Why Digital Transformation is a Necessity for the Financial Services Industry14 Apr
The phrase “Digital Transformation” is pretty common these days. Spend no more than 15 minutes in your average conference room or board room, and it’s bound to come up. But what does the term really mean? And how important is it for your business to be going digital?
In the financial industry, the answer is that it’s critically important for your company to be at the forefront of cloud-based services. Multiple studies have shown that up to 85% of consumers prefer to engage digitally, and that the idea of brick-and-mortar institutions is quickly diminishing in the public eye. While this may seem daunting when you look at it from a traditionalist point-of-view, the reality is that cloud-based services provide businesses with a tremendous opportunity for growth. Digital transformation can help you achieve greater operational efficiency, but, just as importantly, it can actually improve upon the customer experience, if it’s done right.
While there are plenty of discernible benefits from going to the cloud, there are also some potential obstacles. For starters, protecting your customers’ information is the most obvious challenge. Fraud is a $1 trillion industry, and banks and financial institutions are frequent targets. This makes perfect sense – pick just about any large bank, credit union, credit card company, or investment firm, and there will be funds to be extorted, or sensitive and private information to be stolen. Hackers even sometimes leverage a financial institution’s assets for political or ideological reasons. Either way, cyberattacks are big news, and can irreparably harm a company’s brand. Cybercriminals are becoming more and more sophisticated, and part of committing to a digital transformation means that a business must stay ahead of the latest strategies that hackers deploy.
And then, of course, there is the compliance issue. Compliance teams in the financial industry are scrambling to keep up with constant (and often expensive) regulatory changes that have been the norm since the financial crash of 2008. Even before Covid-19, the challenges of making sure that work-at-home models were compliant with regulations was daunting. Now, with remote employees comprising a significant percentage of the overall workforce, the exchange of potentially sensitive information and access to a range of platforms and systems must be fully secured. The scope of that challenge can be massive, as legacy systems are updated and upgraded to meet new standards.
While a lot of businesses are doing all they can just to keep up with changes, other companies are working to accurately predict what’s next on the compliance horizon. Anticipating consumer needs and expectations is one way these companies stay ahead of the curve.
Technological breakthroughs like Artificial Intelligence (AI) and Machine Learning (ML) allow businesses to create smart automation platforms. These tools improve core processes such as fraud detection and claims processing, and can create custom, personalized offers. “Conversational AI,” which is the innovation that allows for 24/7 chat support, can further optimize operational efficiency while providing round-the-clock customer service. Financial institutions that are shedding previous notions of how business is done and adjusting to a new way of thinking are leading the way.
There are three main factors at the heart of the Digital Transformation era:
Customer Expectations – Companies that are thriving in today’s business environment are ahead of the curve when it comes to cloud-based functionality. Anticipating demands and operating on the cutting edge of technology is critical to long-term profitability, growth, and security.
Competition – If a business doesn’t consistently anticipate changing needs and strategize on how to provide the best and most comprehensive range of services to customers, their competitors certainly will. Competition in the financial industry has always been pretty fierce, but things have truly ramped up in the digital age.
Regulatory Complexity – The rate at which regulatory change is increasing, combined with a shortage of financial services compliance experts across the industry, makes it absolutely critical that businesses position themselves for future success. Costs associated with compliance are rising each year, whether it’s money spent on upgrading legacy systems or hiring employees dedicated to compliance and risk management.
When all factors are taken into consideration, Digital Transformation done right will improve the customer experience, increase profitability through operational efficiency, and allow for sustainable future growth. Neovera is a leading and trusted provider of professional and comprehensive managed technology services for financial institutions. For over twenty years, our team has integral in providing financial companies with consulting, multiple Cloud platforms (IaaS, DaaS, PaaS, etc.) and cybersecurity solutions, including monitoring, managed services, CaaS, and Identity and Access Management.