Union Budget 2022: Five reasons why financial services need digital transformation
Riding the wave of digital transformation, almost every company is trying to automate, implement, and introduce artificial intelligence
Information Technology has played a big part in keeping people connected in a world crippeled by pandemics. It is true that technological advancements have saved many lives. Furthermore, most businesses would not have been able to survive without the support of IT and digital technology. Every industry has adopted the phrase “Digital Transformation” and “Digitization” as a buzzword.
So What does digital transformation mean? The answer is both simple and complex. Everybody is riding the wave of digital transformation. Almost every company is trying to automate, implement RPA, and introduce artificial intelligence.
Does that mean automation is also Digital transformation? No, the answer to this question is that, in any organization, "Digital Transformation" means embracing new ways of managing and doing business.
In a nutshell, it is a new method of managing data, processes, and technologies as well as changes within the entire organization to embrace a digital approach.
When we consider industries that have evolved through technological advances, the financial industry will undoubtedly be one of the top three. Technology advances have allowed it to flourish enormously. Pandemic has in fact accelerated its automation and digital transformation.
A government initiative dubbed "Digital India" has further enabled automation in the financial industry. Fintech-based payment methods such as UPI, IMPS, and payment wallets have created a paradigm shift in how money is exchanged in India. Through introduction of UPI along with the Jandhan account, financial institutions like banks have been able to connect with their remotest customers more efficiently. Today, many people use UPI to pay for even small purchases, as low as 10 rupees. Today, more than 4 billion UPI transactions are processed every month, an increase of more than 4 times in the last five years.
So What does that mean for the Financial industry as a whole? The current transformations represent merely a tip of the iceberg.
Customer is king
An old adage that applies to any industry in particular. Customers have access to multiple service providers, and as technological improvements have evolved, so have customer expectations. For any competitive financial institution, what was a luxury five years ago (debit cards, share trading app) has become a necessity today. To sustain the growth of the industry, it is essential to give customers easy access to products and services based on their preferences, i.e. give them an individualized experience. This is unimaginable without the assistance of technology - the Digital transformation.
Access to markets in remote locations
With a highly competitive industry, another avenue is to reach people in the remotest parts of the world in order to create a new pool of potential customers. Even a giant in the financial industry cannot achieve this unless its products and services are technology based. Current technology usage includes UPI, POS based collection and disbursement services, but a large section of Indian society doesn't have access to many services, something that can be improved with new technological innovations.
Employee Efficiency and effectiveness
So far we have discussed how technology can connect customers with financial institutions. But all of this is irrelevant if the digital way of doing business isn't implemented as a parallel process within the organization. To provide the best product and service, employees in the organisation must be trained and given access to new management methods. In turn, organisations are able to scale up their operations both horizontally as well as vertically with lesser costs and are able to get greater efficiencies out of their employees.
Enhanced Measurements & Effective Decision making
An HBR study published in 2018 showed that approximately 1.3 trillion USD was invested in digital transformation and a large portion of the money was wasted because most organizations failed to analyze the effectiveness of the initiatives. Top management may have a hard time measuring such things, but the well-planned measurement and decision-making capabilities of digital systems can come to their rescue.
A robust analysis and decision making process must also be utilized in order to identify targeted customers based on their preferences, provide selective products and services, and identify areas for innovation. It is still possible to take data-driven decisions even with complex and large data sets using new techniques like Big Data analytics, AI, and ML.
Promotes the culture of innovation
Many organizations, like Nokia and Kodak, despite making significant technological breakthroughs, failed because they failed to innovate and use the advances to their advantage.
As the Financial industry is highly competitive and regulated by various authorities, such as the Reserve Bank of India, Securities and Exchange Board of India, IRDA, etc, it becomes imperative for organizations to be innovative in order to ensure their survival and growth regardless of the economic conditions.
An organisation's commitment to digital transformation in incorporating latest trends of technology in day-to-day operations can go a long way toward keeping it relevant at all times, regardless of market conditions.
The author is the head of Pre-Sales and Implementations Infomatics Services. Views expressed are personal
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