Competition is getting stronger. Regulations are getting stricter and more complex. Margins are getting tighter. The legacy systems are getting obsolete. And customers are demanding more.
In between all this, financial institutions and banks are finding their way, their version of digitalization to turn this chaos into opportunities. A version of digitalization that will not only automate financial processes but would also upgrade their customers’ experiences.
Digitalization would definitely give this industry the super-connected, real-time system that allows customers to access financial services as and when they want.
We all know, we’ve come a long, long way from having to physically go to a bank to withdraw or deposit money. But there’s still a lot of ground to cover for financial institutions which are what we are going to explore in this article.
We’ll start with understanding what financial digitalization is, why CFOs & financial leaders can’t and shouldn’t ignore digitalization, and the top 5 processes all financial institutions should digitalize.
What is Financial Digitalization?
Financial digitalization can be defined as the holistic approach to financial management where multiple innovative technologies and strategies are integrated to enhance the function of financial processes to deliver value in this digital age.
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When the digitalization of financial processes is executed effectively, you can expect benefits such as:
- Lesser number of errors
- Optimized allocations of work
- Improved efficiencies
- Accelerated processes
- Increased financial gains
- Competitive advantage
According to a recent survey of financial executives by McKinsey, CFOs and other financial leaders said that they want to spend more time on digital initiatives and digital technologies that would redefine financial processes.
But what was interesting, upon further research, they found CFOs spending more time on traditional tasks & processes in comparison to digital trends.
So, let’s explore a few reasons why CFOs and financial leaders can’t ignore digitalization.
Top 3 Reasons Why CFOs & Financial Leaders Can’t and Shouldn’t Ignore Digitalization
1. Better Forecasting and Planning
There’s literally no threshold to the amount of data being produced by banks and financial institutes. With the availability of so much data, the opportunities are unimaginable. All CFOs and finance leaders need to deploy digital transformation initiatives that would add more agility, flexibility, and responsiveness to how their data is being handled.
By introducing digital tools and processes, financial institutes can collect, process, and direct data into workflows automatically. This would reduce overall resources and time spent on repetitive data entry and sorting. Moreover, the forecasting and predictions based on the automated process will be more accurate as the margin for human errors is eliminated from the process.
AI algorithms and machine learning models can help CFOs unearth new and compelling insights from the historic data which can be used alongside market insights and analytics for better strategic decisions, budgeting, forecasting, and more.
2. Increasing Digital Workforce
This reason doesn’t need any introduction or logical explanation. With the pandemic changing how and where we work from and machine learning & AI robots eliminating 90% of manual, repetitive, and routine work from your financial teams. This means that majority of your team’s efforts can be redirected towards customer experience, strategic planning, and decision making.
AI, ML, chatbots are set to make the processes speedier, more agile, and transparent while maintaining quality and complying with all rules and regulations.
3. Need for Real-time Data-driven Decisions
All the demands from customers and partners occur in real-time and they expect you to look after their demands in real-time as well. To keep up, CFOs and financial leaders need systems that generate real-time insights based on real-time data.
An integrated eco-system where all the stakeholders – customers, vendors, suppliers, distributors, and more can communicate with your organization in real-time can skyrocket the success of your financial institute. Moreover, such an ecosystem can bring people, data, processes, insights into a more collaborative environment which enables smooth functioning of the entire institute.
Considering the wide range of benefits that could be drawn from the digitalization of financial processes, the CFOs and financial leaders should adopt the same for their institutes. It is the need of the hour.
And with the increasing number of FinTech startups that are capable of offering faster, better services, financial institutes and banks better bring their A-game otherwise they’ll be left behind with their rotting legacy systems.
Let’s explore what all financial processes can and should be digitalized.
Top 4 Processes All Financial Institutions Should Digitalize
Process #1: Financial & Accounting Process + Blockchain
Blockchain is an advanced technology that uses distributed ledgers to record transactions to make their data more secure, reliable, and transparent. By introducing blockchain technology to F&A processes, financial institutions can unleash the power of real-time digital contracts, faster & improved operations, and overall reduced cost of maintaining the database.
There might be some challenges and roadblocks in adapting blockchain like governance, regulations, scalability, etc. but the processes like account payables, trade finance, and general accounting can easily be candidates for this technology.
Also, consider the adaptability and willingness of all the stakeholders and the capacity of your existing ecosystem to expand before making any decisions regarding new technology.
Process #2: Data Entry to RPA
Processes with preset variables can easily be automated by Robotic Process Automation which would eliminate mundane and repetitive tasks for your financial team. This means your team can focus on tasks that require dynamic intelligence and application. For example, instead of allocating a customer success executive to visit a consumer for signatures, you can easily deploy an e-signature software that enables your customers to sign important documents from the comfort of their homes.
RPA is known to increase efficiency and productivity by enabling swift, data-centric decision-making.
Process #3: Cloud-based Data Storage
By storing data in the cloud-based storage system, you will be able to share real-time data with your major stakeholders. Moreover, you will also be able to get insights into real-time trends which would allow you to make better decisions regarding the overall customer experience.
When your team will have access to real-time data and trends, they will be able to make better decisions without any guesswork which means no margins for human error.
Process #4: AI-enabled Analytics
Replacing manual data mining with AI algorithms and machine learning for conducting analytics can eliminate room for errors. Such algorithms can proactively work on the data being feed into your system to make forecasts, identifying gaps, and calculating expenses which can help you optimize your processes further.
On a Closing Note,
The entire exercise of digital transformation should be done keeping in mind the end goal to build processes and functions in synergy with the technology and the teams.
The future of financial institutes and it’s digitalization will be largely dependent on the finance technology trends and the willingness of people to adapt to the new ways and technologies.