digital transformation journey of your financial services company:
- Mobile banking - Mobile banking has fundamentally changed how banks and financial institutions function. It is only expected to grow further and is an essential service to offer in 2021 and beyond.
- Blockchain - This is the advancement that we will be talking about in years to come. Not many companies have adapted to blockchain but it is gaining momentum and expected to play a crucial role in digital payments, loan processing, and other processes.
- Big data - Big data can be utilised to serve customers by curating services based on the insights gathered. Financial firms can use machine learning and advanced analytics to process data and generate insights.
- Automated wealth management - These are essentially wealth bots. This AI uses complex algorithms to calculate ideal investments, loans, interest rates, etc.
- Financial technology (fintech) - Financial technology has been present longer than we realise with ATM and credit cards falling under this classification. However, this has now expanded to include tools such as customer service chatbots, expenditure trackers, and online budgeting tools.
Improving Customer Experience
Customer experience has a major impact on how well financial services are received. While it can be influenced by a range of factors including UX/UI, colour palettes, and ease of use, customer experience boils down to two things - accessibility and user friendliness.
Ask yourself these questions:
- “Is my service easy to find?”
- “Is it an option for people making transactions in popular marketplaces?”
- “Are the features of the service easy to navigate through?”
- “Is the interface good to look at?”
The answers to these will determine whether or not your financial services are meeting consumers’ expectations for customer experience.
Investing In Technology
Financial institutions are taking several steps to improve regulatory compliance and control the increasing costs associated with advanced analytics, AI, and surveillance.
These steps include:
- Improving and testing controls across the three lines of defence
- Centralising compliance management
- Improving coordination between compliance, risk management, finance, and IT
- Developing a standardised data platform for reporting and analytics related to regulatory risk and finance
- Employing dashboards - alerts, predictive analytics
- Leveraging machine learning
- Improving regulatory archiving and e-discovery systems
- Leveraging surveillance tools
Why is Digital Transformation Crucial for the Financial Services Industry?
With the increasing levels of competition in the financial services industry, it’s difficult to imagine a financial landscape without it going digital. The number of fintech companies has continued to rise faster than ever, regulatory complexity is at an all-time high, and businesses are constantly being pushed to innovate digitally.
Despite its share of challenges, undergoing digital transformation will play a major role in your business strategy and ensure that you’re future-proofing your business to ensure long-term success.
To find out more, download our ‘3 Ways Financial Organisations Can Enhance Their Digital Customer Service Strategy’ whitepaper.