Over the past two decades, the global financial services industry has been developing at a rapid pace. Today, financial services and insurance are among the frontrunners in digitization. Financial institutions need to come up with a wide range of investment strategies and instruments to cater to rising demand and cater to their clients’ needs in a better fashion. In such a complex environment, most organizations are digitizing their back office operations, including conversion of document to electronic format.
Why Financial Institutions are Adopting Digital Technologies
Customer trust and engagement are the ultimate goals of financial institutions. Techniques such as leverage analytics and data analytics are usually employed to gain insights on customer preferences and needs. Innovative techniques can deliver the desired results only if data is readily available and in digital format. Financial institutions have adopted digital technologies mainly to address the problems created by legacy based back office systems. As per a recent report, back office systems that continue to be legacy-based pose several issues
- Inefficient manual and paper based processes
- Maintaining legacy systems consumes 90% of the technology budgets
- Outdated back office operations negatively impacts the customer experience
- Manually intensive processes
- Increased labor and maintenance costs
Manual processes make bank processes vulnerable to errors and increases the cost on rework, affect the ability to launch new products rapidly and cause delays in response time.
Changes in industry trends and market conditions have shaped the strategic direction and the need for digitization in the financial services industry. Researchmoz recently released a report ‘Digitization Trends in the Financial Services Industry’ based on the analysis of expert opinion to identify the key factors and objectives driving organizations towards its adoption in 2014. It also examined executives’ viewpoints on preferred digital technology for back-office operations and evaluated the budgetary allocations for digitization over the next two years.
- In the financial services industry, cost reductions and improvements in customer service and engagement are key factors driving digitization
- Many organizations are implementing or planning digitization on their own
- Business process management is the most preferred digital technology for back-office operations
- Revenues from value-added services are projected to increase by 10.5% over the next two years
- Asia and North America will show greatest advances in digitization over the next two years
Digitization Helps Regulatory Compliance
The banking industry faces major regulatory challenges. Regulatory scrutiny is increasing and banks need to respond to this and provide accurate reports on risk exposure. Paper-based systems make this difficult as they are complex and lack flexibility. Failure to comply with regulatory requirements can lead to loss of trust customers and regulators. Digitization simplifies document storage, search and retrieval, helping financial institutions to effectively manage, track and report on regulatory compliance.