How digital transformation enables the financial services industry in emerging markets
By Ndagi Job Goshi
Digital transformation has had a profound impact on almost all industries, fundamentally altering how customers experience the organisations they deal with on a daily basis. The financial services space is no exception, with legacy players having to keep up with new, digital-first disruptors in order to remain relevant.
This is especially true in emerging markets, where digital transformation can play a massive enabling role. Not only does it improve operations and efficiency, correctly implemented, it also has a profound impact on customer experience. That, in turn, results in improved customer loyalty and can ultimately see increased revenues.
Despite this, many financial services companies aren’t taking full advantage of what digital transformation can do. According to research by Forrester, just 26% acknowledge that transformation is never-ending, 19% are still considering what to do, and 14% mistakenly think they’re done.
Knowing that, it’s critical that financial services companies in emerging markets understand the benefits of digital transformation and how to best ensure they go about achieving it.
The digital transformation imperative
While there are a number of forces driving digital transformation in the financial services space, a significant driver is a high demand for digital products and services from younger people. There are people currently entering the workforce (and therefore in need of financial services) who have never known life without a smartphone. Many will never even have owned any form of mobile device that wasn’t a smartphone.
In emerging markets, those young people make up a much larger percentage of the population than in developed countries. In Africa, for example, 60% of the population is under 25. When you factor in the fact that the continent’s already high mobile penetration rates (smartphone penetration has surpassed 90% in South Africa) are converging with increasing levels of connectivity, it becomes obvious that companies will be under even greater pressure to provide great digital experiences.
A customer-centric approach, personalisation, and a preference for mobile are consequently the key components that enable digital transformation in financial services. Large financial service companies that have developed their own IT platforms are lagging in the current, dynamic competitive environment, as their systems are built using legacy solutions. It’s hardly surprising then that alliances and partnerships with fintechs are becoming more prevalent.
Making a real difference
More than just meeting customer demand, however, embracing digital transformation can bring tangible benefits too. By digitally transforming, organisations can wean themselves of inefficient paper-based administration and billing systems. Doing so can improve efficiency and create better value for their partners and customers.
Of course, there are still obstacles that financial service organisations will have to overcome when it comes to digital transformation. These include lacking a central repository for customer information, or a problematic volume of unstructured data, and being unable to contextualise customers and their needs because of disorganised data).
That said, the rewards for overcoming these obstacles are massive. McKinsey estimates that digital transformation and a focus on customer experience can generate a 20-30% increase in customer satisfaction and economic gains of 20-50%. In emerging market countries with high-growth economies, those gains could be even higher.
Simplifying digital transformation
For many organisations in the financial services space, the trepidation around digital transformation may be down to perceptions that it’s a complex undertaking. The thing is, it doesn’t have to be.
With the right digital transformation partner and the correct use of technology, the process can be made a great deal simpler. A digital experience platform (DXP), for example, can aid businesses by allowing them to digitise business operations, deliver a consistent customer experience across all channels, and gather insights on customers.
Additionally, the data insights provided by a DXP make it easier to ensure that a company’s customers get the right message, at the right time, through the right channel. These insights not only ensure that customers are more likely to make a purchase, but also that they’ll remain loyal to the company and advocate for it among their peers.
There is no reason, then, for financial services companies in emerging markets not to embrace digital transformation. In doing so, they can build great digital experiences which foster customer loyalty. Perhaps more importantly, though, they can cater to the demands of a growing, upwardly mobile, young population who’ll need their services.
Ndagi Job Goshi is the GM of Liferay Africa