In today’s hyper-connected, global economy, digital transformation has been embraced by businesses across industries. This trend especially became relevant in the wake of the 2020 COVID-19 pandemic when customers migrated online, and businesses had to cut costs to operate.
One industry that has adapted well to digitization is financial services.
The Financial Services Industry Overview
This is because the financial services ecosystem lends itself to digital initiatives. It is a highly regulated and complex industry reliant on the customer experience to drive revenue. Digital transformation provides the financial services industry an opportunity to differentiate customer experience and transform it into a digital experience. It enables banks, insurers, or fintech to provide what customers want, when customers want it and how customers want it.
Such instant service delivery makes businesses more competitive in a sector where innovation is hot. The financial services industry was once comprised of a few well-known institutions that had significant resources to innovate. Now, new businesses of different sizes and services are entering the market.
Barriers In Financial Services To Innovation
This creates an interesting dynamic. Smaller startups are more agile and able to quickly pivot in response to market trends. But the middle-sized companies neither have the resources of the larger counterparts nor the agility of the smaller companies to be responsive. A barrier to innovation forces the industry to become more creative in finding digital transformation solutions.
The Adoption of Digital Transformation In Financial Services
As the market landscape shifts, financial services companies are in the process of developing or implementing a digital transformation strategy. Research has found that nearly 97% of financial services firms are actively pursuing digital transformation. In the big picture, 68% of financial services firms are committed to digital transformation v 63% of overall businesses across industries.
A closer look reveals that only 23% of financial services firms view themselves as “advanced” in digital transformation compared to 35% of all organizations. This indicates that the financial industry is hyper aware of the challenges and benefits of digital transformation on the road to adoption. Middle-sized financial services firms stand to gain the most benefits from digital transformation as they can scale up to the big players.
3 Benefits Of Digital Transformation For Financial Services
1. Better Customer Experience
During the pandemic, customer trends, and buying trends shifted online and businesses had to respond. Now, financial service companies are competing with other brands for more than just customer service, but an overall customer experience. The customer journey from start to finish is critical in driving revenue and building brand equity. It can be compared to the way customers had a personal relationship with a bank in the past. The same level of care and personalization needs to be expressed online as part of a successful digital transformation.
2. Improved Employee Experience
As much as customer experience is a driver for financial services firms, part of successful digital transformation is an improved employee experience. Robotic Process Automation (RPA) can be a part of the digital transformation. Banks and other customer-facing services are embracing automation such as virtual assistants and bots for service delivery. This enables employees to focus on higher-value tasks and to be relieved from mundane and repetitive tasks. The increase in employee satisfaction and the buy-in of employees is what financial services firms need to execute digital transformation initiatives.
3. Increase In ROI
For financial services firms, a better customer experience and more operational efficiency led to an increase in ROI. This industry can see even more profitability than other sectors. Some middle-market financial services companies can anticipate a revenue increase of 10% in the first few years of adoption.
In the financial services industry, the road to digital transformation is complicated by changing market demands, customer preferences, and technology. By being responsive and focusing on the customer experience, financial service firms can digitize, increase revenues, and drive innovation.