By Andrew Doyle, CEO, NorthRow
Digital transformation, the adoption of technology to establish new (or improve existing) processes, has changed the way companies operate, communicate, and interact with their customers.
In fact, the impact of digital transformation has been so great that according to a report by McKinsey, it can generate as much as a 20-30 percent increase in customer satisfaction and economic gains of between 20 and 50 percent while improving employee and customer experiences significantly.
So digital transformation can undoubtedly bring widespread benefits to all businesses, but none more so than those operating within the regulated space, particularly financial services. These businesses are under huge scrutiny from regulators to ensure they are doing everything possible to protect their customers from incidents of fraud and financial crime and face hefty fines and massive reputational damage for failing to do so.
Yet these same industries are known for being change-averse and slow to implement digital solutions. According to data from the Digital Banking report, as many as 41 percent of financial institutions say they have only partially deployed digital transformation initiatives and 27 percent have only managed to execute a limited deployment. Data from McKinsey also shows that large banks are typically 40 percent less productive than digital natives.
So how can digital transformation help transform regulated industries and why does it need to be accelerated?
Competitive advantage
The banking and financial services industry in particular is being transformed by the emergence of a completely digitally-driven market, where customers expect immediate access to financial services and solutions from their own devices. Whether transferring money or setting up new accounts; the desire for quick, effortless access to financial products and services is at an all-time high.
Banks and financial service providers therefore have to embrace digital transformation to remain competitive and meet the evolving needs of their changing customer base who expect a seamless and exclusively online customer experience. As a report from EY states: ‘The maturity and sophistication of digital capabilities will increasingly differentiate financial institutions from competitors, replacing the traditional drivers of profitability, scale, history, and brand recognition.’ The same applies to other more traditional and regulated industries including property and insurance.
The bottom line is that digital transformation will help businesses grow and succeed, largely due to the fact that customers now expect fast, seamless and convenient solutions from their smartphone. If companies cannot provide this level of customer experience, they will lose out to competitors that can.
Enhanced compliance
Manually completing customer onboarding and client checks which are required across all regulated industries, particularly at a high volume, are both cumbersome and open to human error. Digital interventions speed up the process hugely, are more accurate with better audit trails than their human counterparts and ultimately result in higher levels of compliance. It is no wonder regulators now expect to see digital solutions in place to counter the risk of financial crime and fraud.
But being compliant goes beyond the onboarding process. Across regulated industries, customers and clients must be continually monitored and not doing so leaves businesses unprotected, open to risk and unable to meet their regulatory obligations, for which they can be heavily fined.
This can be a very manual and resource-intensive process, but digital transformation automates it, saving companies huge amounts of time and resources, while reducing the risk of human error and non-compliance. This is especially important when you consider that, according to data from GlobalScape, organisations lose an average of £3.5 million in revenue due to a single non-compliance event.
Operational efficiencies
With fierce competition across most industries and business costs rising, companies are increasingly looking to become more productive with less. Automating processes, streamlining workflows, and implementing digital solutions can significantly reduce manual errors, save time, and massively improve overall operational efficiency.
For example, traditional anti-money laundering measures are often very manual and labour intensive, requiring time-consuming checks and verification processes. Conversely, the right technology can automate many of these laborious tasks, reducing the need for large compliance teams and minimising the risk of human error. This enables compliance professionals to focus on the areas of their compliance strategy that require their expertise and input the most.
More widely, digital transformation and technology adoption enables organisations to allocate resources more effectively and focus on more strategic initiatives that drive revenue.
The future
While financial institutions and other regulated industries including property and insurance have typically been more adverse to the process of digital transformation, they can no longer afford to be.
Large-scale digital transformation by its very nature is not easy, and so it is not surprising that many regulated businesses have struggled. However, it has now become a necessity when it comes to enhancing the customer experience, streamlining compliance practices and driving company-wide efficiencies. There is no looking back.
