Digital Transformation in Financial Industry – What are companies doing about it?

Every industry is moving digital! Why? that’s because it’s the new business imperative and customers are demanding it. Go Digital or be left behind forever! – has been the mantra from all pundits and they are right. Financial industry has undergone a massive change in recent years with the change in consumer behavior and emerging digital technologies. They’re shifting their attention from merely what they need to offer customers to how to deliver more value to customers more quickly – think “value creation and engagement with customer“.

Companies that have digitally transformed across industries are outperforming their competitors financially by as much as 26% (Capgemini)

The pace of digital transformation maturity have varied across industries – some have transformed business models, some have focused on transforming customer experiences whereas a few others on digitizing a few processes.

What are the barriers/challenges?

While opportunities are plenty, there are several challenges in digital transformation journey. They include

  1. Digital Benefits vs. Risks: Many companies are risk averse and don’t quite understand the benefits of going digital. So, what is needed here is more education outlining benefits outweighing risks.
  2. Regulations and Legal/Compliance issues: Will digital technology adhere to the requirements?
  3. Infrastructure issues: Tight coupling with legacy technology systems with integration issues, preventing faster experimentation and agile delivery. Digital transformation needs integration to realize value.
  4. Digital Culture: Embracing digital culture and agile-mindset is still lacking. No measurable investments in innovation.
  5. Privacy/Security: How to balance privacy/security issues whilst providing great customer experience.
  6. Cross-channel view: Not having one view of customer.

The biggest opportunity in Financial industry, be it – insurance, retail, asset/wealth management, securities, etc – is around creating a compelling, intuitive customer experience and delivering great experiences across all channels and devices. Personalization, customization and running targeted campaign is equally important.

What are financial companies doing to get ahead in digital maturity?

Companies are beginning to realize that Technology is key enabler for digital transformation and are undertaking several initiatives like –

  • Transforming Customer Experiences
    • redesigning websites leveraging Content Management System (CMS) platforms for providing more control and flexibility to marketing to make changes to site
    • Omni-channel delivery i.e. providing seamless, consistent experience across channels and devices
    • leveraging social media platforms to enhance the brand and engage with customers
    • opening up discussion forums, creating surveys and polls for customer feedback
    • showcasing thought leadership by creating blogs and engaging with customers E.g. Better Money by Bank of America
  • Process Digitization
  • Investing in Innovation and Agile Processes
    • adopting agile and devops for faster product development and rollout
    • creating user labs where they bring customers to help them work through the very early stages of thinking about a product (E.g. CapitalOne User labs), and many other things
    • providing digital tools for asset managers, wealth managers to collaborate and engage with their clients
  • Data Analysis
    • leveraging analytics data to measure customer behavior and refine strategy thereof
  • Single view of Customer
    • developing single view of customer with investments in CRM, analytics and other marketing technologies

Trends shaping up

Trends that will most likely be mainstream in few years include –

  1. Digital advise (“high-touch” replaced by “high-tech”)
  2. Robo-advisors (AI/robots based advisor to manage clients portfolio/goals)
  3. Mobile payments, mobile wallets
  4. Crypto-currencies – digital currency that is decentralized, peer-to-peer (P2P) i.e. no central third-party. (Bitcoin, Blockchain disrupting the payments industry at global scale)
  5. Smart banking (mobile, smart deposits, online bill pay, and other avenues)
  6. FinTech – Technologies for banking, corporate finance, capital markets, commodities, financial data analytics, payments, personal financial management, and many others. See Global Fintech landscape.
  7. Biometrics authentication

Today’s empowered customer wants it all: mobile, online, social, face-to-face and everything in between. The urgent and critical task for financial institutions, esp. banks is to figure out what truly matters to their customers and deliver the experience people are looking for.

Retail Banking and Insurance are leading the digital space among all the other sectors in Financial space.

Conclusion

Digital transformation is happening in every industry, industries are taking different paths at different speeds. Eventually, in couple of years, all industries will be forced to digitally interact with customers, will digitize many processes, free up their workforce on driving value-add business, operate their businesses based on real-time information, and will continue to improve job functions with more automation and innovation. Exciting times ahead!

What other trends have you seen across your industries? Please chime in with thoughts.

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