Skip to content

Successful Digital Transformation in Financial Services

Blog

April 24, 2024 | Provenir

Q&A with Industry Experts

Digital transformation is critical for financial services organizations who want to thrive in our increasingly digital age. As consumers demand more and more from their financial services interactions, those organizations that don’t evolve will be left behind. But what are the keys to a successful journey?

We recently hosted a webinar focusing on the intricacies of this transformative process, looking at key challenges and guidance for financial institutions looking towards a digitally empowered future. And from that discussion, a number of insightful audience questions were addressed – so we wanted to share some of them here with you! 

Q: With digital transformation came digital banking which made life easy for both consumers and would-be thieves. How can we mitigate the increasing hacking risks associated with digital  banking, from both the customer side and the bank side?

A: Digitalization is increasing – and yes, so is fraud. This is where client authentication becomes so important, and truly understanding and knowing your customer is key. Device authentication for example can be critical, as well as collecting the required data to be sure we are understanding our customers without impacting the customer journey. That level of discipline needs to sit with the financial institution, without necessarily being seen or experienced by the customer. Identity theft is quite prevalent, especially in certain regions like the Nordics, so it’s critical to balance the need and desire to have strong authentication in place, without adding friction to the process for your consumers. 

Q: How is generative AI impacting decisioning?

A: There is a potential for a large impact on decisioning with the use of generative AI tools. We’re in the early adoption stages, because from a regulatory and compliance standpoint, there is a nervousness about using these tools to push businesses forward. Institutions are risk averse, cautious, and measured in the terms of the policies they implement. Corporate governances are challenges for many banks, particularly when dealing with a variety of regional regulations. In part, it comes down to explainability. While AI tools can certainly help from a risk decisioning standpoint, and should be fully explainable in that regard, there is not enough known about the control and regulation of generative AI tools to ensure that data is being used and stored properly. Ultimately, we’re early on in this journey and they will play a fundamental role in our industry over the next few years.  

Q: What is the importance of being able to adjust business lending and fraud rules quickly given the rate of change in the macro-economic landscape, customer behavior and MO of fraudsters? Why are organizations, particularly in the financial services industry, struggling to keep up with these rates of change?

A: Often, organizations struggle to keep up with the rate of change due to the technology infrastructure in place. Being able to make changes quickly to respond to market demands and evolving threats is key to not only accurate fraud prevention, but also simply ensuring that you’re meeting the needs of your customers. If you have to wait six weeks for sign-off on a policy change, and then wait additional time for a vendor or your IT team to make iterations in your decisioning processes, you’ve left your organization susceptible. Having self-sufficiency in times like these is critical – being able to use advanced analytics to optimize decisioning strategy, quickly, and then make those changes just as quickly is key. But you need the right technology in place to support that flexibility and agility. 

Q: When the bank is undergoing a full digital transformation, many projects and developments are done at the same time with limited resources. What does management need to pay attention to when making decisions on priorities?

A: The first step is making sure that all projects have been categorized and prioritized with the entire group, and that those priorities are aligned with the overall group/organizational strategy. Alignment is key. It is very difficult to have competing projects fighting for resources (time, money, human) and this is a common challenge among financial services institutions. Allowing for a level of flexibility and adaptability is crucial – often what helps is reevaluating priorities at set intervals, every quarter for example. The largest priorities may not change often, but the smaller, more nimble priorities can (and often do), and your project management structure should be flexible enough to accommodate that. 

Q: Given the increasing flow of information, number of processors and variety of processors within the competitive landscape, what is the importance of increasing the number of data connections to enhance decisions towards better business outcomes?

A: Increasing data connections can be helpful, but it’s worthwhile to note that we don’t want to connect to so many that it’s overwhelming. It’s not just about more data, it’s about the right data at the right time, in order to see the real value of those data sources. Getting the right level of customer data that you need to adequately support your decisioning processes is crucial. Having a broader spectrum of data available, in terms of types of data sources and variety, as well as quality, is more important than just continually adding new data sources that won’t provide any additional value to the view of your customers (and may in fact add more friction to the journey). Data sources that allow for a strong level of automation in your decisioning processes will also be more valuable than those that require manual intervention or human oversight (which add complexity and slow down the process).  

Q: Will the current path of digital transformation that banks are on (locally and globally) lead to more financial stability or more future crisis scenarios (like Silicon Valley Bank)? 

A: Financial stability is important – we weathered this during the financial crisis in 2008, and there are continual efforts to combat any instability. One of the things that led to that instability is the fracturing of the value chain. When you have new players who are so specialized and who don’t see the whole banking picture, there are inherent risks. On the other hand, when you have large incumbents who do everything in-house, they see the whole picture, but they can often be very rigid and slow to move or make changes, which has different risks and implications on financial stability. 

What all of our experts agree on is that it’s important to keep your customers at the core of everything you do. Understanding your customers and their journey, especially in an increasingly competitive environment, will be key to differentiation, and digital transformation has a critical role in this. 

Be sure to check out the full webinar on demand for more insights from our panel of industry experts!

Latest Resources

BNPL, Decisioning

On-Demand: Anticipating Tomorrow: A dynamic approach to account management

As consumer debt and delinquency rates continue to rise, we are seeing loan loss provisions reach new heights ...

Maximizing AI/ML for Fraud and Risk Mitigation

Contact us for more info on Provenir’s robust, AI-powered fraud solutions. Learn More How to Harness Artificial Intelligence ...

Transforming the Customer Journey: How Unified Technology Can Enhance Experience and Efficiency

Ready to upgrade your legacy technology? Contact Us Written by: Mark Collingwood, Vice President Sales, and Managing Director ...