Benefits of Digital Transformation in the Finance Industry
In this article, we’ll provide a high-level overview of digital transformation in the finance industry, what you can expect from a data pipeline, as well as define some of the most prominent benefits of putting your company through such a transformative process.
Any digital transformation will be a resource-intensive, hard, and relatively slow process – so why do companies undergo it at an increasing rate? Well, companies tend to invest in digital transformation for more than a few reasons.
Not only is this the premier way to improve many internal and external business operations, but it’s also a proven way to provide better customer service while reducing costs. These days, almost every business has a digital presence, and those without it are missing out on a significant portion of the market.
The internet has proved itself time and again to be one of the most lucrative business environments in any industry, and that doesn’t exclude the finance industry.
What is Digital Transformation in the Finance Industry?
A digital transformation in the finance industry is the same as a digital transaction in any industry – it’s a process of digitizing as many elements of your business as possible. Integrating as many innovative digital solutions into your current business dealings is truly transformational and can take years to fully implement.
All digital transformations consist of different objectives, and based on the type and size of the company in question; these objectives will vary. Some of the most common objectives in the finance industry are:
- Cutting down costs
- Improving response times
- Reducing friction between buyers and sellers
- Streamlining internal and external operations
- Entering a new market
- Increasing profitability by reaching new customers
These are just a sampling of common objectives. Every business is unique, and every business has its ideas of what a digital transformation should be.
How Does the Digital Transformation Process Work?
Based on the digital transformation’s set objectives, prioritization plays a prominent role in the digital transformation process. Undergoing such a fundamental change is going to be slow, resource-demanding, and laborious – which means that based on the prioritization of objectives, all companies are going to have a different approach to the entire process.
There are many tools, software, and hardware that go into a digital transformation, and all of them can get pretty pricey when put together, so make sure that you plan for all costs.
The start of the digital process is always the same – it starts with assessment and analysis. Once the executive team clearly articulates the problems they need to solve, they can start considering strategic options, compare vendors, and move towards implementing digital solutions step by step.
That’s where the aforementioned prioritization comes into play. Once you’ve set goals, targets, and steps – the digital transformation process becomes as simple as following the plan.
There are failure points within a digital transformation. The executive team should be aware of them early and have contingency plans in place to get out of any situation that doesn’t go as planned.
Internal and External Changes of a Digital Transformation
Ultimately, the digital transformation process boils down to internal and external changes.
The internal changes will be the way that your company and all of its employees work and interact within the enterprise on a day-to-day basis. Through digital transformation, you’re actively investing in streamlining as many aspects of your business, freeing your workforce up to do more demanding tasks.
Externally, you’ll have to pay attention to the digital culture.The best way to get in on the current digital culture is to follow the latest trends. The internet moves fast, and things that were trending a couple of days ago can be dated today, so make sure to follow all developments and trends closely.
The external digital transformation process usually manifests itself as an interactive website or a social media presence. The point of this step is to get people to interact with your business on a new, digital medium – opening up the doors to a brand new, buzzing, and well-populated market.
The finance industry is highly regulated and tends to move more cautiously when it comes to external changes. That having been said, there are best practices for large enterprises in the finance industry for online banking services, customer interaction via phone applications, etc. If you’re dealing with finance, you’ll have to do your best to make your companies’ digital representation seem as professional as possible, as that reflects your company’s legitimacy.
The Benefits of Digital Transformation in The Finance Industry
There are more than a couple of benefits of digital transformation. While the process might seem like a high initial investment, the returns gained on it will pay the investment of in no time at all, as long as you play your cards right.
Some of the most prominent benefits of digitization in the finance industry are:
- Reduced Costs
By implementing a digital transformation, you’re actively cutting down on the costs of some of the many necessities that needed to be performed manually. The beauty of digitization is that it streamlines many processes, speeds them up massively, and even automates them to a degree – significantly cutting down on the cost finance businesses have to chock up to menial and repetitive tasks.
- Streamlined Operations
Digitization directly reduces the costs of many internal and external processes – it further improves the way that business is conducted. Operators, managers, and employees all have tasks to do in any given company, and through the advent of digitization many of the more mundane and time-consuming ones can be automated.
- Data Collection
These days, most businesses are prone to making data-driven decisions, and because we live in a world where leveraging data provides a competitive differentiation, you’ll need to work to get as much data as possible. A great way to improve your company’s data collection is by digitally transforming your external operations, website, and social media to captivate as much data as possible from your target demographic.
Data collection today might set you up for tomorrow, as assembling an efficient big data pipeline is an ideal way to prepare for big data itself, a buzzing and promising new technology in its own right.
- Improved Analysis
What you do with the data once you have it is just as important as collecting the data itself. Data analytics have been the go-to decision-making tool for a while now, and they’ve become simpler to operate and more powerful than ever. With advanced algorithms, AI, and a range of software solutions, a digital transformation will have an enormous impact on your data and business analysis alike.
- Leveraging Innovation
Innovation within the finance industry can increase customer loyalty, enhance brand stature, and drive new customer acquisition. Companies across all industries, especially the finance industry, can leverage innovative technology solutions to improve their business aspects. By investing in a digital transformation, you’re actively laying the foundation needed for leveraging innovation later down the line.
The Bottom Line
Increasingly nimble fintech players are stealing market share from traditional large banks and financial services entities. Their flexible technology stack, focus on data-driven decision making, and ability to scale quickly via the internet and the cloud are driving innovation and causing market disruption. Traditional players are being increasingly forced to modernize and digitize their business offerings in order to compete.
A digital transformation requires organizational focus, a skilled and talented workforce, and a long-term commitment for execution. However, those that are unable to digitally transform will find themselves increasingly losing market share and risk becoming irrelevant in the market landscape.