Digital Transformation Financial Services Specialties

Digital Transformation: The Holy Grail of Innovation. Today, it is almost impossible not to hear a phrase that has been captured at least once, twice, or a dozen times in a boardroom, client meeting, or innovation brainstorm.

Wall Street is no exception. The growth of Fintech companies and solutions has led to a completely new and transformed financial services landscape over the past five years. Changing customer expectations, increasing ruthless competition, increasing control complexity, pressure to streamline operations, and other factors lead to re-creation and innovation.

The new era of open banking has enabled systems to connect quickly and smoothly with new platforms and applications. Physical banks and paper systems are rapidly being replaced by strong networked digital ecosystems.

Types of affected companies range from 100-year-old banks and insurance providers to Fintech start-ups a decade ago. Regardless of whether a business was born in the digital age or is holding on to it now, nothing has been affected.

Traveling to digital changes can be challenging. While some companies have made digital changes to their DNA, the majority is needed for harassment and planning. They need to break old habits, update cultural principles, nurture their employees, and make their way of thinking become a digital business. It is important to understand how the point between digital programs, strategies, and business execution is. Two to one o’clock.

Middle markets financial services companies, in particular, have a unique challenge. They must begin the journey without the more robust means of these large partners, nor the same level of flexibility and agility should they start traveling today – Either staying out of competition or fostering industry ties.

Top Financial Services Digital Transformation Trends

1. Digital transformation is a top business imperative.

Digital transformation is a business imperative in all industries, and financial services are no exception. Almost all (97 percent) financial services companies are undergoing a kind of digital transformation – whether they are in the process of developing a strategy or are already executing it. The fifth (21 percent) list is developing a digital transformation strategy as their first digital preference.

The driver behind it? Conditions to quickly change financial functions. See a small section for example – at Banking. Although many of the original functions of banking (i.e., security, payments, loans, and investments) are similar to those of a century ago. The performance of these transactions and transactions – as well as what consumers expect them to do – has changed dramatically.

At the same time, competition in this field has raised. After explaining some well-known trends, thousands of new players are coming to the surface in the financial world, finance and services are no longer good or secure at all levels – and in most cases, it is in technology. There may be interruptions.

Financial services companies know this – and know they have a lot more work to do compared to other industries. Although many of those surveyed indicated that they had a digital transformation strategy, many did not implement it.

More than half (55 percent) of those implementing (or planning to implement) a clearly defined strategy is designed to take action (or planning to take) on it.

However, even though most financial services companies have many miles to go on their digital transformation journey. Many (66 percent) see themselves as equal to their industry counterparts, compared to 53 percent of all companies.

Meanwhile, only 23 percent see their peers as “sophisticated,” 35 percent of all companies. This suggests that financial services companies have a more realistic assessment of their own digital capabilities – or understand the significant investment and effort required to make the digital transition happen. It also indicates that they have realized that they still have a long way to go.

 

2. Digital transformation brings proven—and highly anticipated—ROI.

The benefits of digital transformation, such as improved customer experience and operational efficiency, are clear. As a result, most financial services companies take advantage of higher revenues and profits from digital transformation than any other industry. Details), therefore, they are willing to increase costs by the same percentage.

Revenue

Profitability

Because of the benefits shown in its promise, the financial industry is making huge amounts of digital money. More than half (65%) of all financial workers plan to increase their income by more than 10% (but not 37% of the total). In particular, the medium of inquiry (83%) intends to invest large sums of 10% or more.

3. Improving customer experience & operational efficiency to top financial services’ long & short-term business goals.

Improving Customer Experience

Customer experience is not the only customer service. While the latter is a reaction (and only part of the first), the customer experience refers to the customer journey that goes from start to finish, including anything related to the relationship n between ways.

This is changing rapidly. A few decades ago, the idea of ​​having a better “customer experience” could mean having a better experience at a physical bank or other financial institution. Today, it can include anything from being able to access accounts through multiple channels. Asking questions directly through a chatbot or robotic advice, and receiving real-time information.

But, these are old-fashioned – customers will expect the financial services system to expand in the future. Everybody will want to manage all their money – not just one part – in one place, for their own benefit. People cannot expect anything less than the sum of the time they need it. They will use simplicity, efficiency, and understanding. They will not tolerate even the possibility of data breaches.

On top of all of this, financial institutions are no longer competing with other financial institutions for customer attention, but each company offers a better customer experience – including other brands.

Thus, improving the customer experience is 83 percent of long-term business leaders with the shortest-term business objective (74 percent). More than a quarter (28 percent) say the customer experience is not as big as their digital fears – which is higher than all 17 percent of all others.

Digital transformation helps financial services companies improve their customer experience in many ways – from attracting new customers to simplifying banking. In this process, it is important to clearly focus on customer-centricity or meet customer needs.

An important factor in improving the customer experience is that introducing new products and services is one of the long-term goals of 80 percent of financial services companies. It often includes a mix of enhanced Fintech offerings (often partnerships, collaborations, and joint ventures with start-ups, innovation hubs, and accelerators) and more traditional offerings.

All businesses want to cut costs, but financial services companies are especially feeling the pressure to tighten their belts. Optimizing business efficiencies and operations across the supply chain is a top digital priority for financial services organizations (cited by 37 percent). Eighty-two percent also cite reducing operational inefficiency as one of their top three long-term goals. The 76 percent point to it as one of their top three short-term goals.

Upgrading legacy IT systems as part of streaming operations, the top target for next year is 88 percent. Nearly half (49 percent) said that interoperability with legacy technology was a major obstacle for them to successfully implement digital programs. Many large (and historic) companies rely on major systems built 30-40 years ago, making it difficult to develop and integrate new products.

As a result, financial services companies are more concerned about their IT infrastructure to integrate advanced technology than any other industry. A high percentage (61 percent) of all firms describe their IT system as “affordable or poor”. Only 39% said it was “excellent” or “very good” (63% vs. all companies).

4. IoT, AI & Blockchain investments heat up.

Fifth (17 percent) financial services executives say investing in innovative digital capabilities is a top digital priority for business needs. These include the Internet of Things (IoT), Artificial Intelligence (AI), and Blockchain, as well as advanced technologies already in use (such as cloud computing, advanced analytics, and automation).

Internet of Things (IoT)

The Internet of Things (IoT) has significant implications for financial services companies. Although IoT devices are often associated with consumer products, the benefits of having real-time data about clients’ physical assets. The financial services companies seek to improve their current products and services, invest in customer buying behavior, and further personalize. User experiences.

General financial services IoT applications today range from providing consumer-based insurance to analyzing biometrics data to improve the credit guarantee process. However, a lot more will come out. In an organization, IoT devices such as smart sensors can help improve labor dynamics by tracking employee movements and work habits and reducing building maintenance and utility costs.

Artificial Intelligence (AI)

Advances in AI have changed every aspect of the financial services industry. By using AI to detect transaction frauds, companies can greatly reduce the risk of fraud and money laundering. Capital market firms can make fast and intelligent business decisions based on advanced analyzes of past market performance data. Companies can personalize customer experiences based on customer sentiment and mood analytics and personal customer profiles.  As such as suggesting customized portfolio solutions based on each individual’s risk appetite.

However, while financial services companies see AI and machine learning-based solutions as opportunities for growth, many are still concerned about AI’s younger siblings: automation. Thirty-nine percent say commoditization and automation are their biggest digital threat, accounting for more than 23 percent of all companies. Robot advisors, chatbots, and other automated processes can greatly increase operational efficiency, but it can also be a job security fear – or the possibility of being replaced.

5. Cultivating a strong “employee experience” is critical.

Improving customer experience may be on the top of the mind for most financial services companies but promotes an equally important employee culture. Digital transformation is less about revolutionary technology than changing the way companies work. The change of mindset is that the ultimate customers-employees and customers are embracing those digital capabilities through business. And business implementation rather than on digital capabilities.

Cultivating this change — and inducing organizational behavioral change — begins with the upper voice. The senior-most leaders of an organization need to be persuaded to understand why their employees should abandon the status quo, believe in strategy, and engage in the process.

They should also strive to cultivate a corporate culture that embraces sustainable experimentation and practice. In which short-term mistakes and failures in the pursuit of long-term innovation and value creation are expected and accepted. This can be very challenging for financial institutions in the pre-digital age.

But buying a shareholder is not enough. Nearly a third of financial services executives (73 percent) said a lack of skills or adequate training was the biggest challenge moving forward with the new digital initiative – 54 percent higher than the average for all companies. Injecting new talent can help improve overall digital potential. While companies should provide existing employees with the resources, training, and development they need as their roles develop. Companies should consider an official digital upskilling program to prove their workforce in the future. The personalized training modules are based on preferred learning methods.

6. Strong governance remains a challenge.

Good governance – everything from planning and evaluation to implementation and implementation. Is the key to any initiative across the organization, but not so easy. Establishing the right metrics to measure progress is the biggest challenge going forward with the new digital initiative of financial services (39 percent, compared to 27 percent for all firms). While this percentage is rising to 46 percent in lower-middle market firms. This level of experience in management programs may not be as great.

Meanwhile, more than half (53 percent) of financial services firms cite poor communication and project management as the top barrier to successful digital implementation, once it happens. Lack of senior management leadership or vision is another big problem for fourth party participants, especially lower-middle market firms (33 percent).

The good news is that the challenges facing business share internal shareholders and employee pushbacks are lower than average for all industries. Indicating that most financial services companies are aware that digital transformation is imperative.

To make digital transformation effective, financial services companies need to develop a unique performance within their organization to drive digital efforts — a cross-disciplinary. “Digital dream team” of individuals to become their champions in this field. Fortunately, one-third (77 percent) of financial services executives already have a digital innovation steering committee (compared to 58 percent of all companies). 60 percent of board members or senior management-related supervisory skills (49 percent of all companies).

THE RISE OF REGTECH: DIGITALIZING GOVERNANCE & REGULATION

If there is one factor that all financial institutions can agree on. It is the number and complexity of the rules, regulations, and compliance demands they are subject to. Not only has the number of regulations increased over the past decade but so has the number of federal governing bodies and compliance costs (and non-compliance).

Whether it is the Financial Crimes Enforcement Network, the Financial Industry Regulatory Authority (FINRA). The Comptroller of Currency (OCC) office, or any other body, financial institutions can not reduce their protection even once.

To navigate this critical demand network, financial institutions have no choice but to resort to technical solutions for assistance. An important field that has emerged as a result is regulation technology or RegTech. They are designed to help companies manage their financial compliance demands efficiently and cost-effectively. By combining cloud computing, data analytics, AI, and other technologies through their data mountains. RegTech can help shed light on the more granular activities of a financial institution and may not adhere to the guillotine before bed. Regtech allows companies to make decisions faster and more accurately with significant cost savings, rather than relying solely on humans.

Again, it should be noted that technology implementation is not only a digital transformation, it is a part of the journey. As middle-market financial services companies continue to develop and improve their digital strategy and goals, RegTech is an important part of assisting them in day-to-day management, so they can spend more time and resources on R&D and innovation.

7. Cyber and data privacy needs to be more of a priority.

Data privacy and cybersecurity will remain a serious issue for decades to come as attackers. Use sophisticated methods and access through a large number of entry points due to the proliferation of technology platforms and IoT devices.

Financial services companies are vulnerable to these attacks because they have a sensitive client and funds with third-party information. Those who experience infringement face serious consequences, including loss of money and reputation, as well as legal claims and sanctions.

Unfortunately, many financial services companies are overconfident about their ability to withstand an attack or are unaware of the reasons for their own security failure. Less than a fourth (24 percent) of those surveyed cited cyber taxes or privacy breaches as their top digital threat – lower than the average for all companies (33 percent).

The percentage that cites cyber concerns as their biggest challenge in moving forward with the new digital initiative is also below average (15 percent and 25 percent).

This is embarrassing, especially considering the many widescreen cyber discussions that have taken place in recent years (i.e. Equifax, Wannacree, Notty, etc.). To prevent such work for victims of these attacks, financial services organizations should focus more on identification and response (including real-time defense), increase internal controls, and implement awareness training for all employees. It starts with defining and documenting potential threats and a part of their current risk management framework. Internal controls, especially those related to payment functions, should ensure that employees are not surrounded by the four-eyed principle and separation of duties.

CONCLUSION

Financial services companies face many challenges daily, from current banks to fintech startups. This financial service has running depends on the upgraded points. Financial service depends on the reasons behind everyone.

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