Opinion: Digital Transformation in new-age Financial Services
The financial institutions globally have been constantly evolving their businesses due to competitive environment and constant changes in regulatory situations. This is further becoming complex as the expectations from customers are also changing. The ongoing COVID-19 pandemic poses a serious challenge to the industry amid a lot of uncertainties. However, financial services continue to work diligently with an aim to re-emerge and adopt the new normal. While the think tank of financial institutions is occupied with managing the crisis in the short run, their strategic focus is on preparing for the future. In these uncertain times, focus on long-term strategy will be critical for the profitable growth of this sector.
One of the key themes of long-term strategy is Digital Transformation. Financial services have always been adopting digital capability to make it a competitive advantage. However, in current situation embracing and evolving with digital automation to enable contactless sales, services and customer-employee interactions are becoming the new normal. This push to adopt the technology and undergo digital transformation will be a game changer – as it supports managing the current situation and also makes the organization future ready for the post-pandemic world.
The key objectives of these digital transformations are:
-Achieving operational efficiencies, including automation
-Improving customer experience
-Improving insights for decision making
-Gaining competitive advantage over peers
-Product innovation and portfolio expansion
-Ensuring regulatory compliance
-Improving employee engagement and safety
Digital transformation is a long journey consisting of various steps. However, the focus remains largely around the automation of processes and use of traditional and alternate data that is leading this transformation.
A few initiatives that the new age financial services have adopted to make it a digital transformation are as follows:
-The digital experience for the customers by adopting “Direct to Consumer” mode. The customers have been provided an option of directly reaching out to the financial service provider through a digital mode and make an application.
-Leveraging artificial intelligence (AI), including natural language processing and psychometric recognition capabilities across customer touch points.
-Identifying potential partner FinTech’s in various categories such as credit underwriting, on-boarding, payments and partnering with them quickly to enable contactless services and usage of alternate data.
-Allocating appropriate budget for digital acquisition and technology adoption. A proportion of marketing dollars are kept aside to be used for digital technology and automation that enhances the revenue and profitability.
-Strengthening the usage of alternate data in combination of traditional data. These alternate data may be transactional information, partner transaction data, digital footprint that reflects the customer behavior to provide him a customized offering.
-Digitally enabling the sales force to generate sales within the work from home (WFH) model.
-Developing the corporate ability of remote collaborative working and enhancing employee experience with digital interfaces. Setting up digital collection process has also become key focus area for lenders.
–Adoption of new digital tools such as Video Customer Identification process (VCIP), Digital Address Verification (DAV), Video Personal discussion (VPD) is becoming the norm. Lending organizations are partnering with specialized service providers to accelerate digital acquisition processwhile ensuring customer convenience.
-Focus on customized offerings for customers that includes digitally originated, digitally underwritten, digitally disbursed and collatable loans. The requirements of short-term credit are expanding. As customers’ needs are moving more towards “essential” nature of consumption the product economics are govern towards inclusiveness, contactless, transactable flexibility.
-Fintech and technology companies are facilitating digital transformation in financial services and the speed has been tremendous in last few months. Innovation is coming from everywhere and consumers have never had more flexibility and convenience. Organizations will also witness a cultural shift as they will realize the importance of being more agile and open to new ideas and experimentation. All stakeholders need to heavily invest in tech and digital capabilities.
In conclusion:
Speed and scale will give competitive advantage. Customer wants easy interaction with companies they do business with. Companies who are facilitating this are almost having an advantage over their competitors.
Innovation is realized through intelligent decisions. Through the right data and the latest technologies such as AI and automation, innovation is much easier. Alternate data goes beyond traditional data to give you 360-degree view of a customer that further supports in customizing the offer. Technology gives you the power to process this data and means to design innovative journeys that not only brings customer delight but also makes the process seamless that builds customer loyalty.
One needs the right tools, information and partner. By working with right technology and data partner organizations can layer new thinking, new data and new capabilities into their business. Financial services are setting the wheels in motion to transform the acquisition of customers, delivery of customized services, customer management and underwriting with the ultimate aim of becoming part of new age organization.
Importantly, data, AI, machine learning and automation will only be effective at building friction free customer journeys if they are embedded and shared at enterprise level.
Source: The Banking & Finance Post
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