COVID-19 and Digital Transformation: Finance
The COVID-19 pandemic has brought about radical change to the finance industry, forcing financial institutions to rapidly adopt a digital-first operating model.
Before the COVID-19 pandemic, digital transformation garnered much enthusiasm in the finance industry. However, that enthusiasm didn’t translate into widespread, comprehensive adoption.
As recently as December 2019, only 12% of financial institutions considered themselves digital transformation “leaders.” Thirty-four percent classified themselves as “fast followers,” and 55% said they were either “mainstream players” or “laggards.” While the industry understood the benefits of digital transformation, there was little urgency to make drastic changes. Most institutions focused mainly on supplementing in-person visits to physical branches, a common practice for more than half of bank customers, with online services and apps.
Gartner’s Vice President for Global Financial Services Peter Redshaw described this surface level approach in the following way, “Every single bank we talk to has a digital strategy or a transformation initiative or a disruption program, but when you dig a little deeper, 90% of those strategies are not strategic at all. Most plans just optimize what the bank is already doing.”
COVID-19 has brought about radical changes in customer behavior. With branch offices closed indefinitely, financial institutions have been forced to rapidly adopt a digital-first operating model. The pandemic and resulting social distancing have forced the finance industry to adopt enhanced, robust digital transformation initiatives on a drastically accelerated timeline.
Digital-first means customer-first
A digital-first business model means supplying an entirely digital customer journey. Customers still need to pay bills and conduct regular banking activities, along with seeking financial advice and expertise they have traditionally received from in-person interactions at local branches. However, they now need to be able to conduct more complex banking activities such as refinancing mortgages, consolidating debt, and managing portfolios virtually. Anything a customer could conceivably do at a bank must now be available to them digitally.
Creating a cohesive and personalized digital customer journey requires integrating all of a customer’s data, known needs and preferences into a single, easy-to-use platform. It also calls for a single app customers can use to do everything from depositing checks and transferring funds to getting approved for a loan. To thrive in a climate in which customers prefer streamlined processes, financial institutions will have to focus on developing user-friendly applications that take advantage of automation, AI, and big data. Financial organizations offering superior straightforward and intuitive digital services that provide customers with the most convenience and peace of mind, will be the ones most likely to prosper during this pandemic and beyond.
Making this digital-first transition will require overhauling legacy systems, breaking down data silos, and adopting new technologies, such as AI and advanced analytics, across entire IT ecosystems. While this restructuring will require considerable investment, the benefits will yield significant competitive advantages.
When customer data from all channels and interactions is aggregated and readily available, organizations can utilize AI and analytics to better predict and understand customer trends, shedding insight on how customers would like to be engaged, and which products and services best meet their needs. In addition to enabling banks to deepen their understanding of customers and create more targeted marketing campaigns, the introduction of AI and Robotic Process Automation (RPA) will enable banks to translate their operating model to a digital landscape. The world’s highest-valued FinTech company, Ant Financial (formerly Alipay), already utilizes AI in the approval process of app submitted loan applications. The acceleration and widespread adoption of digital normalization will usher in a new era for the finance industry – redefining what banking means and how customers access financial services.
Connecting locally to profit globally
True digital transformation in finance requires restructuring organizations from the inside out. Simply providing online banking and customer-facing services like portals and chatbots will no longer suffice. Financial organizations must proactively cultivate an internal, top-down digital culture. Once this digital culture is successfully achieved, digital platforms and services supported by technologies such as automation, AI, and advanced analytics can offer tremendous value to customers and ensure financial companies stay agile and competitive.
Colocation data centers, situated near customers and end users, provide the bandwidth, processing power, scalability, and near-zero latency that financial institutions need to implement technologies now required to adequately serve their customers. Partnering with an interconnected colocation site allows financial firms to take advantage of direct on-ramps to nearly any cloud provider, enabling optimal scalability and flexibility while supporting cost-effective, sustainable growth.
Netrality’s interconnected data centers provide direct on-ramps to leading cloud providers, including AWS, Oracle, IBM, Microsoft, Google cloud, and Alibaba. Our facilities are regularly audited for adherence to the highest compliance standards and provide externally validated physical protection and adherence to the latest cybersecurity best practices. Our flexible, scalable and reliable environments are designed to match your specific needs and eliminate any worries of downtime, disruption, availability, or security. Contact us for more information.