Traditional financial institutions (FIs) are now facing intense competition from digital banks, ecommerce payment platforms, and other nontraditional actors in the finance space. To meet the challenges posed by these organizations, most FIs have undertaken steps to pivot towards new ways of doing business, a process often referred to as “finance transformation.”
Finance transformation refers to the strategic realignment of an organization’s financial functions. Though there are many ways to implement this process, the most common approach used by banks and FIs is to update their finance and accounting platforms, usually to match a specific operating model. Today, cloud-based SaaS (Software as a Service) products are the most compelling finance transformation solutions on the market.
1.) Discover New Insights from Existing Data
Modern finance transformation solutions can help FIs use their data in new ways, giving decision-makers new perspectives and a more complete picture of everything that’s going on in their organization. This can give business leaders a more realistic overall picture of their FI’s position as well as the relative state of their target markets.
2.) Create Timelier and More Accurate Reports
One reason many FIs are switching over to new systems is to enable more accurate and up-to-date reports. Updating to a new system that consolidates all the data on the older systems enables FIs to more easily automate manual processes, enabling analysts to spend more of their time doing analysis instead of busywork.
Once all the data is migrated to the new solution, it becomes possible to do away with most manual data wrangling, speeding up the reporting cycle while also improving the accuracy of the data presented. This, in turn, allows the FI’s decision-makers to make choices based on the most recent information possible.
3.) Reduce Your Financial Institution’s Risk Exposure
When implemented correctly, financial transformation should reduce an FI’s risks across the board. The improved situational awareness enabled by new solutions may give the FI’s analysts the ability to detect more potential threats and opportunities from more distant time horizons. Additionally, they can also effectively remove the risks of regulatory noncompliance.
4.) Easily Comply with Evolving Regulations
Because of the sensitive nature of their business, FIs are subject to a vast amount of regulatory oversight. FIs are also under constant pressure to meet new and upcoming regulations on top of existing ones. Failure to comply with these regulations and standards can put an institution at risk of fines and other penalties and effectively limit its ability to serve a wider market.
Older systems often need customization and months of testing and validation before they could reliably comply with new regulations. These changes also have to be implemented by finance IT specialists that are often in short supply.
Fortunately, updating to a contemporary cloud-based SaaS solution can simplify compliance. Much of the compliance work is handled by the service provider’s own finance IT personnel, allowing the FI’s own team to focus on other pressing tasks.
5.) Develop Competitive Products and Services
The reduced risks, timelier reporting, and new data insights offered by today’s FI tools make it possible to develop products that are highly tuned to serve existing and future client bases. The labor savings permitted by better finance solutions also enable FIs to dedicate more of their available resources towards improving customer service, marketing, and other activities that help set them apart from their competitors.
6.) Increase Profit Margins
As mentioned earlier, contemporary solutions permit a high degree of automation. This automation can be used to dramatically expand an FI’s capacity to handle data without it needing to hire additional personnel. This, by itself, reduces baseline operational costs, often allowing the new system to pay for itself. When leveraged correctly, the added ability to deliver better product offers and pivot quickly to new market opportunities can then further improve the FI’s profit margins
7.) Improve Organizational Adaptability
Updated finance solutions are designed to make full use of current tech developments. What this invariably means is that newer tools enable more productivity compared to older solutions.
The improvements bundled into newer financial transformation solutions can dramatically speed up an organization’s situational awareness and decision-making, allowing policymakers to adapt to new trends and other events as they happen. This effectively allows the FI to quickly pivot to whichever direction reduces exposure and increases overall profitability.
It’s Time to Transform Your Financial Institution
Banks and other financial institutions have always evolved to keep up with the demands of their clients. Given that FIs today face a very different set of external circumstances compared to even just a decade ago, financial transformation is going to be critical if FIs are to remain relevant. Fortunately, there are now proven solutions on the market that allow FIs to easily adapt to current trends in the finance market.