Digital Transformation In Financial Services: Putting Customers First
Today, customers want an interactive digital experience that is quick and seamless from beginning to end. That experience in the financial services sector should be no exception.
by Emily Tran
Enterprises have shifted their focus from just the product or service to the entire customer experience. A customer’s experience encompasses all aspects that make up a person’s perception of the company—initial impression, follow through of sale, troubleshooting services, and follow-up on service. What does this mean for financial services?
Traditionally, financial services organizations have been overwhelmingly pen and paper-based. Over the past decade, there have been small steps towards the integration of technology beginning with the digital revolution that is e-signatures (part of what Aragon calls basic digital transaction management). Financial services leaders have since realized that by avoiding change, they will likely put their organization at a high risk of becoming obsolete with the growing number of FinTech and tech financing firms. In this blog, we will explain the need for digital growth within the financial services sector, what’s holding it back, and how to accelerate it.
Transitioning Out Of The Paper Era: DTM Is An Imperative
The introduction of electronic signatures was a catalyst for digital change in the financial industry. It suggested the potential for better security and detection of fraud all in rapid time—and a huge upgrade to a seamless customer experience. By no surprise, paper transactions began to decline and in business as a whole, we’ve begun to edge closer to the end of the paper era. But we’re not quite there yet, especially in industries such as financial services, which have historically been slow to change.
In order to remodel the current customer experience that is reliant on long hours, handwritten forms, and a lack of transparency, financial service leaders who have not changed the way they manage content need to do so quickly. Digital transaction management (DTM) refers to a set of tools that help enterprises manage their transactions without paper. This market has been and will continue to evolve quickly with the advancing technology applications. Aragon advises financial services leaders to get started with basic DTM (e-signatures) first, followed by advanced DTM (workflow and content automation) to fully automate their document processes from beginning to end.
Workflow and content automation (WCA) is a new enterprise software category for automating workflows and producing intelligent documents. Leveraging WCA can allow for enhanced customer journeys, faster time to revenue, and several other critical benefits. This form of automation represents a shift in the market away from the human creation of documents. For financial services leaders, this could decrease the time of current manual processes while increasing the accuracy and speed of the operation.
Business Vs. IT
If financial services have such a great need to be digitized, then what’s holding it back? There are several factors that could be attributed to this lack of change. One problem could be a disconnect between IT and the business, a common issue plaguing organizations in all types of industries. If your firm does not have direct lines from the IT department to your company’s executive board, then IT might very well believe they are solely an enabler to business but do not actually make up the business in any way. IT and business solutions are kept separate when in fact, they are co-equal branches and should inform and support one another. Significant, successful change cannot happen if IT and business leaders don’t work together.
This disconnect leads the second challenge: lack of change management. Change management refers to the discipline that guides how to prepare, mentor, equip, and support people to successfully adopt change and drive future success. There are three levels of change management—individual, organizational, and enterprise.
Individual change management suggests that employers need to understand how their employees react to change and how to adequately support them. This first level focuses on the transition of people, which focuses on the timing of teaching new skills/behaviors and what best helps with adoption of new technologies, company goals, or mission statements.
Organizational change management takes into account a larger audience and pinpoints the different groups of people that need a customized plan to ensure that change is effectively embraced and applied.
The third level, enterprise change management, encompasses both individual and organizational by embedding a strategic plan that reacts well to society and technology change with less productivity impact.
Lastly across industries, financial services struggles with system integration issues that deal with regulatory compliance. Most financial service firms do not want to take the risk of violating these regulations because they will often result in legal punishment or federal fines. However, in today’s age, financial services can no longer afford to stay scared and resist digital change. So what’s the solution?
Aragon advises clients on how to choose the providers that are right for their business, including the providers that will meet stringent regulatory requirements. Many major providers of technologies such as DTM are aware of these regulations and provide detailed information on how they are in compliance. Aragon has also noted in its research (see The Aragon Research Globe for Digital Transaction Management) providers such as eOriginal, who is one of the go-to and trusted providers for DTM solutions in the financial services industry.
New Technologies Are Paving The Way For Digital Innovation
Banks and financial services organizations everywhere are well aware that within the next 5 years, most people could be doing all their banking through Amazon, Google, and PayPal—and perhaps even Facebook. This is why enterprises are looking to accelerate their growth with new applications that keep them relevant in the market. Ultimately, clients want to be able to readily access, track, and review all documents with ease. One of the first investments that have been appealing to customers and transforming the way they manage content is protection through electronic vaulting.
Electronic vaults provide tools for lenders and various services to manage and protect the authoritative copies throughout their lifecycles. By committing to electronic vaulting, banks have been allowed to preserve their chain of custody and legal control through encryption of security layers within the system. The three built-in layers are provenance, transferability, and integrity.
- Provenance allows access of authoritative documents to solely the owner of the loan/lease.
- Transferability creates a secure record of transactions to identify and locate authoritative copies.
- Integrity ensures that unauthorized changes are flagged immediately. Throughout all transactions, information and data are consistently maintained and tracked for privacy and confidentiality purposes.
Similar to the second layer of electronic vaulting, plenty of financial service firms have been looking towards investing in blockchain as another means towards digitizing their content. Blockchain is a shared distributed ledger that can record transactions between entities in a verified manner. What is most appealing to customers is that it is an open database that stays transparent to everyone and carries no transaction cost. In the financial world, blockchain suggests revolutionary changes in how insurances are contracted, stock exchanges are run, and loans are given. Blockchain does not replace the existing e-signature or electronic vaulting, but it does pose a potential threat due to its transformative potential in the use of a new technology called smart contracts. Smart contracts are a way to develop an enforceable contract that can be monitored, inspected, and enforced by all parties involved. This is an option that is both low-cost and unbreakable.
Today’s advancing technology and changing customer expectations have disrupted the industry and demanded the reinvention of financial services. We have moved out of the paper era and enterprises are now looking to deliver the ideal customer experience without pen and paper. By leveraging technology to better manage their content, business leaders will witness the growth in size, capabilities, and reach. Electronic vaulting and blockchain only scratch the surface of what AI and digital intelligence will soon bring to the field. Financial service leaders need to listen and adapt to customer trends and determine which technologies will improve the overall experience. Talk to an Aragon advisor to learn more about the digital transformation strategy best suited for you.