You’ve heard the phrase personalized customer experience thrown around a lot. Like all other areas in business and finance, banks try to use the latest technologies to understand what every client wants and how it can best be tailored and offered to them. There are numerous tools a bank could use to draw new clients, like artificial intelligence (AI), machine learning, digital banking, virtual advisors, mobile apps, platforms, and so on.
The digital world is transforming all areas of human life, and the financial service industry is no exception. Digital transformation drives these changes and creates new interactions between clients and financial institutions, constantly making things more accessible and efficient.
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Understanding Digital Transformation in Financial Services
The financial service industry requires diverse processes. Still, digital transformation, by definition, means creating a single digital ecosystem across all the departments that make up your financial service. It would help to have a comprehensive plan to transform all your processes into digital ones. Only by doing so will you be able to make a realistic long-term plan for your business in today’s competitive world.
It’s simply impossible to exaggerate the importance and necessity of digitizing all parts of one’s business. One study conducted in 2020 shows that 62% of companies have reported that they plan on prioritizing their digital transformation. Once you have invested enough in this crucial project, you must find the right people to help you. It’s a very technical journey; only a team of experts can provide you with a digital road map.
Current Digital Transformation Initiatives
It is usually suggested that 2018 was the year that witnessed a massive change in how things are done in the financial service industry. That was when cloud computing became the norm, and analytics revolutionized how customer data was used. The digital economy also made it possible to reach out to new markets. The financial service had to take a more proactive approach and use new technologies to attract a more tech-savvy customer base.
A personalized customer experience is central to all technological changes in the financial service industry. So, let’s review some of the current digital transformation initiatives.
Another state-of-the-art technology used by the financial industry is blockchain. It enables secure payments, identity management, smart contracts, etc. In the face of all these changes, it\’s easier to imagine how a bank can survive in this competitive market if it uses data analytics or automation to bring efficiency to its business
Digital Transactions
This is the most crucial step in moving from a paper transaction to a digital one. A financial service company is widely expected to provide a fast and secure digital transaction option. Paperless transactions are efficient and convenient for providers and service users. However, more important is the capability of digital transactions to create a more personalized customer experience.
Workflow Automation
Another part of digital transformation that a financial service company cannot do without is workflow automation. The system, which consists of human employees, should be replaced by software robots as much as possible. The new system will take care of repetitive and boring office tasks. It is far less likely to make errors and will save much money in the long run. An example could be coding invoices and sending them off for approval, all done automatically and according to your company\’s preferences and regulations.
Artificial Intelligence
This section of your digital transformation is where you can really create an edge over your rivals. Figures show that 85% of financial institutions already use AI, meaning you must adopt the latest technologies to outdo them.
Interestingly, the average financial institution invested heavily in AI and recovered faster after the pandemic. AI, machine learning, and data analytics could be helpful in many areas of your business, including automated fraud detection, credit risk analysis, personalized recommendation engines, etc. Through data analytics, you can identify patterns and predict an unfavourable situation that is otherwise unpredictable. Therefore, the AI system makes taking the necessary steps to neutralize a coming crisis possible. There is simply no doubt that embracing AI into your business is one of the most necessary investments your company is in great need of:
The Cloud
Many might be surprised to learn that the number of brick-and-mortar banks has dropped during the last decade, all due to Online and mobile banking. This trend gained momentum during the pandemic. New services include payment processing, alternative lending, automated investing, and wealth management services. One thing that is in common between the top fintech organizations is that they all operate on the cloud. Cloud providers can offer fast and highly secure services for your data. Banks and insurance companies are among the top customers of the cloud. Computing and restoring hardware are costly to buy or maintain. Still, you can spend this money on your other priorities thanks to cloud-based solutions.
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Digital Transformation Examples in Finance
Let’s review a few real-life examples of financial companies that have tried digital transformation.
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DBS Bank
DBS is unique because it was the first to establish a digital-only bank. The Singaporean bank started its project with three goals in mind:
- A comprehensive approach to digitization
- A way the customer journey can be guided to meet the bank’s objectives
- Transform the company’s culture to perform like a startup
One of the very first steps was to create digital platforms. They knew the speed of banking processes was critical to their success. To expand their services in India, they offered a successful mobile-only option.
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ING Banking Group
ING Banking Group implemented digital transformation back in June 2015. They were looking for ways to adapt to a shift in customer behaviour. Their answer was an Omnichannel environment that welcomed the customer journey. By launching DevOps and IT delivery services, they dominated the Dutch mobile bank environment.
The banking group also offered extensive training courses for their employees to ensure they had the knowledge and skills required for a digital banking system. ING finally found success through an increase in engagement, quick response to market and demand, and offering a much more convenient customer experience.
Customer-Centric Digital Solutions
Anybody engaged with the banking industry, financial services, or fintech firms knows that customer expectations have never been higher. With all the offers bombarding people daily, it’s not easy to keep one’s clients satisfied. Therefore, it is crucial to invest in technologies that help understand what every individual wants and how they want it. Your company needs an effective strategy to reevaluate your customers’ data constantly. Such data is gathered through different channels, such as the sales cycle, onboarding, customer service inquiries, etc. Ideally, your relationship with your customer must be a partnership, with their needs and desires taking centre stage.
Let’s review a more non-AI approach before we discuss data analytics. A standard method of analyzing data is categorization by demographics. The next step is to create detailed individual customer profiles. Your financial advisors could ask questions and categorize the customers accordingly. For example: Is your customer insecure or confident about financial matters? Do they prefer the in-person approach or a banking app? Were they ever engaged with any type of institution similar to yours? How did it work out? Do you have any other questions about their history and latest activities?
Now, it goes without saying that a company equipped with only human financial advisors cannot compete with robo-advisors and chatbots in some regards. Your AI-enabled chatbots should be able to handle most inquiries and only leave a few complex inquiries for your human advisors. That will save you a lot of money and make your service more convenient and satisfying for the customers. However, there are more efficiencies that a traditional approach can bring about. Keep reading, and you will see what we mean. After gathering the data, you must restore such data on a customer relationship management (CRM) system and create profiles. Your customers have access to their profiles and can update them.
After you get your hands on all the data you can get from your customers, whether through their profiles or a third party, you need to analyze what the data means and how it can be used. Now, this is where you cannot go far without the help of AI. All the data gathered over time will be of little use if it cannot result in identifying behavioural patterns and building predictive models. This is a very broad and complex part of running a financial service, but let’s review how an AI system can create a more customer-centric service.
Identify customers that might churn
By processing data and identifying patterns, an AI system can help you determine if, when, and why an unsatisfied customer may churn. A quality AI system can also suggest the necessary actions you should take before you lose your customer. Even if you cannot improve your customer’s experience and they ultimately leave, this data will be useful for your AI system to improve its suggestions for the next case.
Intelligent chatbots
Your AI-driven chatbots can gather information on which parts of your service your customers complain about and what they prefer to be offered instead. This means you won’t have to waste resources and time trying to succeed by trial and error; your AI will show you the shortcut to success.
You have probably heard about conversational AI before. Another magical thing about intelligent chatbots is that they can understand how customers feel about a single aspect of your service and adapt their language accordingly. Such chatbots differ from older versions, which only work like unemotional robots.
Personalized recommendations
Just think about how millions endorse the service they receive through Netflix and Spotify. What did they get right? Many things are inevitable, but making hyper-personalized recommendations is undoubtedly among their top secrets to success. Show every potential customer what they want and how they wish to see it, and they will come on board. If you could hack into their deep desires, which are only possible through AI, the sky would be the limit for your business.
Convenient customer journey
Ever wondered why Apple and Amazon are among the wealthiest companies in the world? Amazon is known for demanding the least possible customer efforts to provide its services, and Apple manufactures the most user-friendly products of its kind. They make life easier for their customers, and the customers make up for it by paying them colossally.
Facilitating your customer’s experience is also related to how user-friendly your website and payment systems are. Another big part is developing an app that reduces customer effort as much as possible.
Let’s go back to the topic of intelligent chatbots for a second. What if your chatbot can make things easier for your customers by assisting them in selecting services, making payments, requesting information, making suggestions, filing complaints, and so on without visiting a website or downloading another app? You could use your intelligent chatbots on popular platforms like WhatsApp, Facebook Messenger, and Instagram to reap the benefits. To enjoy the full benefits of chatbots, you could make them voice-enabled to boost a more convenient customer journey.
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Overcoming Challenges and Ensuring Security
So far, it is evident that the impact of Digital Transformation on Financial Institutions is tremendous. But is there a catch? There are quite a few challenges when it comes to digital transformation. The biggest concern for a financial organization is security. It is possible that extending technologies into more areas of your business may expose you to more cybersecurity risks. That is why strict security measures should be one of the vital steps in your digital transformation journey. Digid’s cybersecurity services are a great way to protect your financial service business from malicious attacks and leaks.
Your company needs highly skilled CISOs to safeguard you and your customers. Cyber security is irreplaceable when building trust and solidifying your position in the market. Invest in this area as much as possible, and you will reap the rewards in the long run.
The Future of Digital Transformation in Financial Services
The financial service industry has been one of the sectors most affected by digital transformation, and the reason is apparent. Digital transformation has repeatedly proved that it is unmatched in reducing costs and increasing efficiency. While banking apps and implementing artificial intelligence in customer service haven’t been around for long, we already see parts of the financial sector adopting blockchain technologies and digital wallets. Things are moving at the speed of light, and nobody knows what’s coming next. However, one thing we know for sure is that these changes will not reverse, and the digital transformation will only become more prevalent and complex. And if financial service owners are still hesitant about implementing digital transformation, tomorrow could be too late. So, reach out today and discuss your path to digital transformation and growth with Digid.
Frequently Asked Questions:
1. What are the critical components of digital transformation in financial services?
Digital transformation in financial services involves several key components, including integrating artificial intelligence (AI), machine learning, digital banking, mobile apps, and workflow automation. These elements help create a personalized customer experience, streamline operations, and enhance security. Financial institutions also leverage data analytics for fraud detection and credit risk analysis, which are crucial for modern financial services.
2. How does digital transformation benefit financial institutions?
Digital transformation offers numerous benefits to financial institutions. It improves efficiency by automating repetitive tasks through workflow automation, reduces costs with cloud computing, and enhances the customer experience with personalized recommendation engines. Additionally, digital banking and mobile apps provide customers convenient access to services, while data analytics and AI help detect fraud and analyse credit risks more effectively.
3. Why is a personalized customer experience necessary in digital transformation for financial services?
A personalized customer experience is crucial in digital transformation for financial services because it helps build stronger customer relationships and loyalty. Financial institutions can use data analytics and AI to understand individual customer needs and preferences, offering tailored solutions and services. This customer-centric approach enhances satisfaction and increases the likelihood of retaining customers in a competitive market.
