How Digital Transformation is Impacting Financial Services

Digital transformation is sweeping across nearly every industry. Healthcare, IT, manufacturing, you name a sector, and they’ve found their business processes radically altered by the marked uptick in the use of new, fast (and frequently changing) digital technology implementations. And just in 2019, the financial services saw some big changes or continuations of big changes that are expected to extend into the foreseeable future. 

Below, we’ll recap a few of the more prominent digital transformations in financial services and what it means going forward. 

Mobile Banking

Our phones are capable of quite a few things these days—and keeping people out of banks is one of them. Physically entering a bank seems to be becoming an antiquated activity these days, akin to mailing a handwritten letter to an acquaintance; an exercise done to reconnect with the more primal, romantic versions of ourselves and soak in the nostalgia of simpler times.

So much, now,  can be done right in our laps through our phones that most of the day-to-day banking activities (depositing checks, transferring balances, etc.) can be done without having to stop by the local branch. Hardly considered a luxury anymore, mobile banking is becoming the new norm, especially among the digital-savvy younger generations—97% of millennials report using the technology to accomplish the heavy majority of their banking needs.

Developing new, innovative ways to utilize mobile banking and reach customers where they want to be reached will be a key focus for those embedded in the industry heading into 2020. 

Mobile Pay

Continuing the trend of smartphones invading every aspect of daily life, an increasing amount of purchases can now be facilitated through mobile pay. While every brick-and-mortar retailer may not be set up for mobile payments, those that aren’t are quickly becoming outliers. 

These “contactless payments” amounted to $75 billion in 2016, are but are expected to explode to $500 billion by 2020. Additionally, Visa reports that “29% of Americans now make zero weekly purchases with cash.”

Mobile apps like Venmo, Cash App, and Zelle jostle for position at the top to capitalize on the increasing customer demand for contactless payments, and competition is only expected to increase in the coming years.

Blockchain

Rising to facilitate the surge of digital payments, blockchain technology is expected to further permeate financial services. This record-keeping technology and its ingenious method of ensuring security when completing transactions are being used by banking and financial services in a variety of ways including digital transactions, loan processing, money transfers, escrow services, and more. 

International money transfers, for instance, is a process largely being facilitated by blockchain lately.  Numerous larger banks have already begun leveraging blockchain to facilitate “cross-border” payments, and other service providers are busy developing solutions. When done in this fashion, both banks and customers save money as there’s no need for a visit to the money transfer office, unnecessary fees, or additional time-consuming procedures. 

Big Data

The amount of technology being used to drive the way industries operate and compete will only increase, encouraging companies to develop new, innovative ways to leverage processes to capitalize on the unfathomable amounts of data at their disposal. Just for reference, —90% of the world’s data has been produced in the past two years alone, 

The need for machine learning tools and AI to suss out and extract the value from the mountains of data organizations produce these days is hardly industry-specific, but the banking industry is one of the primary drivers of this growth overall.

As traditional databases prove to be insufficient to contain the amount of data and complexity of analytics required to interface with it, companies in financial services will have to devote more resources towards big data analytics to increase efficiency, better inform investment decisions and provide better services.

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