Key Factors For Digital Transformation in Fintech

The IoT is changing the financial digital transformation services industry around the globe. The technology that improves the security and processing of data, as well as smart customer support, has made the banking and finance sectors more dependent on IoT in a short time. Due to evolving customer behavior, regulatory changes, and modest economic outlooks, the banking sector is evolving in a competitive market.

Each digital transformation aims to make a fundamental change, from both the customer's point of view and within the organizational processes. What is the difference between a bank that is digital-ready and others?

There is so much written, debated, and written about digital journeys and digital transformations and the benefits they bring. The question that remains, however, is whether all digital transformation programs result in the desired goals.

Many global banks have been affected by or are currently being challenged by the increasing expectations placed on digital performance. However, these expectations are also constrained by reality. Digital banking doesn't always drive customer satisfaction. There are some obvious, but easily addressed reasons.

Globally, the estimated spending on digital transformation will grow to $2 trillion over the next three years, even though only 20% of it is in financial services. The digital transformation journey is not fundamentally different from any other if you look at it through the lens of the ultimate goal of driving change. Therefore, the success factors embedded in it can be very similar.

However, some dimensions may be very different from other transformations. NAB's decision not to reduce 6000 jobs (source: IBS Intelligence November 2017) is an example. They will automate and simplify their business model while creating 2000 new jobs to support the 2020 plans.

These types of dual-hire and fire methods are quite unusual, which is why digital transformations are needed to address them differently.

What are the key questions that will be answered in the digital transformation of your bank? These are the four core success factors, which we at Cedar-IBS consider essential for any bank's CEO who is embarking on a digital transformation.

Are customers getting a different, unique experience?

If smartphones account for more than 80% of mobile penetration in the next three years, and customers want to access all their banking online (pun intended), it's not enough to offer the best service but to attract their attention by being the most unique, differentiated, and intuitive service provider.

The key to success is "Design Thinking," which places simplicity at the heart of the service model. An app that converts your smartphone into a barcode reader and automatically charges items to your credit card without you having to pay at the checkout is an example of convenience.

It is not about digitizing customer touchpoints or driving coherence through omnichannel banking. It is about everything that has to do with banking. It's about bringing all channels, data analytics services, and technology together to create a better customer experience (CX).

According to industry estimates, there is a 2–3% increase in revenue for every increment in customer satisfaction. CX is all about ease, speed, and transparency, but above all, the "wow" factor. Digital banks can score high in this area, as shown by their higher NPS among digital-first banks. This is where value perception drives customer experience. It pays to invest in building an identity, but the delivery framework must live up to it.

Are the bank's operations being redesigned to adapt to the digital age?

Many theories can define the core theme of any operating model, from being customer-centric to product-centric to process-centric. But, it is crucial to be able to thrive in the digital age by weaving technology and a digital thinking process around everything.

This is evident in the increasing number of banks that adopt a digital customer journey map-based process framework. The digital agenda will be used to reorient product design and development, mainstream customer engagement, and all aspects of the back-end process to accommodate new-age innovation in services. The real essence of digital transformation is not about where you are or when you are, but how you use it.

If Social, Mobile, Analytics, Cloud (SMAC), is not the main vocabulary of a bank's strategic roadmap, then it is likely that digital is seen as an additional initiative. If digital is just another project in a long list of bank projects, or if the bank has another business line, likely, the current operating model they are delivering is not going to last. If digital banking is the main way to bank for urban millennials, then the default operating system—the design that caters to them—must be digital.

What happens to the branches?

Let's just say they serve a purpose in the new scheme. As customer profiles evolve across generations, smartphones become a one-stop-do-all device, and branches become more prominent, encouraging digital experiences embedded within them, there will be a new paradigm. In the coming years, a new paradigm for a digital end-state will likely emerge.

Do we have a digital organizational framework that is future-ready?

It is not enough to talk about being agile. It is about fostering that spirit in both thought and action. One example is that the roles and responsibilities of a manager may differ between agile and waterfall development models. Trying to co-exist with both can lead to team dysfunction.

Driving innovation-inclusivity with the team and having an agile framework that can plug-and-play with multiple outsourced entities is emerging as a dynamic ecosystem that allows for digital innovation, promoting both collaboration and co-creation.

Capital One's efforts to embed design thinking and learn from lean startups across the company are a great example. It also aims to accelerate the enterprise's digital agenda by creating a supportive environment for innovation and customer experience enhancement. Banca Intesa is an Italian bank located in Turin that has invested in a digital education process that is based on the Netflix app. This led to 100,000 employees engaging in the learning process. The digital learning portal won the Workforce Empowerment & Behaviour Award.

Timing on the market is crucial. Any framework that weakens this concept is not likely to last. Long cycles of planning, development, testing, and rollout are not a good idea. New-age thinking is all about prototyping minimum viable products (MVP) and scaling those that pass the sniff test.

COVID-19 has increased the need to allow remote work and shifted the focus to digital and online promotion. Banks that continue to use traditional banking methods are put under intense pressure and forced to adapt to better serve their customers. Many other industries faced similar challenges and were unable to adjust to the new environment immediately. Some banks were struggling to stay afloat. Banks needed to invest valuable resources and time in cost reductions while simultaneously transforming their operating model and improving the customer experience.

Small banks can't afford to invest in FinTech innovation funds like large banks. Technological advancement has led to changes in the banking infrastructure, making it easier for smaller players to participate.

FinTechs make use of AI and IoT to improve their services and offer more reliable customer service.

Improved business efficiency

AI and IoT apps allow firms to automate services that improve productivity and efficiency. Digital transformation in FinTech can be a cost-effective solution that helps customers and streamlines various features. Many banks have signs that allow customers to use their phones to open ATMs outside of normal business hours.

Security Assurance

When connecting multiple devices to a single network, security is of paramount importance. This is especially true for sensitive information like finance. PwC found that 49% of the surveyed companies had been subject to fraud in a variety of ways. The implementation of AI and IoT systems could prevent financial fraud. This would help reduce the number of losses that banks suffer. Cloud-based services will soon be a key business model for banks.

Every aspect of our daily lives has been affected by the pandemic, which has been dominating media headlines for nearly two years. While I don't want to dwell too much on this sad subject, we can all agree that COVID-19 has required us to adjust to the new reality at lightning speed.

Customers seek out change in five criteria when it comes to Fintech solutions: transparency, availability, cost, convenience, trust, and cost. Financial institutions must accept that mobile payments and automated onboarding are essential to their future success. Failure to do so will result in a significant loss of market share.

Digitalization is another important fintech trend that has gained momentum and will continue to dominate the future of Fintech. The industry's future is characterized by the provision of online access to services, automated onboarding, credit card issuance, and online AML/KYC checks. This is why Fintech was created in the first instance—to solve problems and digitize processes that no one else could.

The Voice Of The Industry

Digital transformation: the fintech fuel for tomorrow

Determining a value proposition involves distinguishing between segments that are primary today and those that will be central-stage tomorrow. Digital models are also about identifying the key value drivers for each segment of customers.

Another connotation is that being digital means you have to protect yourself against new risks, such as cyber security. This can cause havoc if it is not done well. If not secured vigorously, customer data, drivers of relationships and information assets can be a source of great value. The cost of compliance in the digital age can be high due to increasing regulatory norms.

The real case for digital transformation is, however, more than that. The key to this is where the organisation will be in the next three to five years and what it will mean for shareholders. What are the key changes required to get there?

Most of the changes are driven by what can be done quickly. According to the digital paradigm, it is about combining long-term vision with quick-term execution. The digital paradigm is all about achieving a greater end. Is there more business? The proof of the pudding is in the eating, and this must be true for once!

Digital transformation in financial services must be customer-centric and mobile-first. Users realise the importance of quick services and immediate procedures. Fintech Digital transformation companies are leading the charge in supporting different service applications to offer seamless customer experiences. There is a lot to be done to make such partnerships work. We also see many ways in which such collaborations can support the companies most affected by this pandemic. For example, moving lending into a digital environment could give SMEs who have lost access to financial flow tools to get it.

Digitalization is another important trend that has gained momentum and will continue to dominate the future of Fintech. The industry's future is characterized by the provision of online access to services, automated onboarding, credit card issuance, and online AML/KYC checks. This is why Fintech was created in the first instance—to solve problems and digitize processes that no one else could.

A stale technology stack is the biggest stumbling block to any kind of progress. Many industries, including banking, have legacy systems that are outdated or were not part of their original technological solutions. They are restricted by a poorly scalable solution that makes it difficult to be flexible and responsive to changing circumstances. Fintechs can solve these problems by managing both individual business issues and whole business processes. This saves time and allows these companies to keep up with more proactive competitors. Collaboration between traditional banks and fintech creates new opportunities for both sides. Banks receive new products and customers in return for their innovative solutions.

A few trends that I find crucial in the growth of our industry are also mentioned :

Embedded financing opens up new opportunities for financial services to be integrated into other applications.

Platform APIs in Fintech and API distributions are a great environment to build something global and saleable.

Open banking could increase transparency in the banking sector and provide convenient financial tools for business and retail clients without unnecessary bureaucracy.

Digital wallets are already a reality. They are replacing bank cards in our lives. Cardless transactions will soon be a surprise to no one.

We can create the financial world of tomorrow and develop solutions that are supported by modern tech infrastructure and innovation. Contact our experts today to learn more, as Fintech has the opportunity to shine and lead the charge to a more adaptable future.