Today, finance is one of the most traditional yet innovative industries at the same time when paying attention to the fintech sector. This contradiction may seem strange at first glance, but there are a number of reasons for this.
First, finance is a highly regulated industry where security is critical. Thus, many financial institutions continue to use outdated methods and models.
Secondly, the development and spread of Internet technologies and smartphones naturally lead to demand for more efficient and innovative financial applications. This is precisely what fintech does.
However, the obsolescence of many existing models of financial transactions is becoming increasingly noticeable over time. That is why digital transformation in the field of finance is no longer an update of existing technologies but a business necessity and strategy today.
The value of digital transformation is that it improves customer experience, helps organizations reduce costs, and provides access to seamless digital services.
Also, in order to remain competitive in the modern market, companies need to offer potential clients services and products that provide greater accessibility, speed, and variability in terms of financial operations.
When planning a company’s digital transformation, technical due diligence software is also a valuable thing, as it allows you to make informed decisions and protect the investments.
Any transformation is a costly process which, however, has many benefits in the long term. Let’s take a closer look at what digital transformation is, as well as what challenges and advantages it includes.
What Is Digital Transformation
Digital transformation can be markedly different when it comes to the financial industry.
Conceptually, any transformation is about implementing digital technologies into all areas of business that radically affect both the company and its clients.
In the case of financial institutions, the process of digital transformation largely involves the reorganization and change of finance and accounting functions. This is necessary to create more efficient operating systems and streamline processes. However, the company does not need to replace its traditional systems with this approach.
Planning for digital transformation is a major headache for many organizations. Because any transition to new technologies is often not only difficult but also expensive. In the case of financial organizations, it is also essential to ensure compliance with the rules. Thus, many companies are struggling with how to implement the transformation process most efficiently and stay within budget.
But one way or another, the market does not stand still, so digital transformation is a necessity for a business to remain competitive and sustainable. That is why many financial organizations are looking for a digital transformation and UX design agency for banking and fintech to make the transition process the least painless and costly for the company.
Challenges Of Digital Transformation
As already mentioned, the main difficulties that companies may face when planning digital transformation are often the cost and complexity of the process since it affects all areas of the business. However, if these obstacles are successfully overcome, the organization can significantly strengthen its position in the market and attract more audiences to its products and services, which is especially valuable in the long run.
Here are some of the challenges traditional financial institutions may face when it comes to digital transformation:
Outdated Systems
Often, an outdated system is the main reason why a bank or other financial organization is considering digital transformation. And in this case, the transition to a new technology infrastructure to provide a digital experience usually requires huge investments since it affects the entire system.
Compliance
Meeting compliance requirements is critical for financial companies. Because of this, the larger an organization’s customer base, the more difficult it is to shift to digital transformation. The reason is that large financial institutions are subject to high-security risks as they maintain a database of customers and transactions, so any change must consider regulatory compliance first and foremost.
User Experience
Digital transformation is not only about increasing efficiency and modernization but also about delivering a consistent user experience across all platforms. This is where traditional banks and financial institutions can struggle, as a large customer base means extensive research to understand exactly what your users want and need. Such studies are expensive and take time, making the transformation process more complex and costly.
Company’s Culture
Digital transformation is fundamentally changing how business is done. This usually means changes in the workforce and workplace culture. Therefore, the company will need to find data and analytics specialists, as well as focus on upskilling current employees. This may require a lot of money, time, and effort.
Competition With Fintech
Competition with fintech startups and online banking is one of the main challenges. However, here, it is worth understanding that the main advantage of fintech startups is the speed of product development and release, as well as innovation. At the same time, traditional financial institutions are safer and more regulated, so with the right approach to digital transformation, traditional intuitions can do well as they often inspire more trust among clients with high incomes.
Benefits Of Digital Transformation In The Financial Industry
Here are some of the core benefits of digital transformation that provide competitive advantages and make the investment spent on company transformation a reasonable decision, especially in the long term:
- Increased operational productivity and process flexibility through automation
- Enhanced and personalized user experience across all platforms
- Data and insight-driven decision-making using AI-based tools
- Improved revenue generation due to streamlining and automation of processes
- Easier data access and management