Technological development of the most recent times has served as a game-changer for numerous businesses and industries. However, financial services have seen the greatest shifts and swings due to digitalization. This year once again proved the point that digital services are much more important than we thought, especially after the Covid-19 pandemic locked people inside their homes.
Hence, it is not surprising to witness digital transformation being prioritized by top managers at various companies. The accelerated pace at which financial services companies seek digitalization and technological revolution further increase client expectations. They expect to observe high levels of comforts in financial services industries, reduced costs, increasing competition, and of course, regulatory frameworks.
The long journey towards digital financial services
Let’s first define what we mean by digitalization. It is the long-term process of utilizing various digital technologies to implement changes to the business model of the company. These services are gradually shifting towards online presence instead of the traditional physical one. The digital businesses acquire new value-producing opportunities which creates a win-win scenario for the companies and their customers.
Online banking was a pioneer of digitalized financial services and has been increasing in popularity and usage since the very turn of the century. If in the past the service users were mainly tech-savvy young generation representatives, after the Covid-19 outbreak more and more people turned towards digital banking services. The limitations and restrictions that pandemics imposed on the global community have emphasized the essence of digitalization in a very positive and essential way.
However, banking is not the only large financial sector where digitalization strengthened its roots. In a trading world across numerous financial markets, the services are no longer delivered in a physical environment. Almost every single trader nowadays uses digital platforms to trade various securities, uses advanced technical indicators in Forex trading instead of manual calculations and complex formulas, and utilizes AI-powered auto trading algorithms. The digital trading platforms, online brokerage companies, e-wallets, and many other innovative digital services have proved that certain industries can work and operate fully online without a necessity to leave the house.
We have to also mention e-wallets and e-payment platforms and services that have gained immense popularity lately. If a few years ago we knew only PayPal as the sole reliable online payment platform, nowadays we are getting Skrill, Neteller, WebMoney, Bitcoin payments, etc. The range of these service providers is very diverse and covers anything from local and international transactions to currency exchanges and holding the money, or even cryptocurrency in a digital wallet. It is true that some of these platforms have witnessed considerable safety issues within the past few years, however, the security concerns were addressed seriously and they become more and more reliable to use.
Technologies behind the digital transformation
Numerous technological tools and approaches were used in the digital transformation of financial services including Artificial Intelligence and machine learning, cloud computing, data analytics, and the Internet of Things (IoT). All of them are products of modern technological advancement and it would be impossible to imagine the current digital finance sector without any of them. They allow the companies to adapt in an extremely fast-changing and dynamically moving environment.
Among the technological advancement that we mentioned above, the role of Artificial Intelligence has been significantly high. Its influence over certain sectors, such as retail banking, is immense, offering both standard and complex services such as virtual assistance services or customer profiling. The AI technologies are increasingly being used in fraud detention or fighting against identity theft in digital industries, as well.
In terms of cost efficiency and enhanced security, the cloud infrastructure has been a key player together with service automation. The lowered costs, more efficient human resource management, immense data processing, advanced security systems, and dozens of other benefits are brought by these technological innovations that play a vital role in the digital transformation of financial services.
The widespread adoption of information and communication technology tools has led to a high reliance on technology over the last few years, especially since the Covid-19 pandemic. This has resulted in the digital transformation of financial services, which allows customers to access more products and services at the click of a button. It has led to increased competition among financial service providers, which has resulted in newer, more technologically advanced products and/or services being launched.
This has been a benefit to customers. Customers face many challenges due to the digital transformation. digitization has, however, encouraging financial inclusion around the world, which is an important enabler of economic growth.
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