Finance and Accounting
Digital transformation in finance: Challenges and benefits
Digital transformation in the finance sector is no longer a technology upgrade, but a core business strategy.
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 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 finance?
Digital transformation in finance is the reorganising and reshaping of finance and accounting function 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 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.
Digital transformation challenges
Legacy systems:Shift from legacy to new technological infrastructure and digital expertise requires huge investments and transition costs.
Security and compliance:Unlike fintechs 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.
Customer expectation on user experience (UX):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.
Workplace culture and reskilling workforce:Changes in 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.
Competition: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.
While overcoming these challenges in initial stages demands considerable time and effort, digital transformation opens the gateway to stabilise and secure an enterprise’s position in the market.
Benefits of digital transformation in the finance sector
- 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, 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 capital markets. Business decisions and strategies can be now be based on calculative insights with a more customer-centric product or a 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.
How Infosys BPM powers digital finance transformation?
Infosys BPM helps craft enterprises’ digital finance strategy to facilitate ‘real-time finance.’
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
- Simplified and harmonised processes