The financial services sector is going through a significant digital transformation wave. Financial Services companies moving ahead swiftly with their digital journeys rip benefits and get the first-mover advantage.
For instance, mobile banking has made it convenient for customers to send and receive payments at the click of a button. You need not commute to the bank to open an account. You can do this by sitting in the comfort of your home. Similarly, the advent of ATMs has made it easy to retrieve money even in the middle of the night.
However, the financial services sector faces many challenges concerning governance, enhanced competition, changing customer expectations, and more.
In this blog, let us explore the top trends of digital transformation.
Top 7 Digital Transformation Trends in Financial Services
The major trends concerning digital transformation in financial services are using advanced technologies like artificial intelligence and machine learning, data privacy challenges, real-time analytics, and enhanced customer experience.
Let’s understand these trends in detail.
Use of AI and Machine Learning for Predictive Analysis
AI and machine learning are rapidly changing the face of predictive analysis in the financial services sector. Artificial intelligence can help you spot transaction frauds and help mitigate the same. Similarly, with AI-powered predictive analysis, you can understand your customer sentiments better. By tracking each customer’s unique requirements, you can tailor their profiles for higher performance, better segmentation, and personalization.
Also, when it comes to capital market analysis, firms can better analyze the performance data and make smarter trading decisions. In doing so, you can ensure a better return on investment for your financial services business.
These days AI-powered chatbots provide personalized financial advice for customers. For example, by analyzing their past spending patterns, they can advise customers to make intelligent savings plans in different financial instruments.
Blockchain and Security
Blockchain technology enhances the security of financial transactions using smart contracts. Since blockchain is made of interconnected and distributed ledgers, it is challenging to hack closely connected transactions. Each node has the credible timestamp of the previous transaction. Hence, the different parties involved in the transaction can easily track the money transfer transparently.
Also, blockchain technology is increasingly being used to execute smart contracts. For instance, smart contracts speed up the insurance claims process in an insurance company. Manual intervention is not required to check if the claims are fair. The blockchain software automatically checks the claim’s credibility and passes on the claim.
Enhanced Customer Experience
Digital transformation helps you enhance the customer experience from the beginning of their customer journey to the end. It does not just involve solving their customer queries. Instead, it is a combination of multiple factors like guiding your customers to access their accounts via numerous channels, giving them real-time updates about customer offerings, helping them to create an optimized online profile, and more.
Digital transformation can simplify the day-to-day needs of your customers. It ensures higher transparency, accountability, and credibility in the operations. In this way, you can enhance your customer satisfaction levels with faster digital performance.
Delivering habit-forming experiences to customers will enhance Customer lifetime value for a financial services company in today’s competitive landscape.
Governance Challenges in Financial Services
The financial sector faces many governance challenges like compliance with numerous regulations, overseeing many digital technologies, and more. To tackle this challenge, a new form of regulatory vertical has emerged in the financial services sector known as the RegTech. Here, technologies like AI, cloud computing, and predictive analysis are used to spot the shortfalls in the governance structures. You can quickly correct these issues before the regulatory bodies question your credibility.
Since RegTech uses the power of technology, the decision-making is faster, transparent, credible, accurate, cost and time-saving in nature. In this way, the financial services sector is well-equipped to predict and tackle any challenges with ease.
Data Privacy Concerns
Due to the proliferation of advanced technologies like AI, blockchain, and IoT, there is always a risk of data privacy breaches for the financial services sector. This sector houses customers’ sensitive data like bank account numbers, security passwords, phone numbers, etc. Hackers can break into the system via multiple entry points and steal crucial business data. Hence, digital transformation must employ checks and balances to tackle data privacy threats.
Increased Return on Investments with Digital Transformation
The financial services sector can expect a higher investment return with digital transformation. Automation technologies simplify the workplace processes, thereby improving the user experience and efficiencies.
For instance, users need not go physically to a bank location to open their accounts. They can easily create an account online using the bank’s mobile app or a website browser. In doing so, they save commuting time and speed up the transactions. Further, financial institutions can regularly notify users about new products and services. Customers can easily subscribe to these services online without taking much effort.
Real-Time Monitoring & Analytics
Real-time monitoring and analytics are crucial to spot operational and performance issues in the financial services sector. The faster you spot customer problems, the easier it is to resolve the same. Nowadays, there are various automation tools and software for real-time monitoring.
You can easily track the live financial transactions of your customers on a single dashboard and see the RoI on a weekly, monthly, or quarterly basis. This analysis is essential to chalk out and plan your future business strategies. Further, automation software also tracks the performance of your employees. Based on this data, you can understand their motivation levels and take effective steps for their grievance redressal.
Overall, digital transformation in financial services is crucial for speeding up transactions, saving time, ensuring the convenience of customers, maintaining higher levels of financial security, and more. Technologies like artificial intelligence, machine learning, cloud computing, and IoT aids well in the digital transformation of the financial services sector. These technologies help with the real-time tracking of transactions and your employee performance. With proactive monitoring, you can expect to solve the issues quickly and faster. Overall, digital transformation ensures the security of customer data and makes it hackproof.