Business

Digital Transformation 2.0: Don’t Waste Your Money

Exadel Financial Services Team

February 21, 2023

#Banking & Finance #Financial Services

Digital transformation is no new phrase in the financial services industry.

Accelerated by the pandemic, digital transformation (DT) has been a topic of focus for businesses for several years now. As the relevant technologies have become more advanced, we are now moving into the era of DT 2.0 where businesses are expected to not just embrace but master digital services and resources.

In this article, we are discussing the rise of digital transformation 2.0 and how financial service providers should approach this new era. The key to success in the coming years will depend on how well a business utilizes and optimizes the relevant technologies, such as cloud computing and AI. 

Keep reading to learn five essential questions to ask when assessing your company’s current standing in the digital transformation space.

What is Digital Transformation 2.0?

Digital transformation 2.0 — or DT 2.0 for short — is the next phase in the technological development of business infrastructures. For the financial services industry, DT 2.0 represents an expansion of the scope of tech-based resources and applications to establish a more digital-centric business model.

DT 2.0 is the natural evolution of the digital transformation trend that has taken the financial services industry by storm over the past few years. While DT 1.0 focused on enhancing operational efficiency and capacity, DT 2.0 hones in on integrating technology into all parts of a business.

In general, DT 2.0 can be divided into five main pillars:

  1. Cloud Computing:

    The cloud played a vital role in DT 1.0 and continues to be a key player in DT 2.0. While DT 1.0 focused more on cloud migrations, DT 2.0 pays closer attention to how well each business is utilizing the cloud and all of its capabilities.

  2. Artificial Intelligence:

    Artificial intelligence (AI) and machine learning (ML) are key components in DT 2.0 for developing an optimized digital business system. AI and ML provide essential support for many critical business tasks, from client onboarding to risk management.

  3. Exceptional Operational Efficiency:

    With DT 1.0 now a thing of the past, businesses in the financial services industry are expected to have a clearly-defined strategy for enhancing operational efficiency. DT 2.0 further reiterates this idea, emphasizing the importance of implementing technologies that reduce costs while boosting productivity.

  4. Advanced Data:

    Advanced data is at the core of DT 2.0. While DT 1.0 enabled businesses to leverage data in new ways, DT 2.0 treats data as a crucial resource for all aspects of a business. DT 2.0 strives to ensure that data is unified and data stacks are modernized.

  5. New Business Value:

    Ultimately, DT 2.0 is all about driving new business value that helps financial service providers to maintain a competitive edge in the technological era. With the right approach to DT 2.0, businesses can greatly enhance the customer experience, offering better products and services to customers while also meeting new customer demands.

DT 2.0 & Financial Services: An Industry Outlook for 2023

In 2020, the world was rocked by the Covid-19 pandemic.

Businesses that had never considered establishing a digital presence suddenly had to adapt in real-time to technology-oriented systems and solutions. The financial services industry in particular had to evolve at a rapid rate to continue providing products and services to customers during a time when in-person business activities were severely limited.

As we venture into the new year, 2023 is shaping up to prove that though digital transformation was certainly a pandemic-driven trend, it is now a staple in any successful business strategy moving forward.

In October 2022, the International Data Corporation (IDC) released its Worldwide Digital Business Spending Guide. This report revealed that global spending on digital transformation is expected to reach $3.4 trillion by 2026, with a compound annual growth rate (CAGR) of 16.3%.

The report further states that banking providers are projected to experience a 19.4% growth rate in digital transformation spending over the forecast period — one of the fastest growth rates dwarfed only by the Securities and Investment Services industry, which has a projected CAGR of 20.6%.

As for which digital transformation investments will take the lead in the coming years, the report looked at more than 300 use cases and highlighted the following as the top uses cases to watch:

  • Innovate, Scale, Operate: Innovate, Scale, Operate is a use case that focuses on optimizing large-scale operations. It is expected to account for 20% of all digital transformation investments from now until the end of the forecast period in 2026.
  • Back-Office Support & Infrastructure: Back-Office Support and Infrastructure follow close behind, accounting for an estimate of more than 15% of total digital transformation spending.
  • Customer Experience: Customer Experience rounds out the list, projected to account for 8% of the total digital transformation spending over the forecast period.

Though not listed in the top use cases, Robotic Process Automation-Based Claims Processing is expected to be the use case with the fastest growth rate, with an estimated CAGR of 31.0%.

Invest now to make digital transformation 2.0 work.

Learn more

5 Key Questions for Assessing Your Current Digital Transformation Status

For financial services firms striving to keep up with DT 2.0, the first crucial step to take is to assess where your business model and infrastructure currently stand.

Here are five key questions for assessing your current digital transformation status:

1. Are You Fully Utilizing the Cloud?

As discussed, cloud technology is poised to play an even more integral role in DT 2.0.

Simply migrating to the cloud is not enough to remain competitive. Financial service providers must consider all of the capabilities the cloud has to offer and how they can employ these capabilities.

To begin assessing how thoroughly your business utilizes cloud computing, compare your current infrastructure against these three factors:

  • Customer Experience

    One of the top use cases for cloud computing in the financial services industry is customer relationship management (CRM). An optimized cloud approach should focus on tracking customer interactions, assessing customer preferences, and providing personalized services to your customers.

  • Fraud Prevention

    The cloud can be a powerful tool for detecting and preventing fraud. Your cloud-based infrastructure should have the ability to analyze large amounts of data quickly and accurately, allowing you to detect and address suspicious activity in real-time.

  • Data Analysis

    Along with assisting in fraud prevention, cloud-based data analytics can help in many other aspects of the business as well. Cloud technology can assist financial service providers in analyzing large quantities of data from multiple sources to create a unified data experience.

2. What Else in Your Business Needs to be Moved or Re-Developed?

Once you have a clear outlook on how your business is utilizing the cloud, you can then assess what parts of your business need to be either moved or re-developed.

For instance, let’s say you migrated your CRM to the cloud during DT 1.0 but failed to develop the proper channels for human intervention within this cloud-based CRM. This could be a priority for re-development in 2023, as the customer experience is impacted by both technology and human interactions.

Taking the time to go through each department of a business and assess how well its current systems and infrastructure are functioning is key. This will help you determine what to focus on first, be that migrating more departments to the cloud or altering current cloud infrastructures to be customized to your needs.

3. Is Your Business Using the Right Methods in the Right Time Zones?

To succeed in the era of DT 2.0, having access to the right development methods and talented support teams in your time zone is critical.

In terms of methodology, the vital methods to adopt are DevOps and Agile.

DevOps focuses on unifying development and operational teams to ensure maximum business efficiency and productivity. Meanwhile, Agile is a software development methodology that focuses on delivering value to customers at greater speed and with greater continuity.

Both of these methods go hand-in-hand with cloud technology. The cloud enables both DevOps and Agile to achieve optimal developmental results within a financial services business model.

4. Are You Optimizing Your Use of AI and Data Analytics?

AI and data analytics offer powerful benefits — but only if they are properly employed.

Both of these tools can help immensely to enhance aspects of a financial service provider’s infrastructure. When assessing your use of AI and data analytics, key factors to consider include automation, personalization, and fraud prevention.

Overall, your AI and data analytics should provide you with a distinct advantage that enables you to get to know customers on a much deeper level while also maintaining a highly secure system.

5. Do Your Business Channels Create Loyalty and Confidence in Clients?

Take a broad look at your business and determine what digital channels you offer to clients.

Now, look even closer at each of these channels and assess how well each one inspires loyalty and confidence in your clients. As we have covered, many aspects of DT 2.0 can positively impact the customer experience when properly employed.

If your digital channels are either negatively impacting the customer experience or even not impacting the customer experience at all, it’s likely time for redevelopment.

Final Thoughts: Exadel Helps Financial Service Providers Achieve DT 2.0

Do you need help getting your digital transformation to the 2.0 level?

Exadel offers decades of expertise in the digital transformation space, as well as specialized knowledge in the financial services industry. We offer a wide range of services and solutions that can help you along your DT 2.0 journey, including:

  • Cloud development
  • DevOps services
  • Agile delivery
  • Data intelligence (AI, machine learning, and data analytics)
  • Digital experience (UXD services and data privacy)

Talk to the Exadel team today to learn how we can support you through DT 2.0 and beyond. We help you compare your current business model to the current market and develop a DT 2.0 strategy that gets you ahead of the competition.