How DX is driving real change in key industries – FINANCE

Let's look at the key drivers for change as well as the impact and future potential that Digital Transformation offers the finance sector.

Drivers for change

Finance is one of the most heavily regulated sectors, and Digital Transformation is making a real and lasting impact. Consumers needs and expectations are changing; ease, speed and access to state-of-the-art banking are at the top of their list. Competition from other banks, including challenger banks, is adding to the need to change.
 
Financial organizations are looking to Digital Transformation to build on their technological capabilities and increase the efficiency of systems and processes. This drive for change is seeing the industry move towards a more technologically open environment which uses intelligent analytics to enhance the customer experience. Embracing potentially disruptive technology, financial institutions must focus on retaining customers and maximizing efficiencies to become and remain competitive.

Banking on change

The emergence and rapid growth of FinTech has led to a vast number of changes already in the industry. For example, you can open a bank account online without physically visiting a bank, and the account is linked to your mobile devices. You can monitor your transactions, and use your cellphone to make payments from your account.


 
Digital Transformation is helping banks, employees, suppliers and customers connect effectively and transparently. Business models are now putting the customer at the heart of operations, and organizations are using Digital Transformation for mobile-first platforms, cost savings, and personalized customer support. Below are some of the ways in which Digital Transformation has already made its mark in the financial sector.
 

• Digital banking – The rise of PayPal, ApplePay and Venmo are examples of digital payment methods which have already disrupted the market. Digital banks are also now commonplace, including Ally Bank, Simple and Finn by Chase. Transactions may now be processed online through payment processors such as Stripe, which also helps to remove the barrier of entry for small ecommerce stores and startups. Online automated lending platforms like Kabbage, provide small business with lending services. Digital banking does not need a building, everything from deposits through to loan applications may all be carried out on any connected device in any location.

 

• Mobile technology and apps – It is commonplace for organizations to give account holders control to conduct transactions through mobile devices. This seamless customer experience is mainly carried out through apps, in which facilities such as payments, budget management and reporting are available to the customer. This is demonstrated in the Bankrate 2018 study which shows that among smartphone users in the USA, nearly two-thirds have at least one financial app on their mobile devices.

 

• Fraud detection – Using AI and machine learning (ML) banks and credit card companies are using algorithms to detect fraudulent activity. From predicting trends to identifying anomalies, the system can alert customers of any potentially fraudulent activity. Microsoft Azure has introduced an AI program which can detect and almost instantly tackle fraudulent activity, while Capital One uses Eno, their finance virtual assistant.

 

• Data insights – Organizations are using vast quantities of data to gain insights into consumer behavior. This enables real-time investment insight and deeper levels of personalization. An example of this is UBS, which is using client data to better understand their customers and their needs.

 

• Digital and Cryptocurrencies – Bitcoin and similar cryptocurrencies are a means for independent storing and transfer of value. The finance industry has had to become experts in this emerging area as investors consider them to be speculative assets. Many banks are exploring the possibilities of trading cryptocurrencies.

 

• Banking on Blockchain – The speed and efficiency of Blockchain has bolstered levels of confidence in the way banking businesses operate. By ensuring high levels of security, transparency, speed, and cost efficiency, the use of the Blockchain ledger is growing. From Canadian banks experiencing success, through to American Express using it to speed up international transactions, there are already many examples of this disruptive technology.

 

• Changing role of the accountant - Technology enables accountants and their clients to work closely together using accurate forecasting and automated services, freeing up resources and expertise to focus on high value projects. The role of an accountant is now finding out what a client needs and then looking to address those needs through the use of FinTech. This can help accountants in establishing their role as long-term trusted advisors. This increasingly strategic role also enables accountants to identify threats and opportunities.

 

• Cloud based accounting systems – By utilizing cloud-based systems such as Xero or Quick Books Online, data can be accessed from anywhere through an internet connection. IBM states that cloud computing is already becoming the norm in mainstream banking, with HSBC leading the charge.

 

• Automated tasks – Streamlining time-consuming administrative tasks such as reconciliations, bill creation and collection, saves time and money. From paperless receipts, automated data entry using optical character recognition (OCR) and workflows, this change is growing and  CapGemini have predicted that such intelligent automation could add up to $512 billion to the global revenues of financial services firms by 2020.

The future of finance

Building on the above examples, FinTech will continue to develop as the finance industry continues on its Digital Transformation journey. Further to these developments, some suggestions for the future of finance are touched on below.
 

• Robotic Process Automation (RPA) - The use of robotics and AI may help to reduce costs, errors and risks while increasing service levels, compliance and scalability. The sheer volume of data to be processed will require greater automation.

 

• Chatbots – Deploying intelligent digital assistants will support customer enquiries as well as provide a secure and consistent personalized service.

 

• Biometrics – Development of this technology is likely to include a range of biometric authentication options to guarantee accurate identification and streamlining processes, but without hindering the customer experience.

 

• API platforms – By combining open platform banking and open application programming interfaces (API), the possibilities for partnerships, products and services on offer are seemingly plentiful. Customers will benefit from enhanced offerings, enabling them to better manage personal finances. Banks will be able to white label services from other providers in a modular approach.

Conclusion

The motivation of the finance sector remains the same – to keep costs under control, manage risk and be competitive. The competitive nature of this industry is such that Digital Transformation is no longer a choice, it’s a necessity in order to stay relevant. Digital Transformation is changing how the financial sector operates and the future may well be unrecognizable.
 
Part 1 - How Digital Transformation (DX) is driving change in key verticals
Part 2 - How Digital Transformation (DX) is driving change - Legal
Part 3 - How Digital Transformation (DX) is driving change - Education
Part 4 - How Digital Transformation (DX) is driving change - Finance
Part 5 - How Digital Transformation (DX) is driving change - Manufacturing
 
What other changes have you seen as a consequence of Digital Transformation? What do you think will change in the future for the finance sector? Please share your thoughts with us by using the below comments section.