The importance of digitalization in finance
Technology and online services continue to penetrate our lives, and the financial industry is not immune to this trend in any way. Whether it’s ApplePay, PayPal or financial applications, banking transformation is here to stay. Clients are getting used to the simplicity of the almost instantaneous digital service and providers are motivated to react fast.
According to the Hackett’s Group Digital Transformation Performance Study, it takes digital leaders about 2.5 years to change their strategy. Currently, more than 50% of finance organizations are redeveloping their approach. So it is no wonder at all, that the amount of the financial organizations that will develop a mature strategy in the next 2-3 years will double.
Yet even the greatest strategy without the right amount of resources can be useless. The 2019 Key Issues Study shows that at this time those resources are only available to 24% of financial organizations. So it is no surprise that according to the study, IT budgets for the transformation will rise in the next year. But what exactly financial institutions are looking for? To name a few things: higher standardization, automated processes, improved performance, and customer experience.
Advantages of digital transformation in banking
Digitalization is different for every industry, but it seems to be crucial for the banking sector because it is one of the most data-driven fields. As Gartner estimates, as many as 80% of traditional banks will go out of business by 2030. Others, according to analysts, will have to move fast to build digital platforms and find new niches. According to the new report from Accenture, retail and commercial banks have invested globally over $1 trillion in the past 3 years to transform their IT services.
Digitalization doesn’t seem much of a stretch when you think about all the regulatory requirements that force banks to store transaction data for many years. Therefore, the challenge to make this information easily accessible and at the same time provide meaningful insights is so much bigger. But digital transformation for banks can also contribute to the engaging and fulfilling customer and employee experience.
Going digital has really affected the workforce. Yes, automation can result in staff reductions, but it can also increase the demand for data scientists. That is why it is time to start educating the new generation of workforce and recruit new talent.
Next-gen technologies applied
Technological advancement makes further business transformation possible, adding technologies like AI and blockchain to the common instruments of the industry. The industry already uses mobile apps, IoT, card readers, and sensors that made real-time financing a reality. But the next step is just as important, to say the least.
Faster but cheaper operations
It is more obvious than ever that new business models and faster processing will become critical to the prosperous future of all financial services. And digitalization, which can provide innovative capabilities, will speed up the implementation of the business-wide improvements. According to Boston Consulting Group, even a few key improvements can have a great impact on the overall performance and can potentially increase revenues up to 20%, while reducing costs by as much as 25%.