Embracing Change – Financial Institutions in the Digital Age

Two important stakeholders in the Slovene finance industry, Matej Golob Matzele and Mitja Učakar, share insights on how digital transformation in the finance industry has revolutionized the way financial institutions operate and interact with their customers.

Can you imagine that up until recently, one had to visit a bank’s physical branch and get in line just to check their account balance? Today, interacting with our financial services provider via an app is second nature to us.

Digital transformation swept through all industries, and the financial sector is no exception. Knowing that it still is an abstract concept for some, we wanted to find out what digital transformation in finance looks like in practice today. 

To get these insights, we decided to ask those who’ve not only witnessed it first-hand but have actively participated in transforming a traditional business with the help of digital products.

Matej Golob Matzele and Mitja Učakar know digital finance

Matej Golob Matzele and Mitja Učakar are both important stakeholders in the Slovene finance industry. Matej is the Chairman of the Board of Modra zavarovalnica, the largest supplementary pension insurance provider in Slovenia, while Mitja is the CIO of the Slovene Export and Development Bank. Both have years of experience in leadership and management roles and have been involved in a number of digital transformation initiatives throughout their careers.

Since we were fortunate enough to host Mitja and Matej as panelists at our Business Breakfast event in Ljubljana, it was a perfect opportunity to ask them about the meaning of digital transformation, its implications, the role of traditional institutions in a market disrupted by fintech challengers, and changing user expectations that come with changing times.

Digitalization improves both processes and experiences

We know that digital transformation, in general, helps businesses, disrupts industries, improves processes, and increases efficiency. But how does it help a financial institution on an everyday, operational level?

“First of all, digitalization helps institutions adapt to client needs,” said Mitja. “It allows us to address those needs more efficiently and, by doing so, sell our products and services in a way that is convenient and simple for the end user. Technology enables us to manage clients in a way that would no longer be possible with a traditional approach.”

Matej pointed out that digitalization in the finance industry can be utilized at two levels  – it improves the customer experience as well as internal, back-office processes.

“Our customer-facing app enables us to have better interaction with our customers. We can adapt it to those who are used to the mobile-first or mobile-only approach,” he explains. 

In addition, heavily regulated institutions like Modra are required to maintain formal communication with their customers. Various types of reports and other documents must be sent out regularly, which is much easier to do with an app. Not only are there substantial cost savings in comparison to using traditional mail, but this way, users can easily find the documents they want when they need them.

According to Matej, digitalization can have an even greater impact on internal, back-office operations. This includes the tech architecture itself, ways of working, and optimizing processes.

“Processes are usually not that easy to change in a traditional industry like ours because we’ve been doing things in a certain way for a very long time. This is why this is even more important than the customer-facing part,” Matej concludes.

Meeting changing user expectations with digital tools

We have grown so accustomed to using digital tools to aid us in different aspects of our lives that we’ve come to expect a certain level of convenience when we interact with them. We want them to provide some additional value, save us time, and offer a smooth experience.

“With all the digital tools available today, we have the amazing opportunity to find out whatever we want immediately. The experience we are looking for is – I want it now. This also applies to financial services. We used to send out yearly reports about the balance on our users’ pension accounts. Now, they can access it on their phones at any time, and this is what most customers expect, said Matej. 

Leveraging the power of digital also includes developing a thorough understanding of the end user. Digital tools enable us to gather information and then utilize that information to offer personalized service.

“Today, the user expects the service provider to understand the context they are in. For example, a bank shouldn’t offer a loan to a customer if it knows that they are not eligible, nor if they have excess liquidity in their account. A bank has to use the information it has to approach the user with a product that addresses their need at the right moment,” Mitja explained.

Traditional institutions in an age of fintech

In the past years, we’ve witnessed the disruption of the financial services market with the rise of fintech challengers. There is now an abundance of fintech tools available, and traditional service providers are faced with serious competition that operates in the digital realm. 

However, according to Mitja, we shouldn’t be too quick to write them off. 

“In the beginning of the fintech revolution, some predicted that these challengers would drive traditional financial institutions out of business,” he says. “Now, a couple of years later, we know that we need to strive toward some form of coexistence. Fintechs are more advanced in the technological sense, but functionally weaker. They don’t know how to guide a more demanding customer through all the steps in the user journey. For example, they don’t offer loans or advanced savings options, or they do so in a way we don’t find familiar,” Mitja explains. 

Mitja emphasizes the importance of creating an outstanding customer experience. We need to embrace the user’s perspective and think about how we can help that person overcome their challenges by offering them something useful at a given point in their journey. 

This goes beyond a great user interface or just one product – we need to think about a whole package of services. For example, a banking app notifying the customer that they may be paying too much for electricity and offering them to switch their provider with just a single click.

“Banks have large databases of information, and if they start using them in the right way, they can win over their competition,” Mitja explains.

“Fintech challengers have forced traditional financial institutions to take customer experience in digital channels very seriously. Their creativity and focus on design push traditional providers to become more attractive to users. However, we need a solid balance between the two approaches. On the one hand, something safe, stable, and regulatorily compliant, and on the other, something that’s appealing to the end customer. In the future, I don’t see it as disruption but more of a synergy between these two sides, Matej concluded.

Financial services and the rise of AI

Of course, we had to touch upon the unavoidable topic of artificial intelligence. With tools like ChatGPT in widespread use, businesses are racing to get AI capabilities working for them. We were curious to know what kinds of implementations we could expect in the finance space.

“In my opinion, AI will have a positive influence on the industry on two levels. First, if the customers agree to it, we can provide them with tailor-made services. And secondly, we can utilize AI for streamlining communication such as claims or inquiries, and it can help us develop new products,” Matej predicted.

Similarly, Mitja believes AI can have a great influence on the way financial institutions operate. 

“AI enables us to digest great amounts of unstructured information, which reduces the time needed for performing various analyses. For example, we could generate company performance summaries based on publicly available information. Combining that with banks’ data and internal documentation, we will be able to perform complex tasks in significantly less time. That will allow us to focus only on business decisions and structuring client affairs. I think that is a situation where everyone wins,” Mitja concluded.

It’s an exciting time to be in finance

Matej’s and Mitja’s expert insights gave us a closer look at how digital transformation in the finance industry has revolutionized the way financial institutions operate and interact with their customers. Embracing digital tools, institutions can adapt to client needs more efficiently, offer convenient and simple ways to access products and services, and improve both customer experiences and internal processes. 

With fintech challengers dictating new requirements for digital products in the finance sector and the inevitable developments in AI, there is no doubt that exciting times lie ahead for the entire industry.

If you’re ready to embrace the synergy Matej Golob Matzele was talking about, and you need support navigating the digital landscape, book a call with us and let’s see how we can upgrade your business.