How did Financial Services change by Digital Transformation?

Payment security finance technology

The world and the internet are exploding with articles and discussions about digital transformation and how it has been catalyzed after the advent of COVID-19.

But, if you look at the development of digital financial services or the evolution of FinTech over the last decade, you would know that the Finance Industry initiated Digital Transformation long back and that Covid-19 has just cemented its success earlier than expected.

We are at a stage where people have started making jokes about digital wallets, such as “I spend money from my digital wallet as if they are paying for it”. Opting for smartphone payments, digital banks, and application banking is a normal thing for Gen Z.

Gone are the days when people used to maintain physical ledgers and when there were long queues to pay the taxes and huge files to manage your taxation documents.

The finance industry has experienced an extreme paradigm shift in the delivery of Financial Services App and since technology brings convenience, ease, and all-time access with it, the world has adapted itself to these changes with open arms.

If you look at the financial services over the years, the need for credibility and security brought with it tiresome processes and complex data infrastructure. With the introduction of technology, the industry can now finally declutter financial processes and services and provide easy access to these financial services.

Along with that, with the use of digital mediums, there are many new financial services being introduced in the market. Such is the impact of the digital transformation and evolution of FinTech that pre-covid, i.e. in 2018, the investment in the FinTech sector alone was USD 118 Billion!

To put things into perspective, traditional organizations and new finance start-ups are investing such huge amounts of money in digital financial services because:

Top 3 reasons Start-ups and enterprises are investing in FinTech because:

  • To deliver seamless banking and financial experiences to the customers
  • To introduce agility and innovation in the financial processes
  • To introduce new financial services in the B2C market

Also, organizations are not the only ones that are betting big on FinTech! Statistics prove that the customers are not just adapting to digital financial services but also promoting them. For instance, 65.3% of Americans have used digital banking services in 2022, and 38% of the total personal loans sanctioned in the US were channelled via FinTech platforms. (Source for all the above statistics).

Now that the customers are investing their time and efforts in FinTech, where can organizations invest their money to ensure seamless digital transformation and Fintech success? To help organizations make informed decisions, we have compiled a list of trends that are currently thriving in the finance industry.

1. Neobanks and digital financial services:

Neobanks, as the name suggests, is a completely digital bank that has no physical branches. These banks either have their banking license or collaborate with a traditional bank to comply with the banking regulations.

Along with that, all the traditional banking institutes are integrating technology such as mobile applications, web applications for net banking and other such technology platforms to provide digital financial services to their customers.

2. Innovative payment methods:

From the adaptation of UPI to the increased use of Digital Wallets Apps and the introduction of Wi-Fi cards or contactless cards for ATM users, payment methods are evolving every day. Not only products but the processes are also getting revamped with innovative financial services.

For instance, the Buy Now Pay Later (BNLP) services provided by various FinTech start-ups are changing the way people buy things and make financial transactions.

3. Introduction of analytics and digital experiences in insurance:

Although the pace of digitalization in insurance is slow because of its rigid policies, there are many digital trends being observed in the insurance sector as well.

The Neobanks are now decluttering the insurance processes and are providing seamless insurance from their applications without the need for human representatives.

Also, there are digital applications and marketplaces where people can compare various insurance schemes and choose the best insurance policy with informed decision-making.

4. Automation in accounting and taxation (continuous accounting):

With the help of robotics, Artificial Intelligence and advanced machine learning, organizations are digitizing and automating various accounting processes, which in a broader way is termed continuous accounting.

With benefits like real-time access, transparency in processes and integration of predictive analytics, continuous accounting is a revolution in accounting that is currently being manifested by organizations across the globe.

Apart from that, there are also platforms that are opted by governing bodies to digitize taxation processes and Digital Payment Mobile App, while FinTech solution providers strive to automate the taxation processes and provide seamless tax document management.

1. Need for cyber-security:

With the increasing digital financial services, the cyber threat to sensitive customer data increases with it. If you were to dive into the B2B financial services, the need for cyber security services in the Finance industry is now higher than ever. The world is not unknown to data breaches across the web.

2. Decentralized data structure and creation of digital data points:

Cyber threats are not just external; with the inclusion of so many human resources and complex processes, the leak of data can also be internal and thus, the Finance industry is now inclining toward Blockchain and decentralized ledger technology to manage banking data infrastructure.

Apart from that, there is also an industry trend to replace human representation with digital robotics to make the process seamless and to create digital data points that can generate untampered data for analytics.

3. Advanced analytics:

Talking about analytics brings us to the latest trend in the Finance industry and that is advanced analytics. Right from consumer behavioral studies to increased use of analytics platforms to understand customer grievance points, the use of advanced analytics in FinTech is increasing with each passing day.

4. API based banking:

To create a bridge between traditional banking and digital banking or to ensure that FinTech start-ups can collaborate with banking institutes to create new financial services while complying with the banking regulations, API based banking is into the trend giving way to Banking as a Service (BaaS) platforms and other such digital banking services.

Focus on the key areas of development to make your Fintech solution future-proof:

If you are to create a successful FinTech product, you need to focus on key drivers of the industry and they are:

  • Real-time and easy access to data
  • Convenience in the financial services
  • Completely customizable services
  • Decluttering the financial processes 
  • Delivering seamless customer experiences

Along with these drivers, what you need to succeed is a reliable technology partner that can provide you with financial custom software development services and create FinTech applications with FinTech app development services. Collaborate with a technology partner that can help you create innovative FinTech solutions that are flexible, sustainable and scalable.

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