Digital Transformation for Financial Services in 2023: All You Need to Know

Around 90% of decision-makers in financial services believe that digital technologies are disrupting their industry. Many of its actors refer to digital finance transformation as an inevitable development stage. But what is digital transformation in finances?

In brief, it’s when businesses use digital technologies to create new operational processes, business culture, and customer experience. Contrarily to digital transition, which is mostly about storing critical data in digital format, digital transformation changes the enterprise at many levels. It often modifies the way the organization does its business. For example, digital transformation of finance introduces businesses to new asset management platforms, forecasting applications, analytical tools, and other fintech software solutions. Customer experience is also reshaped completely with the appearance of neobanks, financial self-service portals, and fintech payment solutions.

Why is digital finance transformation getting so popular nowadays? Check our new material to know the six most valuable reasons inspiring companies to embrace digital transformation in finance .

Technologies that accelerate fintech digitalization

Before we dive into the overview of the benefits of digital transformation in financial services, let’s briefly discuss trending financial technologies. Our article will primarily focus on adopting fintech solutions as the most common form of digital transformation in finance. Hence, it’s important to clarify how these revolutionary apps look.

The main types of fintech apps driving digital transformation in financial services include:

• RegTech software that helps businesses navigate the regulations
• Analytical platforms that make complex calculations and revenue forecasts
• Blockchain and cryptocurrency apps allowing financial companies to trade cryptocurrencies apps,
• Investment and stock-trading apps that provide investors with intuitive asset recommendations
• Insurance platforms focused on managing and automating insurance payments
• Digital payment systems that are widely applied for secure transactions
• Crowdfunding apps help organizations to raise money for specific initiatives
• Personal platforms providing digital finance services that help individuals or organizations manage their finances
• Lending platforms that automate diverse types of lending and help manage loans

Fintech apps are the future of digital financial services. Such software increases business efficiency and improves customer experience. That’s why more and more companies jump on these digital banking trends . Check some stats on industry trends and attitudes that prove it.

In sum, digital transformation in financial services becomes a must for industry actors who want to stay competitive but expect that all companies adhere to mobile banking compliance requirements . If the provided stats are not convincing enough, check the next chapter to learn the top financial companies’ reasons for digital transformation.

The main financial services sectors for digital transformation

As automation and banking blockchain are incorporated into financial processes over the next several years, transactions will become contactless, and reporting will move away from the old cycles of quarterly or monthly reporting and toward real-time reporting. Self-service will prevail, and AI will make it easier to implement new service delivery paradigms. Amazon and Google, two non-traditional rivals, are expanding into the banking and financial services business.

Among prior digital transformation in the financial industry, services are:

• Banking
• Professional Advisory
• Wealth Management
• Mutual Funds
• Insurance
• Stock Market
• Treasury/Debt Instruments
• Tax/Audit Consulting

To compete, financial organizations must continually modernize their business practices and adopt innovative practices to enhance their services and protect their clients as consumers want quicker, more smooth, and more secure transactions when banking and purchasing online.

According to Reportlinker , at a compound annual growth rate (CAGR) of 10.8%, the size of the global financial services industry is anticipated to increase from $23.31 trillion in 2021 to $25.83 trillion in 2022. At a CAGR of 9.6%, the global market share of financial services is anticipated to increase to $37.34 trillion in 2026.

Global financial services market size

Also, in 2020, Western Europe accounted for 40% of the market, making it the largest area in the world for financial services based on the Business Wire report . Africa was the smallest area, while North America, which accounted for 27% of the global financial services industry, was the second-largest.

Six reasons for digital transformation: why the financial sector adopts innovations

Digital transformation in financial services brings businesses many benefits. Here are the most valuable ones.

Enhanced process automation

Fintech software saves both your and your client’s time. Such apps increase efficiency by automating many routine processes, such as documentation and calculations. Many companies also adoptarentegrated chatbots in financial services. These tools automate basic communication with clients.

Others additionally integrate feedback management functions into their websites or customer service apps. Such tools collect the information that helps organizations improve their services and tailor the customer approach to client needs.

Improved analytics

Whether you need to provide your clients with complex financial calculations or just want to research user preferences, analytics is a must. Digital solutions help you make analytics much more efficient, accurate, and convenient.

Financial organizations implement financial data management platforms to save data analysts’ time. Such apps help them label and structure all the information, which is laborious when done manually.

Fintech analytics solutions also include AI-driven risk assessment tools that provide accurate forecasts and help detect business threats. Using apps for fraud prevention measures is another analytics solution encouraging organizations to invest in digital transformation. Such software products may range from scanners detecting false documents to sophisticated digital systems that review and validate financial data.

Fortified security

It’s nearly impossible to ensure top-notch safety of finance software without implementing tech innovations. Cyberattacks become more sophisticated daily, while the loss of confidential financial data leads to significant financial and legal issues.

Fintech solutions allow you to secure transactions and all vulnerable information. One way to ensure top-notch security is by adopting blockchain in financial services. It means that all the essential financial data, including transaction records, is stored in separate blocks that form a chain. Hence, it is impossible to retrieve the information from a specific block without changing the entire chain, which shall be immediately detected.

Optimized resource management

When providing financial services, you must rely on diverse resources such as financial data, official documentation, and reports. Without cloud computing in financial services, you won’t manage to connect them properly. Cloud-based data management platforms help store and structure all the essential information and share it between finance teams. Cloud computing is also a great basis to scale and adopt new solutions in the future.

Besides, many financial companies operate with physical resources, for example, computer equipment or printed documents. Storage management platforms allow tracking such resources’ location and control of their usage. This gives financial organizations better control over their businesses and prepares them for further digitization.

Enhanced cost-efficiency

Even though some companies from the financial services industry avoid expensive innovations, fintech apps are very likely to pay off in the short term. For example, companies with higher digital maturity reported 45% revenue growth compared to 15% for lower maturity companies. Increased profitability is a powerful driver of digital transformation. By improving business efficiency and quality of services, Fintech solutions can take the organization to a new level with IT transformation.

Key digital statistics

Check more specific examples of how fintech financial services and digital transformation make your business more cost-efficient below.

Improved customer experience

Around 51% of clients in the financial sector state that poor user experience is where most financial service providers fail. Hence, to engage and keep customers, top financial software companies focus on building a customer-centric experience through software. Regarding fintech solutions, the key point is to make them as convenient for the users as possible.

For example, you can apply sophisticated IoT data networks that can be accessed from clients’ devices. Such solutions enable users to access relevant data stored in their fintech app accounts easily. Convenient smartphone applications also help clients conduct fast transactions, make instant calculations, or request financial services in a few clicks. Many also have integrated chat functions that allow fintech organizations to stay in touch with their clients constantly. This helps them understand their requirements much better and, thus, provide better service quality.

An exponential increase in competitiveness

With a high level of digital maturity, it can develop innovative business models and surprise consumers with new digital products, increasing market share and attracting new clients while outpacing rivals and generating high rates of return on investment.

Increasing customer satisfaction and loyalty

Any company that wants to succeed and stay in business must focus on the customer experience. According to CCW Digital Research , 57% of consumers consider customer experience when selecting a brand.

Thanks to IT departments, organizations can interact with modern consumers and meet their need for a seamless customer experience across all channels and locations.

Time optimization and higher productivity

The greatest method to increase worker productivity through digital transformation is to give employees the equipment, sources, and support structures required to do their duties effectively. The correct tools can increase daily productivity and pave the way for brand-new business expansion chances.

The most important is the potential to increase employee productivity by using digital technology to automate manual and repetitive jobs that consume a lot of your most creative employees' time.

How to start a digital transformation for your financial services

Step 1. Define vision

According to the Boston Consulting Group, senior leadership must be fully committed to fundamentally altering the financial institution to successfully implement a digital transformation: "Digital transformation must be a clearly articulated strategic priority, supported by appropriate funding, talent recruitment, openness to new agile ways of working, and a willingness to take risks."

Make sure to emphasize the reasons why it is happening, as well as the advantages it will bring to both consumers and employees. This will give them a meaning of direction and keep them motivated.

Throughout the process, keep in mind to stand back while you show off your vision and pay attention to any issues or obstacles raised by the staff. If individuals are having trouble adjusting to this new method of working, be prepared to shift your approach.

Step 2. Ensure support and learning programs

When a digital transformation in the financial sector, leaders must assist employees in adjusting to new procedures, tools, and infrastructures. It might be challenging to guide everyone at once. Establish an internal champion network to assist maintain momentum by providing regular support.

In regions, business units, and departments, champions are deputized supporters and specialists of digital transformation who can take the lead on changes and bring best practices with them. Managers who have seen their talent and uplifting nature may suggest them. Or, more often than not, throughout a company's digital transition, champions might naturally appear, offering their hands and assisting their peers.

Make it a point to offer corporate-wide skill development for new tools and procedures that are being implemented during the digital transformation process. Invest in employee training and growth opportunities to aid in their ability to adjust to change and prosper in a modern digital workplace. Your digital transformation will be supported and staff engagement will be increased if you foster employee progress.

Step 3. Invest in tools and technologies

The basis for a company's digital transformation in banking and financial services is built solidly by establishing a collaborative digital workplace. After all, according to a PwC analysis, technology is quickly changing the makeup of the financial services workforce, and many businesses are increasingly discovering that they may replace entire processes with totally digital cores and tools.

Employees may avoid working in silos and concentrate on delivering excellent financial services and competitive client experiences by making information searchable, controllable, and easily accessible. Ensure that your company's databases, tools, and apps are interoperable once you've developed a digital workplace. The company may accelerate the development of new cloud-based services while optimizing data analytics efforts and operational practices, IT operating model updates, extending cloud-based software, and incorporating robots and artificial intelligence thanks to digital transformation in banking.

Success stories of digital financial transformation

The digital transformation of the finance company into a digital bank aimed to improve the company's digital maturity and competitiveness after introducing all digital goods and services.

Development of all software, systems, and other digital solutions, as well as their connections, to enable a complete digital transformation of the bank and to foster a data-driven culture that would support the pursuit of greater levels of digital maturity.

The platform allowed the sale of all the bank's goods (more than 100 items), which included macro tasks (data and document gathering, fraud validation, consultation, and credit analysis.)

Automations that enable each product's uniqueness and start its unique process This invention enhanced the end user's experience since it allowed them to order many products at once without having first to register an account. Also, the integration tools improved microservices-based architecture.

Digital transformation outcomes:

• New APP for swiftly creating a digital account after a challenging start
• Reached 1 million accounts and credit cards in only three months
• In-app better user experience, foster client loyalty that boosts income and profitability for the bank.
• Expanded the IT team through staff augmentation, which ensures high-performance experts fast, accelerates the creation of new automation and digital goods, and increases the degree of digital maturity.

Final thoughts on digital transformation in finance

As you see, digital transformation can make financial service businesses much more efficient and profitable. Unfortunately, developing fintech platforms, the core of digital innovation in financial services is not the easiest job. You must show much technical expertise to deliver a quality product .

What is the solution? The best choice is to rely on experts and delegate digital finance transformation to an experienced fintech software development company .

Binariks is your helping hand that is always ready to facilitate your plans. We are experts in delivering highly scalable and secure apps to financial software companies. Check our portfolio to know more about our experience.

Do not hesitate to contact us to discuss your needs. Let’s develop fintech software solutions that make a difference.