In the wake of this crisis, the economy, businesses, and services had to go through a major transformation to stay afloat. This is how the digital transformation wave received a great boost. Several tech companies are now developing solutions for other firms to stay afloat, and most industries had to adopt digital means to keep their services working along with maintaining social distancing protocols. The finance and banking industry was one such industry that went through a lot of changes to make its services accessible to the public on short notice.
The term digital transformation refers to the process by which an industry, business or service adopts digital methods to transform, be more accessible, and evolve. In any business or industry, there are four main areas that undergo a digital transformation: Business processes, business models, domains, and the transformation based on culture or organization. For an industry to be considered digitally transformed, all four areas need to undergo a transformation by adopting digital means for operations. Digital transformation stands on six pillars: Experience, people, change, leadership, innovation, and culture.
The pillars of digital transformation
Any industry, be it service based or product based, relies heavily on experience. Here, experience can mean both that of employees and customers. For any existing problem, there will always be a number of institutions working to provide a solution. In these cases, it is important to develop a solution that satisfies customers and ensure that the employees who are working on the solution are in it for the long term which guarantees fewer disruptions.
With the amount of technology that is needed to transform any business model, we often skip over the most important element of the transformation: People. Technology is crucial to transform business models, but in the end, it is the people who are controlling the technology – which makes them a very important component of digital transformation.
The word transformation signifies change that could take any shape or form. For a successful digital transformation, all elements associated with the area or process being transformed need to be comfortable with the idea of change. No evolution in history happens without change.
This brings us to the next pillar of digital transformation, leadership. For any project to be successful, there is undoubtedly need for a leader. With the market changing so fast and new methods getting adopted every day, it is necessary to have someone who can quickly adapt and be accountable for all these changes.
The introduction of any new technology comes with a lot of effort. It can happen only when innovative minds are working together. Innovation, in this case, is not just about skills, but also about communication and teamwork. The idea of improvising on existing infrastructure is what innovation is based on.
Finally, all of these five pillars are held together by culture. The culture, environment, mission, and vision of the organization have a huge impact on the type, speed, and magnitude of transformation that organizations can tackle. The culture of a company speaks a lot about its values and how it functions. The stronger the culture, the more innovation and change the organization can take.
Implementation of digital transformation in finance
Among all the industries affected by the digital transformation wave, the finance industry experienced one of the most drastic changes in its operations. Being an industry that has historically been heavily dependent on manual work and person-to-person contact, digital transformation has been a widely new journey in this sector. Disruptive technologies like artificial intelligence, IoT, blockchain, and machine learning have made their mark on this industry.
Starting from automating the customer onboarding process used by banks and financial institutions for verifying the identity of the customer to running AML and CFT checks, manual processes are getting converted to digital ones. Banks are using AI-enabled bots to replace customer care services. Identity theft and Anti Money Laundering checks are also processed virtually using frontier technologies. Blockchain, commonly known as distributed ledger technology, is being used to validate transactions in the crypto industry.
The documentation process is rapidly changing into a digital one. Wet paper signatures are getting replaced by digital signatures. Even government-issued stamps are replaced with electronic stamping facilities. The whole document signing process is carried out digitally. Even paper contracts are no longer as widely used as they were before. Many businesses now actually prefer digital contracts.
Security and identity verification are becoming increasingly important. This is what makes blockchain technology the next sought after disruption in the financial sector. It is characterized by immutability which has paved its deployment in the identification and verification process. Blockchain solutions can be enhanced when combined with AI and other frontier technologies.
Digital identity verification process and biometrics are two of the most important disruptions that technology has brought in the finance and banking sector. Digital KYC for identity verification and authentication plays a significant role in the customer onboarding process. Know Your Customer (KYC) has now become mandatory in order to take part in any online or digital transactions. Biometrics are replacing traditional passwords/PINs and code to ensure security.
Digital transformation is here for the long haul as all industries are gearing up for change. Leveraging artificial intelligence, big data, and machine learning are just the initial steps towards transforming businesses. A Deloitte survey found that 45 percent of companies reported positive growth after the adoptation of digital technologies. Research suggests that the digital transformation market is expected to grow to a whopping $3.294 billion by 2025. With expectations this high, it is only a matter of time before we start seeing the results in our day-to-day life as well.