Digital Transformation in the Financial Sector

A Change with Enormous Potential

With regard to digital processes and products, a change can be observed in numerous business areas, which is associated with remarkable advantages for both customers and the companies involved. The digital transformation opens up new strategies and business models, enables consistent customer orientation, and offers new approaches in the areas of leadership, culture, and work. The use of modern digital technology helps to optimize work processes and to automate them in terms of cost reduction. The digital change, therefore, has enormous potential for banks, insurers, and other industry participants, but successful implementation depends on various factors. In order not to miss the connection for sustainable customer acquisition and retention, it is important to take the appropriate measures in good time and use digital innovations.

Efficiency-driven Digitization with the Goal of Automation

For decades, banks have been dealing with digitization in the original sense, i.e. the digital processing of previously analog information. The first online banking offers were created in 1983 and have been continuously developed so that the digital networking of market participants beyond company boundaries has been a matter of course for many years. The new thing about what is to be understood by digitization nowadays is the greater involvement of the end customer and the extensive automation of the entire value chain. From the point of view of the financial institutions, this is an efficiency-driven digitization with the aim of being as automated as possible and consequently cost-effective. The beginning of the age of the smartphone initially presented banks and other financial service companies with a multitude of challenges, which at the same time opened up new opportunities. The end customer’s need to be able to access financial services at any time and from any location is growing increasingly and is one of the decisive factors for the digital transformation in the financial sector. By combining the usual functions of a smartphone, such as touchscreen biometrics, camera, and geolocation, with advanced analysis options, institutions can increase sales, significantly strengthen customer relationships, provide up-sell or cross-sell offers in real-time, and optimize joint processes. However, most companies develop such solutions relatively slowly because the possibilities of automation and digitization potential are not fully identified, and the internal analysis and data science teams are often overloaded with everyday tasks. In such a case, external resources can help ensure the future viability of the company.

Digital Customer Onboarding: An Important Success Factor

Market-leading platform providers such as Airbnb, Uber, or MyTaxi are setting new standards for lean and innovative onboarding solutions, which customers ultimately also expect from their bank. Digital customer onboarding describes digital customer proximity and is both a challenge and an opportunity for the banking sector. Creating a high customer experience and promoting acceptance across all channels are challenges that also have to meet the legal requirements, which are anchored in the EU General Data Protection Regulation (GDPR) and the Swiss Data Protection Act (DSG), among other things. As soon as a financial institution fails to meet requirements such as flexible financial services, personal advice, and sophisticated mobile banking, customers are ready to switch more quickly. Ultimately, the customer experience has a major impact on the conversion rate. Like an interview, the first impression is often decisive. With digital onboarding, it is crucial for success whether the product selection or account opening can be carried out at any time in a time-saving and uncomplicated manner from the PC or mobile device. So those leads can become long-term customers, onboarding solutions should be designed holistically and enable the planning of analytically sound marketing campaigns. Digital sales channels can then optimally develop their potential if they are consistently optimized and managed. The next-generation client onboarding as the next expansion stage for most institutes comprises the merging of all customer interaction channels into a single channel and the improvement of digital customer perception. The consistent digital transformation often fails due to organizational structures that have evolved over time or limited IT systems. By using external consulting services, such obstacles can be identified more specifically and ultimately eliminated.

The Digital Customer Interface as a Guarantee for Customer Loyalty

Websites and e-mails represent the standard basis for the digital exchange with customers. For many financial service providers, however, the website only serves as a digital business card that shows various contact options. Modern communication methods such as chatbots or messenger services are used rather hesitantly. This leaves the potential for active customer communication and data analysis and evaluation unused. Generation Z in particular demands digital innovations that expand the possibilities of customer contact. With a view to older customers, the challenge for financial institutions is to recognize the heterogeneity and manage it successfully. As soon as a customer can clarify a question at any time and independently of his current location, receive information about a financial product, conclude contracts and analyze his investment products, a higher customer satisfaction tends to be assumed, which in turn leads to stronger loyalty. Sometimes a customer-oriented app that combines such functionalities in a central location is a suitable instrument for reaching a new level of communication. At every digital customer interface, data is automatically generated that can be evaluated for product and offer improvements as well as new services. Nowadays, marketing is more and more IT-controlled and therefore based on facts and figures. Software solutions that combine customer onboarding, portfolio management, financial information, and CRM functionalities are therefore an ideal starting point for an efficient, digital customer interface.

Digital Innovations as a Driving Force for Change

FinTechs, which conceptually represent a word construct made up of “financial services” and “technology”, score in the area of finance-related services, among other things, with peer-to-peer transfers and loans that do not require the cooperation of banks. Basically, there is growing consumer acceptance of the new providers in the financial sector. Nevertheless, there are certain concerns with regard to transparency, regulation, and data protection, so that the services can still be used within a clear framework. Sometimes financial institutions, banks, and asset managers should emphasize these points for strategic reasons when positioning their own products. Transparency and traceability must therefore be taken into account to a sufficient extent in the digital offer. FinTechs should be seen less as a threat than as an opportunity and source of inspiration. First of all, it is important to analyze whether individual services offer the customer and the institute real added value. If this can be answered in the affirmative, in a second step it must be carefully considered whether the services should be integrated and further developed, or an external provider should be entrusted with the services. Technologies such as robotics and artificial intelligence are likely to play an increasingly important role in the future and will also gain importance in the financial sector. It is estimated that around 90 percent of all available data that represents the raw material for new technologies has only been generated in the last few years. In asset and wealth management, among other things, innovations need to be identified, implemented, and ultimately used. Advice from appropriate experts can accelerate the transformation with a view to the current need for action and thus serve to secure the market position.

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