The financial services sector is not new to digital transformation. But the investments in digital finance and the extent to which digitalization is embraced has definitely been accelerated in recent years.

In this article, we look into what is digital finance, what are some examples of digital transformation in the finance industry, as well as the benefits of finance digitalization. Read on to find out more.

 

What is digital finance?

Digital finance refers to the process of transforming traditional banking and financial services through the use of new technologies. Specifically, using digital products and tools to deliver financial services.

 

What are examples of digital transformation in finance?

Like with most industries out there, digital transformation has had a large impact on financial services as well. Some examples of technologies and solutions that are driving financial services digitization are mentioned below.

Increased use of online/mobile banking

Digital banking is not a new concept. In fact, it’s been quite popular with younger audiences for a while. But recent events have significantly increased the use of online banking. When visiting their local bank branch was no longer an option, more and more turned towards digital banking. This has led to more people getting comfortable with digital transactions, like online payments and transfers – and have even started to prefer them.

The emergence of challenger banks

In the past years, more of the so-called challenger banks have emerged. These are fully digital banks, with no physical branches. They challenge the traditional banks, by making the customer experience smoother – from the ease of opening an account to better functionality and more attractive fees and rates. Some examples of such challenger banks are Revolut, Lunar, and Monzo.

Fintech solutions

Fintech companies are also changing the financial services market. They provide a variety of digital services, from spending tracking, budgeting, to customer service chatbots and more. With more and more financial institutions relying on fintech solutions, these companies have been essential in driving the digitalization of financial services.

Digital investments companies

Algorithm-based investment management and digital financial advice platforms are also increasing in popularity. Their ease of use and ability to offer more attractive fees are just a few of the reasons why more consumers are preferring them over traditional investment companies.

Blockchain technology

Another technology boosting digitalization in finance is blockchain. It provides new opportunities to identify, record, and store assets digitally, as well as changes the way people invest their resources and trade on markets. Blockchain technology’s impact is still unfolding and is likely to play an even bigger role in the future of financial services.

 

What are the benefits of digital finance?

1. More efficiency

Digital tools were created to help us work more efficiently, by removing the manual time-consuming work out of the equation. Relying on such solutions enables employees in financial institutions like banks, pension funds or insurance companies to improve their productivity and focus more on value-adding tasks.

2. Increased security

The finance industry is subject to security and compliance requirements and with good reason. They often process and handle sensitive and confidential information. Most finance automation tools are built with these requirements in mind, making them a good choice for the needs of financial service providers.

3. Improved customer experience

Customers nowadays expect a digital, smooth experience by default. Their interactions should be effortless and at their own convenience. With the market becoming more competitive, financial institutions need to invest in digital tools to keep their customers satisfied and provide the level of service they expect.

4. Insights & analysis

Financial services providers typically have access to and handle large amounts of data, which comes with great potential. But without the tools to analyze it, that data is not of much help. Digital solutions provide financial institutions with clean data and actionable insights, which can be used to identify new business opportunities and grow.

 

How Penneo helps financial institutions on their digitalization journey

At Penneo, we’ve developed two solutions that help financial institutions to automate some of their most time-consuming client-facing processes: the onboarding of new clients and document transactions.

Penneo KYCPenneo KYC automates the manual work in onboarding new clients and performing the KYC process. Our system guides users through the entire process, from risk assessment to requesting documentation and storing data securely. All while ensuring compliance with Anti-Money Laundering laws.

Penneo SignPenneo Sign enables financial organizations to send, sign, and manage documents digitally in one place. Companies can easily keep track of the status of their documents, use automatic reminders to make sure deadlines are met, and store all documents in a secure and GDPR compliant way.

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