The Digital Transformation in the Financial Sector is Irreversible
Author: Luiza Buserska
Co-author: Laurent Tabouelle
The financial sector is experiencing serious changes – legislative, technological, related to the new customer expectations, vigorous competition, and so on. The aggressive competition of new entrants, surfing the “Fintech” wave, provided firms with incentives to deliver what customers need as efficiently and innovatively as possible. Challenges are clear and tackling them requires new solutions.
In search of the most complete and flexible management solution, the players in the financial sector are becoming increasingly aware of the relationship between their digital strategies and risk management strategies, and thus, innovation is seen as a critical condition for business sustainability and growth. At the same time innovations from technology providers keep emerging. That is why the financial software providers face the challenge to demonstrate their ability to guarantee an added value to their digital strategies. To meet this challenge, they need to work on a deep understanding of the corporate strategies, the business and product development, the needs and the priorities of the current market.
The global IT costs of the companies operating in the financial services sector already reach billions. These funds are invested in upgrading information systems and adapting them to the growing competition. Certainly, the IT investments of the financial institutions must continue to increase in the coming years, as pretty much all organizations still have key operations systems that haven’t been upgraded, and can grow nor answer fully the end-customers’ need, or can’t do with an appropriate control of the risk and compliance aspects. The commercial finance and supply finance industry is no exception in this picture. Such investments, however, will lead to cost savings worth billions in the whole sector, together with the optimization of the workflow and the improvement of the efficiency and the effectiveness.
The digital transformation in the financial sector is irreversible and at the center of the digital transformation should be people as employees and clients. At one point either the companies will decide to adopt a pro-active approach for their IT strategy, or they will eventually be forced to react extremely quickly and adequately, either under the pressure of competition or under the pressure of the regulators. The bigger challenge will be within the institutions themselves, with the change in the thinking of management, employees, relationships. So, managers’ efforts should aim at transforming operations and processes, with a genuine intent to question the current rules, and achieving simplification, as well as introducing technology solutions that improve the user experience, internally and externally.
Today we can say that digital transformation in the financial sector to a great extent is a fact. It is no longer necessary to convince the managers of financial businesses that they “keep abreast of the changes in technology” and that the consumer customers’ experience dictates the IT investments. The behavior and expectations of customers, transformed as a result of the modern digital technologies spreading in all layers of the society, in our everyday lives, are among the leading factors for this transition. The customer-centric business model, on the other hand, means choosing the right product that is maximum flexible and able to meet the expectations of all financial businesses and their end-users. In this sense, the constant upgrading and evolution of technology platforms is the most important investment in terms of increasing the productivity. Information technology and what stands behind the label “digitization” becomes a competitive advantage of the products produced by the companies. Therefore, whether small or large, financial industry companies, striving for a long term expansion on the market, need more and more an out-and-out „multilayered“ business solution, able to assure flexibility in the work flow, deep set of features, data exchange formats with suppliers and/or buyers and full functional coverage of all products to ensure the sustainability of their business.
Surviving in today’s rapidly changing world requires from businesses to adapt and change. The winner will be the one that adapts most quickly. The actors in the financial world must become as flexible and as innovative, as they can. They have to make things in a different way. Everyone will adopt their own approach, depending on their current market positions, the ambitions for the future, their organizational capabilities, the limits of their capital, and so on. But no financial institution has an option to stay the same.
However, how the organization will adapt and define their IT strategy for the coming decade will dictate how successful it will be in this digital transformation. This of course puts in the spotlight the old difficult ‘build or buy’ choice, but taken into account the above stated reality of the pace of change in technology and the constantly growing expectations of end-customers on the matter, is it really such a tough decision to make? Shouldn’t such responsibility be given to technology experts, e.g. specialized software providers? Of course, for the authors of this white paper, this question is rather rhetorical. This is the reason we chose to join such a company, to help the commercial finance industry tackle the digital transformation challenge by providing software packages that are mature and benefit from a huge amount of business expertise and experience, acquired and developed on a global international scale. Not only we support the industry today, but also we anticipate on the further by contributing to the general technology evolution, to guarantee the industry will be able to stay on top of the ever-growing customer expectations.