How Financial Services Companies Are Transforming in a Digital World
Leaders of financial services companies are facing operational, technological, and financial challenges that are transforming banks, insurance companies, asset managers and other financial institutions in dramatic and long-lasting ways. Continued economic uncertainty, coupled with the rapid pace of change stemming from digital transformation, are among the biggest issues these financial services companies are grappling with. For these companies to meet the needs of their clients, they need strategies and solutions that reflect where they are now and, more importantly, how they move ahead in this changed landscape.
The Economic Situation
It is certain that the continued economic uncertainty and looming recession is one of the biggest challenges financial organizations will face over the next year. The economy is a top worry for many financial services organizations. Beyond the financial challenges, the rapid pace of digital transformation these organizations need to compete is also an issue. Many companies in the financial services space underwent five years’ worth of change in a matter of months during the COVID-19 pandemic. Putting systems in place for employees to work remotely, as well as enabling customers to bank online and on their phones in a seamless way, suddenly moved to the top of the list. Now, these financial services organizations need to keep up with the speed of digital transformation.
The Path to Profitability
Among the bigger concerns of financial services companies during economic uncertainty is finding a clear path to profitability. The financial contractions that have taken place, along with the cost of technology needed to respond to the pandemic, highlight just how critical a focus on the bottom line truly is. Two different methods to achieving a stronger bottom line include cutting costs or offering additional products. One typical method used to cut costs includes reducing headcount. However, a smarter approach is to leverage technology to have employees become more useful, rather than being seen as a cost reduction method. Implementing technology can assist financial services companies in discovering the most profitable portion of the business and help create a stronger bottom line, and is thus a better long-term solution than reducing overhead costs.
In Financial Services, digital transformation can empower employees and spur innovation.
Digital Transformation Priorities
More than two out of five financial executives believe the top priority for digital transformation is tackling the biggest and most pressing issues first. And no wonder: the past few years put the importance of digital capabilities front and center. Financial services technology is in the midst of a profound transformation, with CIOs and other finance executives preparing to adopt the next phase of digital changes. The challenges are significant. In a competitive environment of increasing cost pressures, banks, insurance companies, asset managers and other financial institutions have to update their technology for both the client-facing and support services components of their businesses. Among the challenges: cyber-security threats and a rapid migration of customers to digital channels. Most major financial institutions understand the need for action but are nevertheless in the early days of this transformation. They know it won’t happen overnight.
The typical estimate of a complete digital transformation journey will take two to three years. Although a transformation can take one to five years, the differences reveal how far along on the transformation path these companies are, and how extensive the undertaking is. The digital revolution a financial services company undergoes has one primary goal: the ability to make data easily accessible, and thus actionable.
The Payoff from Digital
The ability to become more efficient and effective while gleaning better insights from data—seeing around corners—is at the heart of digital transformation. Without these insights, it’s difficult to make smart decisions about where to make investments in the business. To improve the accuracy of financial plans, banks and other financial institutions have to forecast deposits and loans on the balance sheet to effectively calculate items such as net interest margin, non-interest expense and income. And during these challenging times, they must also continually evaluate the impact of market volatility, changing consumer trends and shifting industry developments on their finances. Insight into all of these issues is easier to gain when digital transformation is happening throughout the organization
Where is the money is going?
Investments in technology are being made in many different areas: financial and accounting departments, back-office systems such as those in origination and payments, human resources, regulatory and compliance, and financial crime. With a typical primary goal for a digital transformation including better visibility and insight into their data, investments in financial and accounting departments are a necessary component. And by automating more of these functions, companies can deploy their most valuable assets—their employees—to tackle more value-added functions. These investments can also lead to cost savings and better employee engagement.
The past few years of economic uncertainty has not been easy for any industry. Financial services companies of all stripes have had to deal with disruptions and ways of working that they likely couldn’t imagine. Continued economic uncertainty and a predominantly remote workforce may be the biggest challenges they say they’re facing, but the headwinds of COVID-19 ushered in many more disruptions. Still, companies are committed to investing in the tools and technologies today to build a more successful tomorrow. Having a trusted partner like Alithya on this journey can make the whole undertaking less daunting—and ensure that today’s financial services companies become tomorrow’s leaders. Alithya, a top 1% Microsoft Partner, works with financial services companies on a daily basis to realize performance improvements in areas including consolidation and close, operational transfer pricing, net interest margin planning and more.