What are the driving forces behind transforming the banking and financial services industry?​

Competition in the Banking Sector Giving Rise to Digital Transformation.​

Change is the key to success. With evolving times, many things change constantly. Nowadays, the most common change is digital transformation in different sectors of the world. Today, one of the most prominent digital transformations is happening in the banking and financial services industry.

The world has moved from wired telephones to wireless compact smartphones and from physical banks to digital banking systems on their mobiles. The gradual evolution of technology has made digital transformation a smoother and more effective process. The digital transformation strategy is expected to grow globally from 8.2 billion dollars in 2021 to 13.9 billion dollars in 2026, with a CAGR of 11.3%.

Digital World has made our lives very easy. Implementing the same in banking and financial services can benefit customers. People have always been tired of the traditional banking system as it has many disadvantages, like heavy paperwork, slow processing, lack of security, and too much time consumption. With the advent of technology, customers also want faster processes with better outcomes. Hence, discussing and implementing digital transformation in the banking and financial services sector is necessary.

Technological Advancements for Digital Transformation in Banking and Financial Services Industry.

Technology has come a long way in shaping the banking and financial services industry for good. The continuous innovation and development in the technological front led to the digital banking system. Also, you can see that technology will take over the banking world shortly and improve the overall finance sector. Here are some of the technologies that will be a part of the digital transformation strategy in the banking and financial services sector:

1.  Artificial Intelligence and Machine Learning
  • Artificial Intelligence and Machine Learning are the new technology currently shaping the world for food.
  • Apart from other sectors, the banking and financial services industry can benefit significantly from AI and ML.
  • With the involvement of AI & ML, banks can quickly fulfil the customer-centric approach of digitalization.
  • AI can help provide top-quality banking services to customers at lower prices.
  • It can help reduce the operational cost of banks significantly
  • Artificial Intelligence can also improve customer interactions via chatbots, virtual assistants, and automation.
  • They can resolve customer queries and detect fraud via AI-based biometric systems, KYC checks, etc.
  • They help make lending decisions for the banks, document analysis via computer vision-enabled tools, customer onboarding, compliance management, etc.
  • AI and ML are also useful in risk assessment, investment decisions, and financial forecasting.
  • Hence, Artificial Intelligence and Machine Learning can be excellent inclusions to enhance digital transformation in the banking sector.
2.  Blockchain Technology
  • All you have been hearing for the past few years is about cryptocurrency.
  • The concept of digital assets is fascinating and works on blockchain technology.
  • Blockchain technology uses cryptography to record transactions.
  • The most exciting feature of blockchain technology is that customers can see what happens with their digital assets, which prevents fraud.
  • It is a very efficient technology that is transparent and fraud-proof.
  • There is also no need for intermediaries, enabling faster cross-border payments.
  • Also, the transactional fees of digital assets are lower when compared with traditional banking.
3. Quantum Computing
  • We all know the amount of data the banking and financial services industry handles.
  • Most banks face the challenge of processing data using traditional computing methods.
  • However, the solution to the above problem is Quantum Computing.
  • It provides faster processing of bulk data with more efficiency and security.
  • They can make accurate predictions improving the banks’ cybersecurity.
  • They also help banks in optimizing portfolios.
  • Some examples are- Quantum Encryption, Quantum SaaS, etc.
4. Big Data
  • The importance of data in the digital world must be addressed.
  • The finance sector has the most crucial role in Big Data because all their operations are based on customer data.
  • Incorporating Big Data into the banking sector, we help organizations create customized banking services and improve personalization.
  • Big Data also helps with targeted customer services and effective customer feedback.
  • Also, fraud detection is a critical feature of Big Data.
  • Hence, Big Data supports the digital transformation strategy by helping with the customer-centric approach.
5. Open Banking
  • Open Banking is a connection portal between NBFCs and Banks.
  • It provides accessible and personalized financial services to customers.
  • In Open Banking, the APIs help third-party developers to access customers’ financial data without affecting data compliance.
  • The banking APIs help NBFCs to securely get all information about their customers eliminating the double verification processes.
  • Open Banking helps to approach new customers via third-party sources, improving the financial penetration in the country.
  • It is an excellent approach to digitally transform the financial services and banking industry together.
  • Some of the open Banking approaches include technical API infrastructure, treasury management, etc.
6. Internet of Things (IoT)
  • Personalization is the key to successful digital transformation in the banking sector.
  • The Internet of Things (IoT) helps collect data in the finance sector.
  • Data is one of the critical components of every sector today.
  • In the banking industry, automating data can help with many banking processes, like IoT-enabled ATMs, low cash alerts, digital wallets, IoT payments, KYC, lending, etc.
  • With data, banks can give you a personalized experience and improve accessibility.
  • IoT also helps in detecting fraud; hence it can also be a cybersecurity tool.
7.  AR & VR
  • Augmented Reality (AR) and Virtual Reality (VR) are immersive technologies that can be a part of the digital transformation strategy of the banking industry.
  • These technologies help provide customized experiences to the clients by delivering optimized interaction between the banks and customers.
  • VR creates a virtual platform for the customers to interact with the banks on the metaverse.
  • These technologies are great for training employees about banking procedures and protocols.
  • Banks can virtually streamline the loan application process via VR.
  • These technologies help engage customers and help build a connection between the banks and clients.
  • Some examples of immersive technologies are- AR-powered customer interactions, VR-powered employee training, etc.
8.  Cybersecurity
  • Another critical aspect of digital transformation in the banking industry is cybersecurity.
  • With the digitalization of the banking sector, there is a lot of sensitive and transactional customer data online.
  • The increase in data automatically creates the threat of cybercriminals.
  • Hence, it is crucial to introduce security protocols and data compliance management in the banking sector.
  • The promise that every bank gives its customer is security.
  • Hence, it is essential to stand up to the promise by opting for cybersecurity solutions.
  • Some cybersecurity protocols are- data encryption software, AI-powered fraud detection, anti-hacking software, cybersecurity governance, etc.
9.  Banking Process Automation
  • If you know the traditional banking system, it has a lot of paperwork and repetitive tasks for the employees.
  • The repetitive tasks in banks are important but unnecessarily time-consuming, shifting the employees’ focus from critical work.
  • Hence, the introduction of Banking Process Automation (BPA) can be a great option to increase the productivity of banking employees.
  • Process Automation introduces robotics in the banking sector to handle repetitive yet essential tasks so employees can focus on critical bank work.
  • This automated software can handle invoice processing, mortgage processing, loan disbursement, credit card processing, payment approvals, etc.
  • Through BPA, bank employees can focus on creativity and innovation.
  • It will improve the productivity and workflow of banks significantly.
10.  Neobanking
  • Neobanking is a type of technological advancement promoting banks’ digital-only presence.
  • In this form of banking, the infrastructure and capital expenditure become zero for the banks.
  • Moreover, banks can easily make customers happy digitally with personalized and quick service.
  • It includes an integrated banking system via cloud computing, open API, etc.
  • Neobanking supports automation in the banking sector along with workflow and payroll management.
  • It increases the accessibility of banking services across different platforms.
  • Also, neo banks have lesser operational fees and convenience at the tip of customers’ fingers.
  • Some examples of Neobanking are- Buy Now Pay Later (BNPL), etc.

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Key Factors Driving Digital Transformation in Banking Industry.

banking and financial services

The banking world has always faced complaints from people for being slow, ancient, tedious etc. However, the times have changed, and now, with the digitalization of the world, the banking sector has put its foot forward for a digital transformation. Here are some factors that drive digital transformation strategy in the banking and financial services industry:

1.   Customer-oriented Approach.
  • Gone are the days when customers used to compromise on services due to a lack of technology or money.
  • Today most people are technologically advanced and want the best for themselves.
  • Hence, it is ideal for banks to follow a customer-centric approach.
  • The Banking and Financial Services industry depends entirely on its customers for their profits.
  • So, it’s high time that the finance industry satisfies customers with better financial and banking services.
  • Digital Transformation is the way to go to satisfy customers.
  • It can improve efficiency and workflow, reduce operational costs, save time, and provide accessibility to customers.
  • Hence, a customer-centric approach is one of the critical factors in driving digital transformation in the banking industry.
2. Constant Innovation
  • The digital world is a fast-paced zone, and one of the factors that can help keep up the pace of digital transformation is continuous innovation.
  • The finance sector must develop a constant innovation pipeline to keep up with market trends.
  • It is ideal for tracking the changing market demands, testing the products, and getting faster feedback for improvement and launch.
  • Continuous innovation leads to constant improvement in financial products, ultimately satisfying the customers.
  • Today people instantly accept digital products, but they also get bored fast.
  • Hence, constant innovation is the key to keeping your customers engaged and digitally transforming the banking and financial services sector.
3.  Power of Data Analysis
  • Earlier finance sectors used to rely on physical data, like documents, papers, etc.
  • The concept of a customer-centric approach and data analysis goes hand-in-But, with the digitalization, online data has become crucial.
  • Data is an essential aspect of any industry to attract and engage customers.
  • Hence, it’s time for the finance industry to pull up its socks and leverage the advantages of data analysis.
  • Banks can provide their customer’s personalized solutions and financial services, improving their banking experience.
  • The data analysis can also help to keep up with the changing market trends and allow for continuous innovation.
  • It will also help predict future trends making room for higher creativity and technological advancements.
  • Hence, data analysis is a major driving force of digital transformation strategy in the banking industry.
4.  Digitally Driven
  • Digital transformation of the finance sector means more than just superficial changes.
  • It is a wrong approach if banks or financial institutions only incorporate software and automation to lead to digital transformation.
  • Digital transformation will be relevant only when the organization absorbs the digital concepts and transform from within.
  • Their processes, skills, culture, strategy, etc., should have a digital approach.
  • They should follow the latest digital trends and create a framework to satisfy their customers digitally.
  • Hence, it is essential to be digitally driven to implement digital transformation in the banking and financial services industry.
5.  Feasible Solutions
  • While creating or transforming an organization, there will be a few challenges and problems.
  • The best way to resolve issues in the banking industry is to come up with feasible solutions.
  • While chasing something new, we often must remember to take the old things with us; that’s where we go wrong.
  • While chasing digital transformation in the banking sector, it is ideal to incorporate the basics of transitional banking.
  • Also, identifying small yet crucial things in the system can help enable a sustainable digital transformation strategy.
  • The idea is to make maximum utilization of the prevalent options in the digital transformation instead of bombarding your system with too many technologies and automation.
6.  Modern Infrastructure
  • Going digital with your finance firm or bank can be a cakewalk by introducing some technologies.
  • However, the challenge is much deeper than it seems.
  • Hence, it is ideal to modernize your infrastructure to allow the flow of digital transformation.
  • We recommend modernizing your legacy infrastructure to help with digital transformation in the banking and financial services industry.
  • DevOps, APIs, etc., can help with constant integration, delivery, and shorter release cycles.
7.    Digital Operating Model
  • The idea of digital transformation gives way to accessibility, convenience, and faster finance services.
  • But how will the execution of a complete digital experience happen? It is via Digital Operating Models.
  • The best way to provide a hybrid banking experience to your customers is by designing a digital operating model for your firm.
  • We can transform your finance business using three digital operating models:
    1. Digital transformation as a business model– where we make changes at the management level.
    2. Digital Transformation as a different business strategy- where digital services are a separate division in your firm.
    3. Digital Transformation as a native by adopting new technology with a customer-oriented approach.
  • Choosing the best one that suits your finance firm to engage and retain your customers is ideal.
8.  Upgradation of Skillset
  • The Digital Transformation Strategy of the banking and financial services industry may seem fascinating. Still, it has more work than you can imagine.
  • The current bank employees have been a part of the traditional banking system for many years.
  • It can be taxing for them to switch to a digital banking system instantly.
  • Hence, it is ideal for educating bank employees and providing proper training about digital technologies and banking systems.
  • It will help bring the digital culture into the industry and a smooth transformation process.
  • According to the World Economic Forum’s report, around 55% or more of finance employees will have to upgrade their skill sets to match the changing digital demands of the industry.
  • The skill set upgrade is a type of investment in the finance sector that influences the industry’s thinking patterns, culture, and strategies.
  • Hence, upgrading the skill set of existing employees is a crucial factor for digital transformation.

Competition in the Banking Sector Giving Rise to Digital Transformation.

The top competition that banks face is from emerging fintech companies and giant technology firms. With new technology, these fintechs can engage customers and retain them to use digital finance products. Hence, traditional banks must incorporate digital transformation to improve the end-user experience and leverage their advantages over fintech companies.

The digital transformation strategy had a huge role to play when the fintech companies started providing easy payment options and other accessible finance products. Digital design in banking will improve the customer experience, reduce operational costs, help offer faster services, and employ customer interactions and instant feedback mechanisms. Hence, competition from the fintech companies played a huge role in driving digital transformation in the banking sector.

Regulatory Changes Leading to Digital Transformation in the Banking Industry.

The continuous technological advancement also led to the growth of cybercriminals in the banking and finance industry. The cyber threat is a significant concern for most people; hence regulatory changes are made to address the issue. Regulatory changes led to appropriate digital transformation strategies, analyzing the risks, providing digital encryption and security, risk management protocols, etc. All these are possible with proper digital solutions and technologies.

Other risks in the industry are data breaches, money laundering, consumer protection, financial inclusion, Bank Secrecy Act (BSA), and sanctions. Digital Transformation is an excellent initiative by the banking and financial services industry to provide a consumer-centric, accessible, faster, efficient, and secure approach. Hence, digital transformation in the banking sector is the way to go and is the future of the financial world.


The Banking and Financial Services sector has always been known to be ancient and slow. The traditional banking system had many loopholes, the biggest being unable to satisfy the customers. However, with the advent of the internet and technology, the banking sector has adopted a digital transformation strategy to provide customers with the best banking and financial services.

The continuous innovation in the industry at technological and managerial levels is helping with smoother digital transformation. There are several benefits of digital transformation, like faster service, digital options, secured transactions, innovative digital products, financial awareness, and customized banking solutions. Some banks have moved to incorporate chatbots, VR, AI, and other technologies to improve the end-user experience. Hence, digital transformation is the new trend in the banking and financial sector that has improved customers’ quality of life.

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