Digital Transformation in Finance – Need, Challenges and Opportunities for Professionals

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Digital Transformation in Finance - Need, Challenges and Opportunities for Professionals

 

We observe that today the business has become more complex and challenging on account of the permeation of ICT in all sectors of the economy. The pace of technology and the changes emanated from the technology have posed many challenges especially for the Financial Sector in the liberalized and globalized economy. In the recent past within two or three years, one can notice that the pace of technology is very fast and has changed the mindset of professionals, experts, scientists and so forth. Now, there is an imperative need cast on the part of every type of business organization to go along with the changes taking place not only in India but at the global level. As we all know that an economy is made up of many different segments called sectors. These sectors are comprised of different businesses that provide goods and services to consumers. One among these sectors is the Financial Service sector. In this sector, the digital changes are so dynamic and vibrant that Finance professionals have to acclimatize and familiarize with the digital changes taking place in banks, investment houses, creditors and supplier of funds, finance companies, real estate brokers, and insurance companies.

FINANCE TRANSFORMATION

Finance Transformation is a set of offerings that assist finance executives to assess their finance strategy and vision, and helps to design and implement change to their finance organization, process and systems to improve the overall value of finance. Digital transformation is a holistic approach to financial management that relies on the digital landscape and innovative technology. Enterprise digital transformation is about transforming the customer experience and meeting the customers’ redefined expectations in the liberalized and globalized knowledge era.

NEED FOR DIGITAL TRANSFORMATION IN FINANCE

Today digital transformation is the need of the hour. Digital Transformation in finance is now a realistic goal due to widespread availability of business data; teams’ ability to process large sets of data using accessible algorithms and analytic methods; and improvements in connectivity tools and platforms, such as sensors and cloud computing. Use of innovative technologies is driving and accelerating the exponential possibilities of digitalization and mandate business organizations to adapt to their respective business. The stimulus is often coming from the front-end of the business where digitization is completely transforming the way we work, live, and relax. Innovations in technology and management practices are creating new opportunities for the finance function to add value to the business. In the near future, financial transformation is expected to comprise of restructuring and implementation of the finance operating model, accounting and finance organizations, accounting and finance processes; financial capabilities, and re-platforming of finance and accounting systems.

Finance transformation has become more challenging in recent years on account of the following phenomena:

  1. The perceptible change in the mindset of consumers has warranted and mandated companies and firms to go digital.
  2. The pace of changes in technology has driven the business organizations to learn, adapt and adopt modern digital transformation. It is interesting to note that the average length of time that a company remains on the S&P 500 Index has fallen from around 60 years to closer to 18 in the last 50 years.
  3. A paradigm shift to digital and availability of wealth of modern technologies calling for professionals in the field of data scientists and data analytics made business more complex and challenging.
  4. Further, there is an enhanced necessity to make finance processes easy, simple, friendly, transparent and agile.

ACCELERATION OF INDIAN ECONOMY THROUGH PINTECHS – AN INDIAN PERSPECTIVE

India being one of the fastest-growing economies, FinTechsplatforms are scaling up at a greater position. Delivering a wide range of market opportunities for both innovative and traditional lenders, the new-age lending platforms have catered to a large segment of online banking customers. FinTechs have enabled transparency of financial requirements and services catering to convenient access eliminating the need to visit bank branches. FinTechs have offered quicker turnaround times on digital lending platforms than the Traditional system at banks. Expanding the existing capabilities into the Digital realm, FinTechs have accelerated the Indian Economy to get back to the growth trajectory.

While digital disruption in Finance is fast becoming an inescapable reality, the Deloitte’s 2016 Global Outsourcing Survey reveals that most CFOs remain grossly underprepared. Finance leaders today have metamorphosed as strategic co-pilots to the CEO and have the opportunity to play a lead role in shaping the digital agenda of the organization. Digital transformation of Finance holds the key to make this shift work toward a digital organization – as routine processes get automated and exponential technologies usher in the power of unmatched computing to support the judgment and decision-making roles of the CFO.

Digital Transformation in finance is now a realistic goal due to the widespread availability of business data; teams’ ability to process large sets of data using accessible algorithms and analytic methods; and improvements in connectivity tools and platforms, such as sensors and cloud computing. Use of innovative technologies is driving and accelerating the exponential possibilities of digitization and mandate business organizations to adapt to their respective business. The stimulus is often coming from the front-end of the business where digitization is completely transforming the way we work, live, and relax. Innovations in technology and management practices are creating new opportunities for the finance function to add value to the business.

In the Banking, Financial Services and Industry, during post-pandemic, customer on boarding across certain months has equaled that of the annual numbers noticed during the non-pandemic years. Sourcing new customers has also become easy powered by digital growth. As a result of the seamless customer experiences, transparent communication about services, and offerings, and the option to select the offerings of one’s needs, customer requests through digital channel has increased from 40% to 75%. Thanks to the convenience of trading online, the stock market has on boarded more than10 million customers this year so far. The share of mobile trading has reached 23.4%, emerging as the second biggest trading contributor.

In the insurance sector, consumers responded faster than the industry to the pandemic and the trend of digital transformation. There was an 80 per cent growth in online consumer searchin India for life insurance during the pandemic. The drive is being observed in small finance banks too. These banks traditionally followed a very high-touch model, withcustomers and bank managers interacting frequently. But now, these banks have decentralized their contact centres and introduced cloud-based contact centre’s. This has helped the banks engage with their customers better.

These trends in technology have driven Banking and FinancialServices companies to minimize their documentation and invest in training employees in digital services. The key here is to optimize internal processes through creating a Robotic Process Automation roadmap, automating processes to reduce dependency on humans, and creating a system- driven process, starting with operations and touching other bank functions as well. Multi-channel digital servicing through conversational bots and what’s App have also helped financial institutions.

DIGITAL TRANSFORMATION TRENDS IN INDIA

  1. Mobile Banking
  2. Big Data
  3. Mobile Applications
  4. Automated Wealth Mangers
  5. Fin Tech

CHALLENGES ENVISAGED

  • The finance organization of the future will look drastically different from the shape and from it exists today. Operational Finance will transform into Finance Factory, with fully automated transaction processing. While the Finance control center monitors the process performance, global process owners direct continuous improvement in the processes and teams..
  • Business Finance will drive deep data-driven businessinsight and foresight and integrate risk-intelligent planning models to support the business objectives and position Finance leaders as valuable business partners.
  • Specialized Finance will provide deep subject-matterexpertise, guidance, direction, insight, and advice throughspecialists embedded in the business.
  • Finance Enablers (People, Process, Systems) arerequired and accommodate digital technologies andenable operational, business, and specialized financeroles.
  • This transformation of the finance function will be poweredby the breakthrough technologies of Robotics ProcessAutomation (RPA), In-Memory Computing, MachineLearning, Natural Language Processing, CognitiveAnalytics, Internet of Things (IoT), and many others thatform the building blocks of a Digital Finance Ecosystem.

MEASURES ENVISAGED TO MEETDIGITAL TRANSFORMATION IN FINANCEBY ORGANIZATIONS

Now organizations are required to identify the type of skillsin technology required for the emerging global businessenvironment. It is the duty of the professionals to determinehow one can take advantage of the cloud and get the bestfrom it. Further, the smart organizations have to identity,recruit and develop people with analytical skills, digitalizecustomer experience and project management skills.

DIGITAL TRANSFORMATION IN FINANCE -MULTIPLE BENEFITS

Digital transformation is essential in the financial industry because it provides multiple benefits, as enlisted here:

Standardization:  With digitalization, the financial processes are set to follow the definite standard, leading to overall improved performance of the system.

Automated functions:  The adoption of technical tools aims to automate the processes that were performed manually till now. Automated services such as procurement orders, invoice generation, KYC verification, and money remittance have improved financial institutions’ productivity and efficiency.

Faster performance: Using Big Data analytics and other Machine Learning tools, processes like a budget prediction to finish month-end cycles within time become more accessible and faster.

Insight-driven functions:  Artificial Intelligence and Data Analysis aim to provide insights on the financial models based on the data collected.

CONCLUSION

India has done a phenomenal job on the infrastructure for banking and digital money. According to Mr. Dhiraj Bhandary, Partner at Deloitte India, India’s digital journey began when we adopted GST in the year 2017. He said that in the beginning of The Covid-19 Pandemic, the finance sector faced a complete chaos. But once things began settling down, the relevance of digital transformation hit the industry. The biggest challenge in bringing digital transformation in Indian banking sector is fulfilling the various needs of a diverse population. Indians also have trust issue with digital banking solutions. This may be because of lack of proper knowledge about the banking system. No doubt, the challenges emanated on account of digital transformation in Financial Sector have provided many opportunities for the analytical minded professionals.

The financial services industry is probably the most important sector of the economy accelerating the business leaders in terms of earnings and equity market capitalization. This digital pace has resulted in a higher proportion of project- related teams, more IT and technology-related job families, more data analysts, data interpreters and teams focused on the future to assist better decisions rather than reporting on the past. Taking a cue from the consumers’ preference towards digital, businesses have started to transform their core to adopt digital and define their digital transformation. Further, with the core businesses becoming more digitalized, finance function is not behind in adopting the digital trend. In fact, most of the finance professionals are looking to learn, adapt and adopt this change in their organizations toward digitalized. No doubt, these changes may purport to revolutionize the way an organization manages its financial function and the associated processes, internal controls and financial reporting.