How Digital Transformation is Disrupting the Banking and Financial Services (BFS) Industry

In today’s digital age, the banking and financial services (BFS) industry is undergoing a seismic shift in how it delivers personalized experiences via innovative products and services. Moreover, with evolving customer needs, going beyond traditional banking is imperative to provide unparalleled CX and drive business growth. Thus, the need for operationalizing digitization to enhance customer service is more significant than ever.

Consider this — the global digital transformation in banking and financial services is not just a trend but a massive opportunity. It is projected to reach a staggering $310.7 billion by 2032¹, a clear indication that all BFS firms must adapt and innovate.

However, many financial institutions are struggling to realize the potential of their digital transformation initiatives, with challenges ranging from operational inefficiencies to a lack of understanding of emerging technologies.

Challenges of digital transformation in banking and financial services

In August 2023, EdgeVerve commissioned Forrester Consulting to conduct a custom study with 104 business and IT decision-makers at global BFS firms to understand the effectiveness of digital transformation initiatives. Almost half of the respondents (49%) indicated that their transformation efforts have not been successful in achieving desired business outcomes.²

According to the study, here are some of the key barriers to digital transformation efforts:

Overcoming these barriers is necessary as it fuels a future where customer experience is enhanced, operational inefficiencies are eliminated, and employee experience is elevated. Moreover, the importance of connectivity cannot be overlooked. BFS firms today recognize that connectivity is indispensable to realizing value from their digital transformation and emerging tech investments. 73% said that improving enterprise connectivity across business and IT functions is a key business priority for them in the next 12 months.³ The key, thus, is AI-driven digital transformation.

The rise of AI-driven digital transformation in BFS

Did you know that BFS firms are 1.4 times more likely to invest significantly in AI initiatives?⁴ Adopting cutting-edge technologies like AI, automation, and digital operating models enables BFS firms to accelerate digitalization to drive customer value and efficiencies at scale. AI-driven digital transformation can also augment human potential, paving a new pathway for the future of work.

However, challenges in implementing and scaling AI usage can impede digital transformation efforts, from a lack of skills to develop, implement, and operate AI solutions to immature technology. But here’s the differentiator — digital leaders prioritize digital transformation by jointly leveraging digital and AI to unlock new growth. This is what sets them apart from the laggards.

According to the study, BFS firms believe AI can:

By prioritizing and implementing AI and automation capabilities, advanced BFS firms can accelerate transformation efforts, leading to enhanced CX and better data integration, enabling an insights-driven culture.

Digital transformation use cases in BFS

According to the Forrester study, with CX emerging as a top business priority for BFS firms, 74% are keen to introduce process efficiencies that ultimately drive quicker and better CX.

Below are a few digital transformations use cases that drive CX, efficiency, and compliance.

Embracing a platform-based strategy: A game-changer for banking and financial services

How can BFS firms breathe new life into their transformation journey and stay ahead in the ever-evolving digital landscape? According to the Forrester study, 58% of advanced BFS firms believe that embracing a platform-based strategy that unifies and orchestrates business and technology fosters connectivity and visibility, ultimately driving digital transformation.

Moreover, a platform-driven digital strategy is not just a tool, but a catalyst for change. It accelerates financial institutions’ connectivity, automation, and AI roadmap, thereby revolutionizing the customer experience and driving new business growth. It also provides invaluable insights for decision-making, paving the way for a successful digital transformation.