Digital Transformation in the Finance Industry – 7 Key Insights

Digital transformation in the finance industry is well underway – it’s been going on for no less than 50 years. But what does it take to build a winning digital product in finance today?

The finance industry has been a leader in digital transformation since as far back as the 1970s. In fact, it’s one of the most mature sectors in terms of utilizing digital technologies. Despite this, when people think of financial institutions, the first image that often comes to mind is one of complex, outdated enterprise systems that prioritize functionality over user experience.

This association is not necessarily bad, as when it comes to money, people want a feeling of stability and security. However, in today’s rapidly evolving market—it’s no longer enough.

In recent years, fintech disruptors, such as Square, Wise, N26, PayPal, and even AliPay, have injected much-needed innovation into the market, snapping the industry from a long dream. These companies have proven that financial services don’t have to be dull and difficult to navigate. Instead, they can be engaging, intuitive, and as user-friendly as Netflix.

The success of these disruptors has pushed more traditional financial institutions to rethink their approach, recognizing that consumers now expect financial products to be as simple, personalized, and frictionless as the other digital experiences in their lives.

So, what does digital transformation in the finance industry look like today? We bring you seven experience-based insights to help you build a successful financial product or update an existing one.

It seems that we have slowly passed the peak of the “there’s an app for that” trend in the digital landscape. A couple of years ago, it didn’t matter if you were a bank, a flower shop, or a hair salon—you couldn’t exist in the market without a mobile or a web app supporting your business.

But things have changed. People are growing tired of the overwhelming number of apps they need to manage for different purposes. Consumers are becoming more selective, setting limits on the number of digital tools they are willing to use for a single task.

Take the banking sector, for example. Many financial institutions still offer separate apps for retail users, corporate accounts, investments, loyalty programs, and, especially in the EU, mobile wallets for PSD2 SCA transactions. These services are often spread across multiple platforms with different user interfaces, separate login credentials, varying fees, and inconsistent user experiences. It’s not an ideal situation for the users.

In response to this, the industry is starting to move in the direction of digital consolidation—integrating multiple apps and features into a single, centralized app. And this time, the focus is on simplicity, ease of use, and delivering a seamless user experience.

Revolut is a prime example. Over the past few years, they’ve introduced flexible savings, joint accounts, stock and crypto investments, eSIMs, insurance, and much more, all within a single app. It’s easy, it’s simple, it’s in one place – and people love it.

A digital product portfolio can be consolidated to some extent, as described above, but sometimes, the same services need to be available on different channels. Maybe we can’t have a single app for everything, but we can offer a unified experience.

Don’t you just hate it when you need to use different accounts for different platforms to access services from the same company? And especially when it’s only to find that some crucial information is missing or not synced.

Thankfully, the financial sector has moved beyond this fragmented approach. Today, people expect a seamless customer experience across all platforms. For example, it’s now perfectly common to start a process on a web app and continue it on a mobile device without any disruption. Maybe you didn’t get to finish what you intended before leaving the office; maybe you’re commuting—it doesn’t really matter. You want to be able to log in to a different channel and pick up where you left off.

The omnichannel approach ensures that no matter where or how users interact with a service—whether on a website, mobile app, or even through customer support—the experience is unified and consistent. Remember the aforementioned security and stability? This synchronization is not only good for user convenience but also builds trust and loyalty with the brand.

In this day and age, most internet users are no longer surprised to see advertisements that reflect their recent search engine queries in their social media feeds. If we can have personalized ads, couldn’t we have personalized offers in digital finance?

People in their thirties or forties today have most likely been online for two decades and have used digital banking for at least half of that time. That is one significant digital footprint. More importantly, it’s a business opportunity.

New or existing products in the digital finance sector should use the data they’ve collected over the years to obtain insights into customer behavior. By learning about a person’s interests, experiences, and desires, they can tailor their products to each individual. For example, each January, you book a hotel in the mountains and buy a ski pass. What if, next year, your bank made you a personalized offer for travel insurance?

Experian is a perfect case in point. Over the years, they have evolved from a monolithic credit reporting company to a dynamic, data-driven financial organization that recommends loans, credit cards, and insurance tailored to individual financial profiles. Tools to optimize credit scores and manage household subscriptions put more control in the hands of consumers.

With the advancements in machine learning, obtaining valuable insights isn’t that complicated anymore. If there’s something AI excels at, it’s analyzing large amounts of data and making recommendations.

Many banks today already offer an AI-powered personal finance manager (PFM). While these tools are mostly still in the early stages, we should see some interesting developments in this space in the near future. For example, banking apps often sort transactions into categories like dining, travel, or utilities. What if, in the next phase, a PFM analyzes your spending in these categories and makes recommendations like switching your electricity provider because there’s a cheaper option for your needs?

If Max or Hulu can suggest which show you should watch next, a bank or an insurance company can also track your habits to make you an offer you can’t refuse.

Remember when chatbots were the next big thing, supposedly poised to replace all mobile apps? Then came the predictions that the entire financial services sector would migrate to blockchain, solving problems we didn’t even know existed. After that, it was crypto. 

Most recently, the buzz was all about AI, with claims that it would revolutionize every aspect of our lives and, among other things, render coding a thing of the past.

This happens in every industry: there’s always a shiny new technology that promises to disrupt the market. But often, the hype train derails and companies struggle to deliver on those bold promises.

The finance industry is very specific. Despite the waves of innovation, it operates within a framework that has been in place for thousands of years. Even the ancient Sumerians had a currency system and taxes. While digital transformation in the finance industry began over 50 years ago, we’re still fundamentally working with age-old principles, rules, and protocols.

Why is this so? Because these systems are battle-tested. They offer low risk, they’re trusted, and there’s a large, experienced workforce that can manage and maintain them. The finance industry isn’t resistant to change, but innovation tends to happen on a smaller, more focused scale.

Take neobanks, for example. They didn’t revolutionize the entire financial services sector but instead disrupted it by improving specific processes—like transaction execution. Whether this improvement came from blockchain, AI, or another technology isn’t what matters to the user. What matters is that today, people can send money faster and more cheaply than ever before.

The finance industry is a highly regulated one. After all, it deals with financial data, one of the most sensitive types of information. While meeting at least the minimum requirements for compliance is non-negotiable if you want to operate in this space, the legal framework doesn’t have to be a burdensome necessity. Controversial as it may seem, it can sometimes serve as a springboard for innovation.

Take the European Union as an example. While it’s notorious for its bureaucracy (Apple would certainly have opinions on that), not all its regulations are as pointless as the cookie policy.

A case in point is the 2016 PSD2 directive, which paved the way for open banking by requiring banks to open up their payment services and data to third-party providers. A year after the directive was transposed into the national laws of EU member states, there was a surge of new financial management products, allowing consumers to synchronize data from different banks.

So, rather than being skeptical of new regulations, it’s worth keeping a close eye on them. In the bureaucratic EU, the current hot topics in legislation are PSD3, DORA, and the Accessibility Regulation. They all impact financial services—whether directly, as PSD3, or through broader concerns like cybersecurity and accessibility that affect all digital products.

By keeping up with the regulatory requirements, you’ll be able to identify opportunities for improving existing products or launching something new. At the very least, preparing for compliance in advance can give you a competitive edge, as you’ll be able to roll out services faster than those competitors who may have been lazy about it. 

Whatever the type of digital product, focusing on the customer is paramount. And while most customers are end users with accounts, some of a financial institution’s customers are within its own walls – the executives, employees, and traders who make these organizations run. 

As mentioned earlier, finance is a well-established and highly regulated industry. When introducing a new product for internal use, it’s not uncommon to be met with resistance to change – a “we’ve always done it this way” mindset. But people working in a financial institution have the same high expectations of UX and functionality in their day jobs as they do at home. By improving internal processes, risk assessment tools, and trading platforms, it’s possible to bring more insight to decision-making, simplify and speed up workflows, and settle transactions faster and more seamlessly. 

Innovation teams within financial institutions – often working in collaboration with outside partners – are able to quickly bring new products to a market that’s increasingly being disrupted. As traditional companies learn how to work in agile and nimble ways, they level the playing field with fintechs.

Finally, your future digital transformation strategy can benefit from some out-of-the-box thinking. Or out-of-the-industry, to be precise.

As technology progresses and the world becomes even more connected, the walls separating the digital expectations between different industries are breaking. People exhibit the same patterns while using their digital products—it doesn’t matter if they are obtaining a car loan or buying groceries. We enjoy using apps that are fast, accessible, intuitively designed, and easy to use.

If you want to disrupt the market with your new idea, you need to look beyond what other financial institutions are doing. The finance sector is not special—we are slightly more careful about whom we trust our money with, but ultimately, we expect the same smooth experience as with any other digital interaction.

Looking outside the industry, you just might come across a feature you’ll be able to apply in yours. For example, the concept of gamification originated in education and fitness apps but found a great fit with the financial industry. Banking and investment platforms like Acorns or Monzo now use progress bars, achievements, and rewards to encourage users to save or invest more consistently, which does wonders for user engagement. 

Digital transformation in the finance industry is 50 years in and still going strong. However, today, it is no longer simply a matter of adopting new digital technologies.

To be successful in the digital finance arena of tomorrow, you need to be able to identify and respond to evolving customer expectations. Consolidating services into streamlined apps, creating seamless omnichannel customer experiences, or leveraging AI to offer highly personalized financial products can all be great tactics to meet that goal. 

At the same time, you don’t want to get swept up in every tech trend or hype cycle. Fintech disruptors didn’t disrupt the market through technology alone but used innovation to provide next-level user convenience.

All the operations in the finance industry continue to be underpinned by trust, stability, and compliance. By staying agile, embracing meaningful innovations, and keeping an eye on regulatory developments, financial organizations can offer the best of both worlds: cutting-edge products with the reliability that customers need.

If you would like to consult with an external partner for the next phase of your digital transformation initiative in finance, we’re here to help.