Digital transformation underwent a transformation of its own as organizations felt the pressure from the impacts of the global pandemic. Here’s a look at what digital transformation might look like over the next five years.
To say we are living in the age of disruption is an understatement. Financial institutions (FIs) and other financial service providers underwent an unprompted stress test in 2020 in the wake of the COVID-19 pandemic. Even the disruptors were disrupted as workplaces were broken up and siloed into individual home-based offices. These things presented unprecedented challenges for IT professionals in FIs and payments companies.
While many were thrust into an ad hoc digital transformation of sorts — and others found themselves accelerating a transformation in progress — the alteration of everyone’s path is sure to have ripple effects that last well into 2021 and beyond. This begs the question “what will digital transformation look like over the next five years?” The answers are as varied as they are uncertain. Yet, FIs and payments companies must prepare for both the inevitable and the unexpected. If 2020 taught us anything, it’s that anything is possible — and organizations will need to be prepared.
Post-COVID Digital Transformation Landscape
The pace of digital transformation within fintech and financial services was already reaching a breakneck pace prior to the global pandemic. In a post-pandemic world, the luxury of playing the waiting game has completely dissipated. Those with 18-month to 3-year roadmaps for digital transformation have found themselves scaling these initiatives in a matter of months or even weeks. Between migrating physical channels online and adjusting the surrounding systems, processes, and procedures, FIs and payments companies have a lot on their plate.
Fintechs and IT departments within larger FIs are looking for ways to increase operational efficiency, analyze large volumes of data, and garner insights from that data, especially as digital channels become the primary channels for customer engagement.
As we look at what to expect in 2025, the central theme is to be bold with technology. Laggards and those slow to adopt new technologies should take lessons learned from 2020 and apply them to forward-looking initiatives to enjoy the bottom line benefits that come with early adoption. A McKinsey report from August noted that 47% of incumbents that leverage “bold, tightly integrated digital strategies” have experienced revenue growth exceeding 10% annually over the past three years. Just 30% of those who didn’t focus on new digital strategies experienced the same growth.
In order to understand what the future of digital transformation holds, it’s important to look at what trends and technologies are emerging in the world of fintech and finance.
Emerging Technologies and a Reimagined Future
Deloitte released some predictions regarding the world of finance, and these forecasts are certain to impact the way digital transformation is approached and unfolds over the next five years.
Touchless Transactions Rule via Automation & Blockchain
Emerging technologies like automation, cloud-based ERP, automation, and artificial intelligence (AI) innovation will enable drastically simpler processes that free up human resources to add value. This doesn’t mean that human roles in fintech and finance will disappear entirely, but rather that operational workforces may be leaner as humans move into more business-oriented and specialized roles within financial services.
Customers Will Lean Into Self-Service
While many consumers and business people still enjoy hand-holding and personalized engagement when it comes to payments and other financial products, there are plenty who would be happy to handle matters themselves. With endless information available via smartphones and voice assistants, people will increasingly bank, make payments, get support, and utilize digital financial products to manage their own finances.
Digital solutions will need to rise to the occasion by offering automated activities and providing easily accessible, intuitive, on-demand data and insights.
Data Will Still Be a Mess
Aligning and integrating data is still (an untouched) pain point for many financial services organizations. Without this, they lack the ability to garner holistic and important insights about their customers and their business — meaning they will not harness the full value of digital transformation.
The New Normal for Financial Services Digital Transformation
Digital adoption will be a high priority in order to meet the new needs of customers living in a new normal. McKinsey recommends several areas of opportunity for professionals in charge of digital transformation to succeed in the newly transformed landscape.
Experiment. Testing and learning is the fastest path to innovative processes and solutions. In pre-Covid times, experimentation was often viewed as an unpalatable risk. The problem is that there isn’t the possibility for long-term gains without a little bit of risk. Leveraging the disruption from the pandemic can be one way to make these tests and experiments more appealing to stakeholders.
Maintain productivity momentum. The transition to remote workforces has pushed many organizations to seek out unique ways to increase efficiency via automation. This should continue even after (or if) people begin returning to office spaces. Continuing to invest in automation and predictive analytics will bear benefits that will outlast the pandemic.
Frequently review data. Data sources should be reviewed as frequently as possible to keep a finger on the pulse of dynamic customer needs as well as to garner helpful business insights. Secure file-sharing technologies can also be leveraged to share this critical information and broaden data reviews to encompass all key stakeholders.
The disruption is sure to continue and FIs and financial service providers will quickly find out if their organization and infrastructure are up to the task. Customer preferences will remain dynamic as everyone adjusts to the new normal and a solid roadmap for digital transformation will be critical to ensure that organizations can deliver products and solutions that meet these preferences.