Digital transformation is a popular concept that companies, whether traditional or modern, are exploring to see if they can gain a sustainable competitive advantage. A company has achieved digital transformation when it uses emerging and sometimes disruptive technologies to significantly improve existing processes and business activities.
In the financial world, the digital transformation seems to be a double-edged sword. As financial institutions seek to move beyond their comfort zones to harness new emerging technologies, they see both unprecedented opportunities and impending risks. More and more tech companies start to provide banking institutions with financial software development services.
For example, while some Canadian banks are successful with Block chain, financial institutions in other regions are holding back, waiting for the fog to dissipate. But the question is, how long can they afford to wait?
Are today’s banking institutions able to apologize traditionally for business interruptions when their customers expect a faster, more accurate and modern banking service? As more and more technology companies enter the financial market with disruptive solutions, traditional banks are learning that such excuses do not fit in well with a customer base that can easily opt for technology companies as an alternative solution.
So let’s see exactly what challenges banks face in digital transformation and how overcoming these challenges can lead to long-term, profitable opportunities.
The challenges
We live in the midst of consistent technological change and the emergence of new paradigms. Today, digital transformation is no longer an option for financial institutions, it is a necessity. As customers increasingly rely on new technologies to leverage non-traditional financial services, banking institutions need to adopt new and more efficient ways of managing their banking business and customer loyalty.
The following are the key areas that will affect the banking industry and the competitive landscape of the financial industry in the coming days.
Banking on Blockchain
Like most other business models, data reconciliation is at the heart of financial companies. Almost identical access to the same data with unprecedented levels of trust can change the way banking is conducted today. However, the traditional business practices of traditional banks are inefficient.
Centralization presents its own problems when it comes to scalability, throughput, security and speed. The only way traditional banks can effectively address these issues is to introduce a digitally transformed model with significant potential for cost and efficiency gains. Blockchain technology offers a potential solution by providing a new level of security, transparency, speed and cost-effectiveness.
FinTech
With the development of consumer preferences and the dramatic advances in technological innovation, financial technology companies (FinTech) are rapidly growing and working hard to establish a strong presence in the financial market. With a unique approach to business analysis, the use of new transactional media and the provision of efficient financial services, FinTech companies are taking the financial industry to a whole new level.
This means that traditional banks, which are unable to process mobile payments, use digital currencies, accept online loan applications, and use machine learning and data analysis algorithms, will face ever greater challenges.
The next phase of success for traditional banks will therefore be determined by their ability to quickly adapt to technological change, improve their business practices and explore new trends in the financial industry.
Customer expectations
Customer satisfaction is a key driver of growth, but should not be considered a firm force. As technology improves and new models of financial companies emerge to provide better service at more competitive prices, many traditional banks are feeling the pressure to be unable to provide the same level of service customers expect.
Apart from a variety of customer complaints about inadequate services, there seems to be another risk these banks face: the risk of becoming irrelevant.
As the millennium generation tends to set their own expectations for the efficiency of service delivery, traditional banks have little room to dictate their own standards and offer what they consider appropriate for their clients. This statement is in line with the results of a global survey of SaaS company MuleSoft among 8,000 customers.
In the study, about 15 percent of millennial customers said that opening a bank account should not take more than an hour, and 47 percent considered one day sufficient time to process mortgage applications.
Security and Regulations
Security and regulatory requirements continue to increase as cyber attacks against the industry increase in size, number and complexity. Harmful software, malware and phishing attempts are some of the tools that are used to destroy sensitive financial information and destroy security infrastructures.
Traditional banks often lack IT skills and resources to develop powerful programs and security infrastructures. They also usually do not want to invest in expensive software and / or regular upgrades. As a result, these institutions face a growing number of cybersecurity challenges, given the stringent compliance requirements.
The possibilities
As financial industry changes, forward-thinking banks are responding to breakthrough technologies and practices by developing and expanding internal capabilities. Others think it makes strategic sense to work with FinTechs to help shape digital offerings. Still others with strong financial strength concentrate on the acquisition of their competitors.
These are all good strategies. But those who wait too long for the digital transformation simply miss many potential opportunities that could help in their quest to increase profitability and achieve higher growth rates.
Sustainable growth and the ability to meet increased customer demands for security, reliability and uptime require a whole new class of technology. Here are some of the ways in which financial institutions can track digital transformation.
Biometrics : to authenticate customer identities and optimize various processes.
• Analytics : To gain insights into and use the data of users to achieve deeper levels of personalization.
• Omnichannel : To collect data from a range of digital channels, organize them and ensure their availability as needed.
• Process-mining technology : To leverage existing system data to provide visibility and hands-on insight into how business processes actually work and can be improved.
• Blockchain: Introducing innovative practices and delivering new security standards, transparency, cost efficiency, transaction history and more.
• System integration : Enable open banking and connectivity systems with new platforms to simplify deployment and reduce operational costs.
• Artificial Intelligence (AI) : Promoting cognitive AI initiatives and providing contextualized banking experience through sentiment analysis, sentiment analysis, customer profiling and other techniques.
• Automation : ensuring service efficiency and exempting employees from focusing on higher quality projects.
The digital transformation is more than just the provision of an online banking service or a mobile-enabled functionality. If you are strategic, the digital transformation can lead to a true business transformation. In any case, financial companies need to understand that they must be prepared to break out of their comfort zones and re-network their organizational DNA to meet customer expectations, drive higher enterprise value, and become fully digital companies.
