Financial technology organizations thrive on innovation and always try to create disruptive technology that takes the financial industry by storm. In recent years, there has been a surge in FinTech companies across the globe, and understandably so. FinTech companies offer innovative applications of emerging technologies such as artificial intelligence, blockchain, cloud, and big data to create better customer experiences.
In response, the global Banking & Finance Industry has been quick to adopt digital technology for enhancing its services in the past decade. It has led to an increasing trend for digital transformation in banking and financial services. According to a report, in 2018, the FinTech industry has a global investment of USD128 Billion. By 2022, this number is expected to reach USD310 Billion. That is a 25% annual growth rate.
Recent research has revealed that 68% of companies in the finance industry have a digital transformation strategy in place, compared to 63% of companies overall. Even then, only 14% of financial services companies are currently implementing their digital transformation strategy versus 23% of companies across all industries. 54% of companies in the banking and finance industry have not started implementing their digital marketing strategy yet.
Challenges for Digital Transformation in the Banking & Finance Sector
The sheer speed of technological advancement is a challenge for major players in the banking and finance sector. On the one hand, FinTech companies constantly strive to create disruptive technologies that offer a competitive advantage. On the other hand, there is increasing encroachment on banking and financial services from non-traditional competitors like Google and Amazon.
E-commerce giants like Google and Amazon have developed online payment platforms. They are now eating into banking revenues by dealing in small business loans and offering alternatives to prepaid card issuers.
Apart from the growing competition, the banking and finance industry must worry about regulatory pressures that may reduce their margins. The answer lies in quick reactions to disruptive changes and business evolution by harnessing digital technology along the way.
Benefits of Digital Transformation in the Banking & Finance Sector
Even though digital transformation seems like a tsunami of change, the benefits of digital transformation far outweigh the challenges. The importance of digital transformation varies from sector to sector. But when it comes to financing and banking, the importance of digital technology cannot be undermined.
Let’s take a look at the benefits of digital transformation in banking and finance –
> Offering Enhanced Value to the Customer –Banking and finance is a saturated market. A customer can quickly move their banking affairs to a competitor. Offering a better customer experience can be a significant advantage.
> Business Agility – Easily the most important advantage offered by digital transformation in any industry. Removing outdated business processes and replacing them with newer, technologically advanced procedures can relieve pressure and improve efficiency.
> ROI & Problem Solving – Digital transformation offers more significant ROI and quicker problem-solving in the banking and finance industry.
> Other Advantages – Some other advantages of digital technology include streamlining internal processing, creating efficient customer service, and automating manual processes. Thus, leaving financial experts to focus on strategic tasks and legislation.
For an industry deeply embedded with traditional business architecture, digital transformation should be a meticulous exercise. Therefore, FinTech companies that offer the best digital transformation strategies to carefully transform may come out as the winners. Technologies that help combat fierce competition, bring advertising in-house, and create customer-focused business processes that make a financial business stand out are sought after.
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