Like many terms, digital transformation is one that we see used somewhat liberally. Oftentimes, people just use digital transformation to describe any kind of changes made within a business to bring it more in-line with current digital trends. But there’s more to this. Let’s explore how financial institutions are tackling digital transformation, and what it means for businesses going forward.
While digitization itself definitely part of the equation, it doesn’t really define digital transformation. When dealing with this term, we’re talking about something that’s unquestionably changing the way an enterprise uses and integrates with technology. It has as much to do with concept and ideology as it does implementation. Giving every employee a laptop, for instance, doesn’t hold up as digital transformation unless there’s an underlying force behind that decision intended to alter the company’s operations.
How Does Digital Transformation Integrate into Financial Institutions?
Financial institutions are often vast, complex organizations with myriad services and numerous customers. People’s money is important. Any kind of structural changes to an organization like a bank or credit card company will fail if they sacrifice safety and accuracy of information.
At the same time, there are massive benefits to financial institutions undergoing digital transformation. As mentioned in the previous paragraph, safety and accuracy of information are especially paramount to financial institutions. Undergoing a digital transformation is one the best ways to strengthen both of those things.
One change we’ll likely see in the coming years is computers taking over some of the more rote tasks within the financial world. In fact, it’s estimated 1.3 million financial and banking jobs could be automated over the next 10 years. This can free up humans to work more strategically while outsourcing basic tasks to automated systems.
The process of automation is just one of the prime examples of a digital transformation taking place in the financial world. It’s cutting costs and creating a better product for consumers. However, this isn’t the only way digital transformation is making itself known in financial institutions.
What are Specific Types of Digital Transformation?
An industry filled with so many numbers and data is prime for digital transformation. Greater efficiency in the financial sector could lead to better outcomes for institutions and consumers alike. Here are some ways digital transformation is happening in finance:
- Artificial Intelligence-Driven Data Analytics: It doesn’t matter if you’re trying to evaluate someone’s credit worthiness or see if something is a good investment. Data can help with the decision-making process. Modern financial analytics tools provide data-driven insights that would be hard to uncover otherwise. Platforms such as ThoughtSpot allow employees without a background in data to ask questions and find answers in seconds through its relational search feature. This empowers employees to run data queries with similar speed and natural language processing as they would with a Google search. AI algorithms can also uncover hidden trends, patterns and anomalies then push these insights to human decision makers.
- Utilizing Fintech: There are a lot of different iterations of fintech. Essentially, fintech is a any kind of usage of software or algorithmic processing that enhances user or employee experience. Online lending platforms are one example of fintech bringing about digital transformation.
- Blockchain Technology: A lot of people instantly equate the word blockchain with Bitcoin, the most popular and first cryptocurrency. While Bitcoin probably doesn’t have much value for most financial institutions outside of a speculative investment, blockchain technology does. This is because blockchain allows for more secure digital transactions. Keeping funds and sensitive data safe is one of the most essential functions of a financial institution.
Digital transformation is shaping the very future of the financial world. Enterprises that effectively mold their operations to this are going to be the ones with the most staying power.
Image Source: Pexels.com