Digital Transformation for Financial Services Companies – Imperatives and Challenges

Digital Transformation for Financial Services Companies – Imperatives and Challenges

As per a recent statement by Antonio Guterres of the United Nations, the economic fallout of the pandemic may reverse the progress made in sustainable development. The global economy has taken a hit and the financial services have felt the pain too. Banking, insurance, and other financial services industries are expected to soldier on to address urgent customer needs. However, it is also necessary for their long term survival to focus on the emerging needs of the future. How to plan for the future while securing the present?

Digital Transformation seems to be a catchphrase that the financial services sector is being encouraged to adopt. But where to start and what changes to make? Some of the problems today may show the way to challenges that will need to be tackled in the future.

With lockdowns the norm and social distancing norms in place, regular procedures like customer on-boarding, relationship management, and customer interaction are under stress. Transforming these core processes digitally will help show immediate and far-reaching impact. And the customer is already on this path.

Today’s customer is a digital native. So, it only makes sense that digital solutions are getting more customer-facing. This is helping the financial service industries improve efficiency in their operating processes and provide the customer experience the digital customer expects.

Moving past their skepticism for Digital Transformation is now a necessary step for financial institutions. Let’s start by taking a look at the possible challenges on that route and seek out possible workarounds.

A challenging transformation

Stakeholders and influencers across the financial services industry need to come together to brainstorm their digital transformation strategy. This will require them to first, understand the roadblocks in this journey. Although each organization might have its own set of challenges, some general points could apply more widely.

  1. Establishing the strategic urgency

    This is possibly the prime challenge that every business, in general, would face. Earlier, digital transformation was a future necessity. However, now it is more of an immediate need. Today’s environment means that all digital plans will need to be accelerated. Strategies will have to be drastically overhauled. Decisions from regulatory authorities like the Monetary Authority of Singapore will have to be factored in while designing and executing strategies. Security would always be a major concern. Without a deeper understanding of all these factors, the accelerated transformation could attract risk.
  2. Providing for the skills needed

    Strategy is nothing without excellent execution. And the lack of available skills could come in the way of executing even the most powerful digital transformation strategies. If those skills do not exist inhouse, financial services companies, especially the smaller companies, may have to find technology partners to address the execution so that they are free to address the core needs of their business. These partners will have to be technically competent, experienced, cost-effective, and driven by their understanding of the needs of the financial services business.
  3. Managing the customer friction

    With customer dissonance already high due to unmet expectations, a mismanaged digital transformation might further complicate things. Customers are getting used to the intuitive, seamless, and intelligent experiences they encounter in the consumer world. Using Amazon, Netflix, and Uber has conditioned them to demand the same standard of services while interacting with their financial services providers. This is a design challenge. It’s a usability challenge. It’s also a challenge to established business processes and workflows in financial services companies. Rising to meet these demands could give rise to scalability and performance challenges. 

    With digital transformation, it won’t be an exaggeration to say that the organizations already at some level of transformation, feel equally uncertain as those yet to start down that road! However, there are meaningful solutions for the way ahead.

    Let us see how these tools and technologies might help financial services companies accelerate their business transformation and the benefits that can deliver.

A meaningful solution

Financial services institutions need digital transformation solutions that are customer-centric, regulations-compliant, and scalable. Here are some important characteristics they can look for

  1. Customer-oriented services

    Digital solutions will obviously have to be aligned with business priorities and urgency. Solutions that comply with all applicable rules and regulations will, obviously, be mandatory. But the focus will have to be on the customer. The digital solutions should plug into the digital lifestyle of the digital customer. For instance, a mobile-first design would help make all services accessible to a larger spectrum of customers. Features like ‘click and sign’ would eliminate the need for physical proximity in this socially-distanced world. It should become easy to onboard new customers and to verify and validate them digitally. They should be able to transact their initial business seamlessly. Digital payment options, wallets, digital communications, and even reports and dashboards should be provided.
  2. Empathetic automation

    That there is a need for automation goes without saying. However, automation provisions must enhance customer experiences. Card-less instant payments, digital on-boarding, portals with customized dashboards, etc. will empower the customer to work according to their needs. The more secure the customers feel while interacting the more willing they would be to continue with them. Moreover, automation would also enable internal teams to gain insights, improve efficiencies, and deliver value. Therefore, plug-and-play solutions that offer a 360-degree customer view, easy accounts management, etc. should be preferred.
  3. Smart management

    Efficiency is a key benefit to seek from digital transformation. Automated reporting, flexible client classification, and regular client suitability tests are some of the important aspects to look for. To ensure that the services are running uninterrupted and, in fact, better than before, such provisions will be a real help. This will also help the financial services institutions always stay compliant with regulatory needs. That apart, they will be able to map their customer journey and provide better services in the future. Moreover, smarter monitoring will also help to grow sales. Digital transformation solutions can help create a sales pipeline and drive better campaign management. This will be effective for both internal as well as external customer relationship management.

Conclusion

The recent Digital Acceleration Grant offered by MAS is a wonderful opportunity for financial services companies in Singapore. The government recognizes that the digital Singaporean is looking for more from the financial services companies that serve him or her. This grant is a sign that the digital transformation of financial services is due. There certainly are a few challenges that need to be dealt with. But that only means that the digital transformation strategies will have to be thought through carefully. A purposeful transformation would help financial institutions serve customers better, grow, and become more efficient.