Digital Transformation and Financial Industry : A beginner’s guide (2024)

So, Digital Transformation — we’ve all heard that term by now and have our own understanding of what that means.

If you have been in the IT industry for a while, you’d also realize that it’s not as new as the folks in the business world might think. We, in IT sector have been pushing digitization to business for a long time now, but suddenly that IT-to-business push has become a business-to-IT pull and everybody has woken up!

Rightly so, this is a great opportunity — businesses now sees how IT can add value and want that value. So now, instead of proving business value proposition to the business owners, IT now can try and build what the business already wants without worrying about the scope of work or proving the value proposition as it is already defined by the business teams(pretty much)

There are a lot of reasons for this digital push; increase of mobile technologies, reach of technologies to a wider audience (from emerging markets to GenY)mainstreaming of cloud computing and wide familiarity of SaaS (Software-as-a-Service), just to name a few.

These “new” technologies enable more new businesses to disrupt the traditional business and one of the industries that I am very interested in is Finance.

Before we move further — a quick look at the work FinTech which you must have heard/read about. I think of FinTech and a technology startup or even a group within a traditional financial institution that is able to bring modernization/democratization to financial services which are usually tied up and burdened with tons of regulations by using technology.

I am sure, you have seen ads in the Apple AppStore or Google Play Store for new mobile payments solutions, transfer of money solutions, savings for students or new entrants to job markets solutions and stock trading solutions with very small commissions.

These guys are challenging old traditional business models of the financial institutions from Banks to Lenders to Insurances and sooner or later the traditional folks need to join them or risk losing their share! And I know a lot of them are looking into it already as a ton of surveys out there suggest.

At the end of the day, it is about satisfying customers — who can do it well? A niche risk taking FinTech startup or a traditional risk averse bank/insurance?

A company like TransferWise took a simple thing like transferring money from one country to another(which in my opinion had become way too complicated and way too much fee ridden from transferring bank and accepting bank) and disrupted it! For the customer — brilliant! For the banks where we used to go to send wires/western union — not great! Granted there are still some currencies that TransferWise is working on (like Chinese Renminbi, etc), but it works in majority of countries and of course it has followers like Remitly, etc.

A company like Acorns would be of big interest for people who are starting out in their savings journey, and would challenge banks who would traditionally ask for a deposit or to maintain a minimum amount, which as a student or someone with their first job is not ideal.

A company like RobinHood allows individuals to invest in publicly traded companies and exchange-traded funds listed on U.S. exchanges without paying a commission! Think about it — no commission=major disruption of trading business models!

If I were a bank’s CIO, I would be spending a lot of my time thinking about collaborating with these FinTech companies or how to provide a better experience to my customers before these FinTech’s do. And I wouldn’t be a looking for a big opening rather, small quick releases in my products and services which keep things fresh and exciting for my customers (which is the feelings the FinTech bring to customers).

Think about ApplePay, what if you could withdraw money from your ATM similarly? No card needed! Small start and great convenience for the customer…

Or mobile apps — @apteligent reports that nearly 75% of all millennials access their mobile banking app several times a week and 38.7% consumers ‘might’ change if they discovered one with a mobile app or a better mobile app which 8.9% emphatically would change banks!

If that doesn’t get big banks/insurances to take notice — I don’t know what will!

Of course there are tons of things more which are nipping at the heels of banks like Block Chain, Crypto Currency, etc, but more about that in another post.

Consider Identity and Security

Coming back to talking about Digital Transformation and Finance — two big considerations which would be the linchpin for this transformation are Identity(who is performing this transaction and how do you verify that it’s the right person) and Security(prevent data leaks, hacks, impersonations, etc).

I hope this helps to gather your thoughts a little around digital transformations and Financial Technologies.

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