20 Sep 2022
Digital transformation for finance – what’s worth knowing?
Read on to learn:
- Why digital transformation in finance is important,
- Description of technology used in finance digital transformation,
- What finance digitalization brings to the table for consumers,
- The role of data in finance transformation.
Digitization of the financial sector is steadily advancing on several fronts. Every day companies are moving toward automating data and analyzing patterns to explain and understand consumer behavior. Analytical tools are improving the efficiency of planning and forecasting in finance and business. As finance continues to use the tools built and the algorithms that support it, the boundaries between data scientists and the accounting world are blurring.
Additionally, the issue of big data is becoming a recurring challenge in almost every sector. How do you go about digitizing your company’s finances? What are the digital trends? Which technologies can digitize finance?
Cognitive computing – a broad term for the digitization of finances
Cognitive computing is a general term for converting artificial intelligence (AI), speech recognition, and machine learning (ML). These elements work together to provide automated insights into the ever-growing amount of data we have. People can generate customized management reports in real-time using innovative natural language processing (NLP). AI the digitization of finance plays an integral part in speech, face and fingerprint recognition – it is combined with biometrics to elevate the security of the financial sector. For example, confirmation of a transfer and a PIN or SMS code is done using thumbprint verification, which significantly reduces the risk of fraud.
Learn how to plan digital transformation with profit
Blockchain technology in finance digitalization
Blockchain is a digital platform that stores and processes vast amounts of data securely, quickly and transparently. You can analyze finances using a distributed peer-to-peer network. Blockchain technology’s entries are immutable, meaning the ledger is verifiable and auditable. In the future, intelligent, programmable contracts that will revolutionize how music, work, movable property, and anything else can be bought or sold. Digitization of finance using this technology is already underway, and many banks and institutions use its advantages for their programs.
Automation of digital transformation in finance
The digital transformation of financial functions includes the automation of most business operations by moving to cloud-based enterprise resource planning (ERP) for functions such as:
- HR operations,
- Supply chain and cloud-based enterprise performance management for budgeting, forecasting (EPM), and finance.
Indeed, many financial companies are digitizing their operations and making automation easier. Organizations using a virtual work model must automate all processes, including document signing and collaboration. According to research, many companies have automated 80 to 90 percent of their operations since the Covid-19 pandemic.
Advantages of digitizing finance
In future financial functions, the technological capabilities of robots and algorithms will combine with the creativity and empathy of accountants. Innovative technology enables financial professionals to work faster and more efficiently. It’s no longer a battle between man and machine, as digitizing finance as AI can learn from accountants and accountants.
To proceed with digitization strategies, companies are making substantial digital investments and moving into virtual work and online customer service. Finance departments must evaluate whether these investments create or destroy the organization’s value. In the past, they would assess a corporation’s capital program annually to determine whether it was a success. Today’s business models need a more agile approach and shorter timeframes to analyze their operations. Experts suggest not waiting for annual or even quarterly reviews. Instead, the best players use a dynamic funding model, where they can quickly determine if a project is feasible, adjust and redirect funds to other vital initiatives.
Implementing a strategy to digitize your finances results in several benefits for your business, which includes generating a positive reputation as a forward-thinking contractor. The digital world is making new startups and fintech projects succeed rapidly through automation and smart contracts. However, adopting a digital transformation strategy does not replace human labor. A more effective approach to digitization is to think of it as an aid between the right technology and skilled teams. Successful financial digitization remains exclusive to organizations that have experienced teams with long-term goals who are implementing the most effective technological trends.
Digitizing finance for the customer
A large part of the digitization of finance that has taken place is about improving customer service, so the entire organization, including the finance department, must consider the end-to-end customer experience. Today, projects need to be evaluated not only through the lens of financial performance but also through customer experience, requiring finance departments to monitor consumer behavior through new unstructured data sources, such as social media.
Finance transformation and real-time data sets
Companies are increasingly using short-term reporting and forecasting instead of annual budgeting, which usually takes weeks or months. While financial reporting and planning have traditionally focused on internal matters, integrating external data such as consumer behavior, companies have seen significant improvements in accuracy. Finance departments ought to determine what additional services and solutions need to be provided to support an organization’s data analysis, planning and forecasting.
Necessary skills for a team conducting digital transformation
What are the talents a digital finance software development team should possess? It’s not only about the appropriate set of programming skills. Software engineers responsible for fintech digital transformations should have vast experience working with financial and business sectors. Knowing a client’s needs and having a thorough understanding of the financial industry are essential. Along with operating in an efficient framework and embracing changes as they occur, a digital transformation team needs to take active ownership of the whole process and establish communication channels with the business owner.
A digital transformation in the financial sector introduces more requirements than those mentioned above. As security remains the top priority for every development team participating in digital finance transformation, the best security practices should be used from the earliest stages of software development, focusing on writing safe, secure code. The best way to achieve that goal is to adhere to the highest security standards and be subject to examination based on SOC 2 Type II and custom audits from clients and business owners.
A digital transformation strategy is a must
Financial service companies increasingly rely on digital technologies to gain a competitive advantage. It makes sense to join the IT revolution and transform and implement forward-thinking changes that will lead to better results and greater efficiency. Automation, artificial intelligence, blockchain technology, in-memory computing and biometrics are techniques that are already in place in many companies. Implementing solutions like unlocking a smartphone with fingerprint and facial recognition, virtual ID cards, smart contracts in the blockchain sector and distributed ledgers are a must.
To stay competitive, you should be aware of these solutions. Finance teams are leveraging digital technology and digital solutions to increase their companies’ business performance. The broader transformation of digital finance, or the financial transformation of a single company, is made possible by elements such as digital tools, up to date business data, and the best financial leaders.
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