Digital Transformation Is a Must Have in Financial Markets

It’s not a coincidence that what’s happening in the financial services market is driven by the economics of consumer behavior. The way in which these financial organizations move into 2023 will be driven by consumers -- how rates for mortgages, car loans, and savings impact the market up or down. It’s all connected, and everyone is watching.

There’s another consideration in this mix: digital transformation. This is where digital technology flows into all areas of the business, which impacts how an organization relates and provides value to its customers. The transition isn't isolated to adopting a new software package or retraining the workforce. There are some hard edges in digital transformation and there's potential for a steep learning curve and some failure. No one likes the idea of failure, but digital transformation isn’t an either/or proposition: It’s implement -- or be thrown to the wayside.

Market segments in insurance and banking are moving quickly toward implementing digital solutions, but there are significant holes in the effort to bring traditional brick-and-mortar entities online. Customers of financial companies now demand automation, machine learning (the effort to make digital machines more attuned to human interaction), and improved data strategies designed to collect, manage, and apply data-rendered knowledge across multiple channels. You see it in television commercials and online promotions for banks: When the customer comes through the door an enhanced experience means tellers at the ready, digital banking is available on the phone and there is easy access to information about everything from wealth management to loans.

In the financial services market, sensitive information is all around and includes elements of privacy and compliance, so managing it is mission critical. Layer the digital transformation effort over the top and it’s easy to see that much is on the line. Organizations are making every effort to protect their processes while at the same time ensuring that data collection efforts are compliant with privacy regulations, global privacy regulations. These are critical considerations to maintain the business and retain customers, new and existing. People want to feel safe in the digital environment, especially when it involves their hard-earned cash.

Know the Customer

First-party data -- the consented information organizations have collected directly from their customers (opting in) -- plays a big role in driving transformation strategy. Open a magazine or visit a news website and you’ll be bombarded with stories about low consumer confidence, both in terms of the economy and privacy concerns.

The paradox of this equation is that people are still spending their money, even in the face of a potential recession. So, that first-party data that companies have spent years and financial resources to capture is more valuable than ever because it can offer the only 360-degree assessment of the customer in a difficult environment. Savvy organizations will leverage this detailed, fact-based information about their customers to lessen the blow of an economic downturn or advance against less proactive competitors.

A central topic of conversation in many business circles is about the move away from third-party cookies in learning about consumers’ online behavior. In a highly regulated industry like financial services, the deprecation of third-party cookies and new (and constantly evolving) legislative guidelines can be challenging. But there are steps to be taken that will ensure a clean transition to a third-party cookie-less environment.

Earning user trust from the first interaction is key and getting opt-in from the first touchpoint is imperative. Even with “consent fatigue” in the air, making the effort to streamline interactions and thinking about the user experience in every step of the journey will separate the winners from the losers in a brave new world. Trust will be the No. 1 driver of customer retention in 2023.

More efficient digital systems, better privacy measures and a seamless move to a third-party cookie-less world will disrupt every industry. Financial services organizations in particular are looking for a bulwark to protect against the ravages of recession, and data-first strategies can help them achieve that. Customer behavior is ever-changing, so a strategy that evolves alongside these shifts is the one that offers a brighter future.