How Digital Transformation in FinTech is Shaping the Future of the Industry

Digital transformation has become a disruptor in almost every industry and fintech is no exception. The introduction of digital technologies has made the sector more customer-centric and technologically relevant.

By offering services digitally, financial organizations can effectively deliver the experiences their stakeholders and end-users expect. They can also expect to see growth in employee satisfaction, customer engagement, and business innovation. Fintechs can also work faster and more efficiently to better compete in the marketplace. 

In this article, we will discuss how digital transformation is accelerating changes in the fintech sector and redefining customer experience with its exceptional benefits. So, let’s get started!

Rapid Growth in Fintech Brought by Digital Transformation

While we know that the financial services industry has a traditional perspective and takes time to adapt to innovation, the pandemic has created a different picture. It has accelerated tangible change by adopting rapid physical and digital transformation, which requires the fintech industry to meet the challenge of equipping businesses with powerful computing systems. 

Changes can also be attributed mainly to the rapid change in consumer behaviour and new emerging patterns set by the clear will of cash-less and contact-less activities.

Some stats below describe the rapid adoption of finance digital transformation.

• According to Statista, the share of the population using digital banking in the United States is set to rise to 65.3% by the end of 2022 from 61% in 2018.
  
• According to Forbes, just 14% of the banks that are advancing through their digital transformation in FinTech have adopted machine learning tools so far.
• The digital transformation market is expected to reach $3.3 trillion by 2025, at a CAGR of 23%.

How is Fintech Digital Transformation Making SMEs Efficient?

If you want to keep your finance firm competitive in the industry and meet consumer demands, you must implement digital finance initiatives to match the stride of today’s innovation. Keeping that in mind, here are the key benefits of digital transformation in financial services:

Greater lending flexibility

In the current system, traditional lending models make themselves ineffective because they are not built to scale designed to measure, and therefore, seem to impose a barrier on SMEs to earn money. Legacy systems are more expensive and there is a lack of flexibility because most of their operations are not automated or paperless.

This is where a cloud-based lending approach can make a difference. Createing an application programming interface (API) that will integrate seamlessly with asset systems and provide an awesome and sustainable digital model that can drive a well-designed lending solution.

Also Read: How Sustainable Banking is Redefining the FinTech Landscape

Channeling digital fintech offerings

With the increasing pace of digital platform acquisition during the pandemic, digital payment platforms, digital wallets, and credit cards have seen a rise in demand. Additionally, SMEs and startups from across the globe have started taking advantage of the digital profits and loans available through simple, fast, and secure fintech solutions backed by robust infrastructure processes. With increasing consumer awareness and SMEs warming up to the idea of using digital finance solutions to drive their financial operations, the Fintech industry is poised to make the most of digital transformation. 

Processing data for operational efficiency

With digital lending platforms getting equipped with innovative features, such as video-based or social security-based and personal identity, financial consultants can easily access customer data and get their approval, ensuring better efficiency. Outsourcing Data Analytics services can help improve the understanding of customer portfolios to enable better credit processing. Another useful area where data can be used is to detect fraudulent detection, where customer behavior is recorded and used to analyze potential fraud.

Simplifying complexities

In this competitive financial landscape, it’s crucial to make online processes highly secure, simple, and effective. And this is where digital transformation in financial services comes into play. Advanced digital solutions not only simplify the complexities of the financial sector but also make processes more customer-friendly for users. For instance, a feature-rich fintech application can serve many purposes while bringing automation into the processes and enhancing customer experience. Thus, digital transformation in the financial sector is a must. 

[Also Read: An Entrepreneur’s Guide on Outsourcing Digital Transformation]

Digital Transformation Trends in Financial Services 

Among all industries affected by the pandemic and changed by the digital transformation wave, the finance sector experienced one of the most drastic changes in its transformation. With fintech being one of the industries dependent on manual work and person-to-person contact, the road to fintech digital transformation has been a new journey for this sector. The evolution of digital transformation in the fintech industry has become a business imperative to improve customer experience through the development of new products and services.

On that note, below are a few fintech trends that are revolutionizing the future of this sector:

Growing enterprise agility

After numerous experiences gained from the previous financial crisis, an organization’s ability to expand its agility has become a vital trend in the industry. However, to support the type of constant advancement and improvement that shapes the foundation of agility, financial organizations need quick, reliable access to growing amounts of information without making tedious manual work processes.

Increasing mobile banking

The worldwide pandemic has seen customers rushing to mobile services for their financial requirements and accelerating digital financial transformation in the banking industry. While mobile banking is not a new concept, according to Fidelity National Information Services (FIS) there was a 200% rise in new mobile banking registrations in April 2020 as the first lockdown was imposed. Mobile banking traffic rose 85%, thus increasing the need for digital transformation in banking industry.

The universal utilization of smartphones in our day-to-day lives has increasingly shifted our choice to digital banking for everyday banking services like electronic bill payments, shared payments, and instant transfers. Deloitte claims that 72% of people already access their primary bank through their mobile phones.

Big data for driving innovation

The financial sector has already realized the potential of big data analytics. Financial institutions and banks are now thinking up new ways to market their services and use big data to offer more personalized services to their customers. One of the most crucial ways the fintech sector will be able to leverage the hordes of consumer data is to use it to train ML algorithms to automate their processes, thus saving the staff hours of work.

Mobile pay utilities

A decade ago, there was a time, when mobile wallets were a totally new concept to people. With time, the methods of putting away riches and making payments are also changing. Mobile wallets have become the rule of payment. Be it merchants, shopping malls, and other sellers, they like to utilize mobile payments over traditional cash and checks.  Other than that we also have “Buy Now Pay Later” apps like Tabby that offers the users great convenience to make purchases and pay later. Know more about the cost to build an app like Tabby. All thanks to comfort, security, and ease of availability offered by mobile wallets that provide a route to digital development in the finance sector over the years.

Using RPA for streamlining operations

Financial institutions are under immense pressure to optimize their costs, generate higher ROI, and boost productivity. RPA has become their saving grace already driving greater efficiency and increasing productivity business-wide. 

RPA helps streamline businesses by automating repetitive and manual office tasks usually carried out by bank staff. It also helps lower down common errors and inefficiencies. According to Gartner, around 80% of finance leaders have implemented or have plans to implement RPA. Thus, RPA is playing a major role to bring digitalization in the finance sector.

Challenges Faced in Fintech Digital Transformation

The first challenge the fintech sector faces is how to present investors and other stakeholders with a clear view of their proposal, especially if their offer is not in a certain way in the existing markets, and is not allowed by a certain number of customers. These difficulties present challenges in raising funds for commercial investors. These participants will want to see clear evidence that fintech digital transformation is innovative, capable of measuring and mitigating its risks as much as possible.

Fintechs face a major hurdle in building relationships and trust within clients working with traditional financial services providers. They need to fight the myth that their new invention calls for security and data management.

Fintechs need a very supportive control framework that aligns boundaries, to be able to scale globally with minimal collisions. This calls for initiating the process of making the fintech business financially resilient.

Another major digital transformation challenge comes in the form of international action; 95% of Fintech firms failed when trying to scale up. The reason for this is that Fintechs are failing to operate beyond regional and national regulatory limits, and reach customers at critical times.’

How Appinventiv Helped Asian Bank to Digitally Transform its Business?

The Asian Bank app required a solution to offer core advanced wire transactions with crypto buying and selling. The app also needed support for wallet recharge and payments using cryptocurrencies like Bitcoin and Ethereum. 

Appinventiv’s primary objective was to widen the Asian Bank’s app horizon for the use of cryptocurrencies. We started by designing a central ledger to maintain transactions and further incorporated a system that supported both FIAT and crypto user fund’s identity. 

By overcoming the biggest challenge of syncing all third-party solutions into an existing app, Appinventiv offered Asian Bank a core banking solution.  The results? The app currently has more than 250k+ downloads and 50k+ cryptocurrency transactions. 

Conclusion

We hope this article was helpful in understanding the various aspects of digital transformation initiatives in the fintech sector. Every organization must eventually make digitalization a strategic cornerstone if they want to remain competitive and better serve their constituents.

Also, if convenience, scalability, and security are your top priorities, then implementing digital transformation initiatives is a smart move.

In case you want to start your digital transformation journey, or need help mid-way, contact our experts. They will offer top-notch digital transformation services and guide you through the entire process in your digital transformation journey. 

 Our experts will offer top-notch digital transformation services and guide you through the entire process in your digital transformation journey. 

FAQs

Q. What is FinTech digital transformation?

A. FinTech digital transformation is the integration of cutting-edge technologies such as AI, blockchain, and big data into financial services. This modernizes operations, boosts customer experiences, and increases efficiency by automating processes, personalizing services, and enabling real-time transactions. The goal is to streamline financial operations and drive innovation, transforming the financial industry.

THE AUTHOR

Saurabh Singh

CEO & Director