Finance and Accounting
Digital Transformation in Financial Services: Benefits, Challenges & Future Trends
Digital transformation in financial services is reshaping how banks, insurance companies, and finance functions operate.
Banking and finance have progressed from paperwork-laden processes to tip-of-your-finger mobile apps, delivering a positive impact on both revenue and customer experience. Digital trends have also drastically changed the financial services landscape, driving institutions to transform operations and providing new impetus to seamless digital services.
Besides industry trends, customers expect the best in online banking in terms of simplicity, choice, and 24 x 7 instant service. About 22% of customers prefer and frequently use net banking and mobile apps — 10+ times in a month — for all their banking needs.
CFOs are beginning to realise that digital transformation cannot be a bandwagon effect; it’s a unique need for each enterprise.
What is digital transformation in Financial Services?
Digital transformation in financial services is the reorganising and reshaping of finance and accounting functions using technology to recreate efficient operating systems and processes without replacing traditional systems.
While digitally led financial transformation is essential for enterprises, many financial institutions in the banking sector remain in the throes of change due to various challenges.
For instance, many believe personalised customer experiences should be a priority for BFSI institutions and insurance providers. However, 41% of respondents in a survey said that inadequate means to integrate technology silos prevented banks from full data utilisation.
Key Drivers of Digital Transformation in Finance
The pace of digital transformation in finance is accelerating due to several key factors:
- Regulatory compliance: Financial institutions face increasingly stringent regulations that require robust, tech-enabled compliance solutions.
- Customer experience demands: Clients expect personalized, real-time, and seamless digital interactions.
- Fintech and open banking competition: Emerging fintech players and open banking frameworks push traditional institutions to innovate rapidly.
- Cost efficiency and automation: Automation tools reduce operational costs while increasing process accuracy.
Challenges in Implementing Digital Transformation for Financial Services
- Shift from legacy to new technological infrastructure and digital expertise requires huge investments and transition costs. Implementing digital transformation financial services strategies helps organisations manage these transitions effectively by prioritising investments and streamlining processes.
- Unlike fintech’s and other new financial players, banks and traditional FIs are subject to high security risks due to voluminous personal data and transaction records, which make it harder to execute changes while meeting compliance requirements. Adopting digital transformation financial services solutions can address these challenges by enhancing security measures while ensuring compliance.
- The purpose of digital transformation is to offer customers improved efficiency and consistent user experience across platforms. Traditional banks and enterprises find this hard to achieve because it requires extensive research, time, strategy, and marketing to offer the right choices to customers. Leveraging digital transformation in financial services enables organisations to create seamless user experiences tailored to customer needs.
- Changes in the workforce and workplace culture are significant as the talent model switches and focuses on data scientists and analysts, thereby mandating upskilling among employees. Efforts here require time, strategy, and clear objectives and communication. Integrating digital transformation financial services facilitates workforce adaptation by providing tools and training for new skill sets.
- Competition with fintechs and new online finance players like Amazon, Google, or Facebook leaves banks out of the process as customers transact directly. However, banks are more secure and regulated, giving them the edge if they go digital. Embracing digital transformation in financial services can help traditional banks compete effectively by leveraging their inherent advantages in security and regulation.
Legacy systems:
Security and compliance:
Customer expectation on user experience (UX):
Workplace culture and reskilling workforce:
Competition:
While overcoming these challenges in the initial stages demands considerable time and effort, digital transformation financial services opens the gateway to stabilising and securing an enterprise’s position in the market.
Benefits of Digital Transformation in BFSI
- Enhanced customer experience: According to a survey, 76% of financial service executives believe customer experience is the top priority for digital transformation. Customers today are tech-savvy and expect brands to be ahead of them. Going digital can track, attract, and positively engage customers, while banks and FIs can offer and deliver consistent and personalised products and services.
- Improved operational efficiency and revenue generation: Deploying the right set of digital transformation tools streamlines operational processes by automating manual tasks and integrating data. Such initiatives help save time and costs in the banking services sector, resulting in increased profits.
- Easy data accessibility and management: Digital transformation efforts help in collecting, managing, and storing raw customer data that can be analysed to boost business intelligence and optimise growth.
- Process agility and operational productivity: Automation invariably increases process agility and productivity by eliminating human-induced errors. It improves precision in repetitive processes and can greatly improve operational efficiencies.
- Insight-driven decisions: AI-based analyses enable faster trade decisions in the banking sector and capital markets. Business decisions and strategies can now be based on calculative insights with a more customer-centric product or service.
The challenges and benefits, together, call for nothing less than shifting paradigms in finance and accounting. CFOs must work with business transformation partners to digitally empower finance functions proactively in their digital transformation journey.
Digital Transformation in Finance & Accounting (F&A)
Within F&A functions, digital transformation delivers measurable value:
Before transformation:
- Manual invoice processing
- Batch-based reconciliation
- Delayed financial reporting
After transformation:
- AI-enabled invoice scanning and validation
- Real-time reconciliation with automation tools
- Instant access to accurate financial dashboards
Trends Shaping the Future of Digital Finance :
- AI & Generative AI: From customer support chatbots to predictive credit risk models.
- Cloud-first banking: Scalability and flexibility for core banking systems.
- Blockchain in payments: Transparent, secure, and fast cross-border transactions.
- Hyper-personalization: Tailored products and services based on behavioral analytics.
How does Infosys BPM power digital finance transformation?
Infosys BPM helps craft enterprises’ digital finance solutions outsourcing to facilitate ‘real-time finance through digital technologies’.
With expertise in RPA, artificial intelligence, blockchain, and point solutions, we approach transformation with a holistic approach that covers:
- Re-energised and re-engineered organisations
- Digitally disrupted, ‘zero’ back-offices
- Repurposed talent is vital for the success of digital banking transformation
- Simplified and harmonised processes are key to successful digital transformation in banking.
FAQs
1. How digitalisation impacts financial services companies?
Digitalisation transforms financial services companies by automating processes, improving data-driven decisions, enhancing compliance, and delivering personalised customer experiences, enabling faster, more secure, and cost-efficient operations.
2. Is upi digital banking?
Yes. UPI (Unified Payments Interface) is a form of digital banking that enables instant, real-time fund transfers between bank accounts via mobile apps, enhancing convenience, security, and cashless transactions.
3. What is the difference between UPI and digital payment?
UPI is a type of digital payment system that links multiple bank accounts for instant transfers via a single mobile app, while digital payment is a broader term covering all cashless transactions, including UPI, cards, net banking, and wallets.
