Why You Must Embrace Digital Transformation in Banking and Financial Services?

Quick Summary: Your customers are digital. Is your bank? As the financial industry is undergoing a seismic shift where harnessing digital change is the only survival kit for businesses. That’s where, falling behind means losing customers and market share. So, in this blog, we discovered how to successfully opt for digital change, its advantages, importance, and impact to effortlessly drive your bank into the digital future.

The financial world is longer, just about numbers. It’s about experiences. Modern-day customers expect more than just transactions; they demand digital convenience, personalization, and instant gratification. It is a perfect storm, and the only lifeboat is embracing digital transformation.

Remember when JPMorgan Chase took the banking and financial industry by storm by declaring itself a tech company? That wasn’t a publicity stunt, but their smart forecasting to empower the firm and its employees to fulfil the rising needs and demands of digital-savvy customers. They invested billions in technology, recognizing that digital transformation will not always remain an option; now it is a mandate for every business.

So, it's high time to stop viewing digital transformation as a buzzword. To maintain the competitive edge, you need to choose digital transformation solutions, namely, equipping your banking ecosystem with modern technology and tools to provide a top-notch customer experience.

If you want your financial firm to get along (or even outplay) the cutthroat competition of the market, you must embrace digital initiatives and strategy as early as possible.

In this blog, we will dive deep into why digital transformation is non-negotiable for financial institutions, challenges you might face, and most importantly, outline a roadmap to success.

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What's Digital Transformation in Banking and Finance?

Digital transformation in the banking and finance industry is not just about utilizing the latest software and equipment but adopting a revised approach to work culture, communications, and management practices.

Digitization, digitalization, and digital transformation are more like a phenomenon, a direct result of the rapid advancement of technology in the IT-sphere. The economic sector was one of the first to witness its positive impact back when the fintech app development industry started to boom in 2008. Eventually, due to the global recession and the recent Covid-19 pandemic, financial companies had no option left but to pull their socks up to minimize cost while providing quality service to customers,

On top of this, the rate of mobile app development has been skyrocketing from the last few years, leading to a new set of technology trends like IoT, big data, blockchain, etc. As of 2021, 169.3 million people in the US use mobile banking, and 80% of them have said that mobile banking apps are the best way to access their accounts. Together, all these factors have accelerated such a banking transformation.

But the transformational journey might not be easy for you. While some organizations can execute it seamlessly, the majority have to go through considerable brainstorming and planning. You must let go of old work habits, refurbish cultural practices, re-equip employees, and adapt to a digital mindset. Most importantly, learning how to connect the dots between business enablement and digital measures will be highly critical.

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Why Should You Opt for Digital Transformation in Financial Services?

In order to speculate on the future of the finance sector, Deloitte conducted an industry-wide survey and made eight predictions for finance in 2025:

• Touchless transaction methods will rise due to the increasing popularity of automation and blockchain in financial operations.
• Financial services will be real-time. There will be no periodic reporting to drive operations and decisions.
• With automated operations, the banking industry will redouble its efforts for business insights and service.
• Self-service will be the new norm.
• Algorithms and robots will be a crucial part of the new service delivery model and the diverse finance workforce.
• Traditional ERP will no longer be useful due to the emergence of finance microservices and apps.
• The augmentation of APIs will result in data standardization.
• There will be a cultural and organizational shift in the finance workforce.

These forecasts certainly speak volumes of the impending need for digital innovation in banking and finance.

According to Finder, 25% of UK bank branches have shut since 2012. The number had significantly dropped from 11,355 in 2012 to 8.525 in 2020.

Yet, the statistics of two other popular UK banks were pretty eye-opening in contrast. Santander UK, a reputed financial services firm, digitally executed 80% of its sales. And from 100 video banking calls per week in January, NatWest went to 9000 by September.

The impact of digitalization in banking and financial services is far-reaching, empowering you to implement proactive changes in the industry. Hence, the sooner you leverage the agility and power of technology, the better your firm will profit.

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What are the Advantages of Digital Transformation in Banking and Financial Services?

If you want to keep your finance firm competitive in the industry and meet consumer demands, you must implement digital initiatives to match the stride of today's innovation.

According to another study conducted by Deloitte across financial companies, 37% of the respondents have stated that they maintained a cautious and deliberate organizational culture for their company's digital transformational journey. 38% of them have been more progressive in their digital initiatives, while 25% are excelling their competitors.

More often than not, the first step towards digital finance transformation is the formation of a digital workspace where technology, not geographical locations, facilitates teamwork and collaboration. By creating a digital workspace that bridges the gap between physical locations and employees, you can leverage the following benefits:

1. Great Customer Relationships

An EY survey has revealed that 32,000 retail bank customers worldwide consider positive customer experience as the key to winning, growing, and retaining consumers in today's highly competitive banking industry.

You can provide a great customer experience only when your business team understands their roles and responsibilities to deliver that experience. Implement modern tools and processes in your organization to prepare your team for the most significant marketing asset - your unparalleled brand promise. It will encourage them to deliver a positive brand experience throughout a customer journey consistently.

2. Streamlined Operations

Digital transformation services can help you streamline your business operations. As a result, you can save cost, time and enable your staff to be more productive and efficient.

For example, Rathbone Brothers, a UK-based investment management company, replaced their legacy system with a workflow process that has modernized their marketing production and automated the inclusion of compliance teams. The upshot is a significant decrease of time and complete elimination of human errors.

3. Adaptability and Flexibility

The present-day banking industry is well familiar with mergers and acquisitions. And the reason is the advancement of technology and financial services transformation. With the help of Cloud-based ERP systems (since they are a lot more user-friendly and easier to incorporate), financial institutes and banks are much likely to merge and consolidate since there is no longer any need for personalized on-premise systems.

4. Improved Brand Reputation

Brand reputation is one of the most critical factors for increasing sales, and hence, revenue as well. If you maintain a positive brand reputation among your customers, it will help you gain bottom-line growth, a strong market position, and, of course, customer loyalty in the long run.

According to Accenture, while only 68% of executives prioritized maintaining a promising brand reputation in 2012, the percentage is 88 now.

Therefore, digital transformation for small businesses, as well as others, comes with brand management software. Such software can be significantly useful as it deals with industry and consumer-related challenges and helps you manage and grow your brand across all important touchpoints. Aon, Ally Financial, and Rathbones are some of the financial firms that use brand management software to manage the nitty-gritty of their brands.

5. Integration of Apps, Data, and Processes

The legacy core banking systems are just a set of various tools that you place together without an effective centralized data sharing capability. Digital transformation in banking sectors has enabled organizations to get rid of this issue.

And the benefits you will get are manifold, such as - the tech stack of your finance firm will be a lot less in size and complexity (therefore cost-effectiveness), improved data accuracy, standardized data across multiple locations, elimination of time-consuming ETL processes, and so on.

6. Coherent Reporting Capability

Along with easy consolidation of data, real-time data has emerged as a game-changer for the finance industry as well as banks can now have a more accurate and error-free approach to reporting. With real-time monitoring and accessible data, you can quickly identify issues and react to changing trends seamlessly.

Since you do not have to invest much time in compiling reports, you can plan and strategize. Hence, banking staff can now have more analysis-based responsibilities instead of spending all their time in mere paperwork.

7. Maintain Compliance

If you opt for digital transformation in finance and banking, financial management systems will make it exceptionally easy for you to stay compliant. A myriad of avant-garde features, such as automation of accounting tasks and auditing processes, allow you to spend less time on these activities and focus on other important tasks.

You can also standardize the data and push it into the centralized system from other applications, bringing down the chances of human errors. Additionally, you can get regular compliance updates in the cloud-based payroll system; hence, there is no need to worry about changing policies and regulations.

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Key Components of Digital Transformation in Banking and Financial Services

Digital transformation calls for a complete transition from the conventional ways of working to embracing new ones that solely depend on the latest technological solutions.

Here I have grouped the key components of digital transformation into three main categories:

1. Improving Customer Experience

This is perhaps the most visible result of digital transformation in finance firms. As you get to access various digital technologies, you can easily simplify all the external communication channels, as well as boost sales, marketing, and analytics.

This will enable your financial institute to perceive what is going on with clients, what is the best time to contact them, and when to personalize your offerings. You can even consider how to build a fintech app, create a constructive marketing strategy, and modify prices according to demands. All this results in enhanced customer relationships, both in terms of quality and quantity.

2. Smooth Organizational Processes

If you are planning to change your company's infrastructure, it will definitely lead to the inception of new processes. Take this, for example; digital transformation allows you to exchange data through emails, but you cannot consider it a new process. It is just a modern and advanced way of executing organizational tasks.

By doing so, you will receive a bunch of benefits like - eradication of paperwork, increased productivity, and upgraded communications. And all these benefits of digital banking come from only one change in the data exchanging model, which is the digitized workflow.

With improved workflow, the awareness level also shoots up. This fundamentally reforms the decision-making and planning process, allows you to allocate resources, assign tasks, and save budget carefully.

The end result of the transformation of internal processes and customer relationships can be so powerful that it can drastically change your financial firm and its position in the industry.

3. Leadership and Political Will

According to BCG, only 30% of organizations successfully execute digital transformation in banking sectors.

Why is the success rate so low? And more importantly, what should your organization do to succeed?

Management's fear of change - is probably one of the biggest reasons for the failure. And this takes us to the concept of the political will of the leadership. The "let's give it a shot, and we will see what happens" approach is essentially incorrect. Your goal for digital transformation must always be clear and to the point.

The outcome of innovation entirely relies on how your leadership team is ready to reimagine the business practices and management styles, especially the customer journey. So, if you, as a leader, become self-aware, your internal team will surely follow the transformational pathway and dedicatedly work for its success.

How Can You Implement Digital Transformation in Financial Services?

For every organization, the journey towards digital transformation is unique. But you can follow a definitive set of practices to get started. As a leader, you can gain the needed momentum and influence your people to buy into your strategy by focusing on their requirements, equipment, and processes.

1. Define the Vision

Change can be stressful sometimes, especially when you are undertaking digital initiatives in banking and financial services. Boston Consulting Group has stated that if you want to commit to vastly changing your financial firm, "Digital transformation must be a clearly articulated strategic priority, supported by appropriate funding, talent recruitment, openness to new agile ways of working and a willingness to take risks."

Remember to stress the 'why' while establishing your financial services digital strategy and consistently focus on how your both customers and employees can make the best out of it. Such an approach will bring a sense of resolution and motivate employees to their core.

If needed, do not hesitate to turn the clock back as you reinforce your vision and take employee concerns into consideration. And lastly, be ready to change the procedure if your people have a hard time embracing this new way of thinking.

2. Offer Continuous Support and Learning Opportunities

While it's pivotal for you to help your employees get along with the new infrastructure, processes, and tools, it's actually quite challenging to guide everyone at one go. So, if you want to offer abiding support to them, the best option would be to develop an internal champions network to keep up with the momentum.

But what do champions mean? Well, it is a group of experts specializing in digital transformation in the banking industry. You can appoint them within business departments, units, and regions to lead the way to a digital future by establishing new policies and practices.

Moreover, you can provide training sessions to introduce new tools and processes. You should not think twice before investing in employee learning and development programs as it will immensely help them adjust to the changes and flourish in a new digital workstation.

Hence, the secret of a successful digital transformation is fostering the growth of employees and keeping them motivated.

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3. Utilize Tech Tools to Promote Collaboration

Creating a digital workplace facilitates the bedrock of digital transformation. According to a PwC report, the advancement of technology is radically reforming the workforces of financial institutes, and a lot of companies have realized that digital tools and cores can replace legacy processes for good.

Hence, this is high time for you to put money into digital tools and smoothen the path towards knowledge sharing, knowledge management, and organization-wide collaborations. Check out these tools, for example:

• Workflow management software like Nintex, Zapier, Asana, etc.
• Collaboration tools like Flowdock, ProofHub, Slack, etc.
• Documents managers like SignNow, Box, or DocuWare
• Internal wikies like Notion, Tettra, Quip, etc.

If your banking employees have available information that they can search and access anytime they want, they can avoid organizational silos and focus on delivering excellent customer experience and financial services.

Once you have successfully built a complete digital workspace, make sure that all the apps, tools, and resources are exchangeable. In doing so, your organization will be able to optimize critical operating patterns and data analytic measures. You can explore fintech app ideas for startups as well. Such benefits of digital banking will surely help you create an organizational strategy and get a better grip in the finance industry.

Here are the four primary areas we would recommend you to prioritize:

• Simplifying legacy systems
• Upgrading the IT management model
• Adopting AI/automation
• Taking software beyond the cloud

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How Will be the Impact of Digital Transformation Services on Your Finance Company?

After looking over the experience and performance of big financial institutions, we are pretty sure that digital banks are the future of this industry. It will help your organization prepare for a digital future amidst mass disruption. Let me mention 5 ongoing challenges in the banking industry and their solutions provided by digital transformation.

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Wrapping Up Overall, it’s crunch time to embrace digital transformation in your financial services. Because digital transformation goes beyond the boundaries of profit, and that is why 80% of C-suite executives were willing to strengthen their digital core in 2023.Well, digital transformation isn’t just about technology, but redefining customer experiences, optimizing operations, and unlocking real revenue streams. For that, every business needs a solid strategic approach, tech expertise, and a deep understanding of the financial industry. That’s where, partnering with a reliable digital transformation service provider can help. They are backed by certified professionals to develop bespoke digital strategies and implement best-fit solutions to tap the full potential of your business.If you are planning to implement a digital change, feel free to consult our experts anytime.