Financial services are one of the first industries to embrace and benefit from digital transformation. This industry has seen the transition of various manual processes to technologies like magnetic ink character recognition (MICR) to automate physical check processing, the introduction of online automated bill pay, electronic payroll distribution, and, most recently, the rise of fintech payment firms.
In the last few years, every consumer action involved digital financial transactions: buying a mobile online, paying for rideshare, borrowing money for a home – even planning the retirement corpus. And according to Gartner, “One-third of financial services CIOs identified digital as their top business priority for 2019, up by more than 8% from last year.”
As popular reports say, increasing “Digital Maturity” seems to be the goal for financial institutions in 2020 as it sets the tone for the ongoing digital transformation efforts. CIOs who hold back or resist the change, risk losing their status quo.
So, what are the five reasons to consider digital transformation?
1. A better customer experience
According to Research and Markets report, the global digital lending platform market size is expected to grow USD 12.1 billion by 2023, at a Compound Annual Growth Rate (CAGR) of 18.7% during the forecast period.
With the increasing consumer demands and new markets for alternative methods of borrowing money, customer experience is the differentiating factor. Financial institutions should prioritize customer experience and leverage effective ‘tech and touch’ channel strategy that integrates both digital and human factors.
2. Streamlined operations
Every segment in the financial sector – capital markets, asset and wealth management, insurance, investments, money transfer, or payments- are disrupted by fintech. And these revolutions have been profitable because of the ZERO inventory.
Fintech has brought efficiency in financial transactions today by leveraging digital channels. Technology-driven financial institutions have also helped to reach out to new and existing potential customers on the go. It’s time for traditional financial institutions to consider digital as a strategy to streamline operating costs and expand their market.
3. Increase in sales
Technologies like machine learning and AI-based underwriting have revolutionized the traditional loan lifecycle to break through to a more straightforward and easier route to ‘3-1-0′ model of lending- three minutes to decide, one minute to transfer the money and zero human touch. As a result, the average debt standing for a single household in the US is about $90,000.
With such a growing demand, lending institutions should start devising new ways to interact with existing customers, while also attracting new ones with digital loan management systems to stay ahead in the race.
4. Retention of customers
Customer acquisition is the prime focus of most of the financial institutions. But retaining existing customers is more comfortable and cheaper than winning new ones. With the wealth of in-depth consumer data available today, organizations can get an accurate picture of the modern banking customer and what they expect from financial services.
Financial institutions should provide the customers with a comprehensive offering of services, integrating with their everyday lives, and becoming their go-to resource for all financial needs.
5. Improved management decisions
Digital strategies help management to make informed decisions by identifying the efficiency of respective departments with the help of building a Data Bank.
Data bank helps organize, interpret, structure, and present the data into useful information that provides context for the data, and to understand the challenges faced by an organization, and overcome with accuracy.
The future of financial institutions is at stake if not upgrading to tech-enabled platforms. Financial institutions should evolve digitally, facilitating faster credit, handy apps, user-friendly online banking environments, and reactive social media communications listening to what their core audience demands.