How Digital Transformation Is Driving the Fintech Industry

Rapidly advancing technology has effectively shielded several core industry sectors from the adversities of the pandemic. Many enterprises have integrated digital transformation solutions to minimize their losses and optimizing processes. As social distancing and temporary lockdowns have become new norms across the world, every industry has to transform core processes.

Startups, SMEs, and even established enterprises have to reorient their strategies in line with new standards and changed customer expectations. Talking about the fintech sector, lending companies or loan management firms have to adapt to a digital ecosystem for various processes. In other words, it is necessary for them to integrate a customized loan management solutions to provide a digitized experience to their customers.

Before studying the ways through which digital transformation can drive the fintech industry, here are its key benefits for the sector.

  • Increasing enterprise agility
  • Improving customers support and services
  • Enhancing collaboration
  • Improving risk assessment
  • Increasing operational efficiency
  • Enhancing lending flexibility

Thanks to digital transformation solutions, fintech has not remained limited to startups. It also compels large, well-established enterprises to innovate for remaining competitive. As financial services are getting digitized, various BFSI organizations tend to simplify processes through automation. Along with this, digital transformation enables the BFSI sector to render a personalized customer experience.

As per IDG Digital business research, out of the top three industries that have adopted digital-first business strategies, financial services remain second with a 93% adoption rate.

Let’s go through the key effects of digital transformation in the fintech sector. It shows the growing importance of digital transformation in the financial industry.

Five Ways Digital Transformation Drives the Fintech Industry

Changing Expectations

This pandemic has brought radical changes in the ways we live, work, and spend. It has a direct impact on the customer’s shopping habits and preferred transaction methods. In such a scenario, the traditional model of transactions and legacy loan models do not work. The pandemic has brought a different narrative. It has exposed the financial fragility of SMEs. Their accessibility to finances is suddenly reduced. In this testing time, an open and transparent digital ecosystem remains useful.

Digital transformation in fintech sector has played a vital role in bringing quick transition from physical to the digital method. It makes the sector ready to accept the challenges with an innovative approach. The finance sector can offer cashless and contactless operations with the help of advanced digital solutions. The sector can offer excellent experience while meeting the rapidly changing consumer behaviors.

Here are the major pain points addressed by digital transformation solutions.

Pain Points of Legacy Models

Traditional lending models remain inefficient because they are not scalable. These models act as a barrier for SMEs to access finance sources. Also, legacy models are not as cost-effective as advanced lending models that require no middlemen or more resources.

These days, fintech companies follow a lean operating model to cut costs and reduce the dependency on resources. Also, the traditional model cannot give flexibility as most of its processes are manual and involve paperwork.

Unlike this type of model, a cloud-based, online lending mechanism has everything to save the finance company’s time, money, and resources.

Though digital transformation is an ongoing process, the BFSI sector can consider building an API (Application Programming Interface)-based architecture. It can be integrated seamlessly with legacy systems and provide a scalable digital solution.

Data Processing

Digital lending platforms have some innovative features including video-based or social security-based Know Your Customer (KYC) and personal identity. It enables finance companies to access the customer’s data easily as and when necessary. Also, it helps account aggregators to ensure due diligence for various processes.

Lenders can make the most of digital transformation solutions by getting an improved understanding of customer portfolios. It helps them process loan applications quickly and effectively.

With this, data analytics and ML can take the security of financial organizations to a new level by identifying any fraudulent transactions in advance. Both these concepts are useful for fetching useful insights like customer preferences and credit history.

Financial organizations can bring customized products in the categories of credit cards and loans based on this data. In a way, more customization and improved customer experience are the outcomes of optimized data processing.

Fintech Platforms

Digital payment solutions are getting mainstreamed rapidly worldwide. With an increasing spike in the adoption of digital platforms adoption during the pandemic. Digital payment platforms, eWallets or digital wallets, and credit card-based platforms are in vogue.

It is possible that various startups and SMEs based on the fintech concept will come in the future. These firms will leverage the benefits of digital transformation and make the loan process quicker and easier for their customers. Also, customized fintech solutions can enhance security and ensure that the process passes through the prevalent standards.

With higher consumer awareness and more SMEs are using digital transformation solutions, it is fair to mention that the fintech industry is getting ready to make a huge leap. We can certainly expect that new innovative ideas based on the fintech concept will prevail in the coming years.

Simplifying Complexities

The BFSI sector is thriving rapidly in the world. In this turbulent time, it is necessary to make online processes highly simple, secure, and effective. Here, digital transformation comes into the picture.

Advanced solutions not only simplify the complexities of the financial sector but also make processes more customer-friendly for users. Think of a feature-rich fintech app. It can serve many purposes while bringing automation into the processes and improve customer experience.

Be it banks or insurance companies, or even microfinance institutions, digital transformation in the fintech sector can benefit all types of finance companies.

Concluding Lines

The adoption of digital transformation solutions is the need of the hour for every sector and the BFSI sector is no exception!

The changing fintech landscape demands more penetration and improving customer experience. Even in the post-pandemic period, digital transformation in fintech will save costs and improve efficiencies of various financial processes. In a nutshell, digital transformation is here to stay for the fintech and other sectors.

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Author: Robert Jackson

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