The digital transformation will have a huge impact on businesses over the next few years. By going digital, banking and financial services (BFS) stand to gain more than the cross-industry average, according to a new study.
Digital technology is quickly changing the way companies and organizations work. The BFS industry is no exception. To compete with digitally enabled start-ups and industry players, traditional banks and financial institutions will have to go digital.
In a study about the changing nature of business in the digital economy, Cognizant and Roubini Global Economics surveyed more than 2,000 executives around the world – including 333 in the BFS industry. Seventy percent of them responded that they believe digital is “important—extremely important” to the future of their business.
The research shows there is a lot of money to be made and saved by making the digital shift. Revenue growth influenced by digital alone will go from 5.3 percent in 2015 to 12 percent in 2018, unlocking a value of about USD 180 billion per year. In addition, by digitizing back-office operations, BFS firms can cut costs significantly.
While spending about the same amount on digital as the industry average, banks and financial institutions expect a much higher return on investment (ROI), according to the survey.
But digital transformation means more than revenues and cost-saving opportunities. New technologies improve standardization and reduce error rates significantly, while cutting time-to-market. They also enable firms to tap into enormous amounts of customer data, which can be used to provide more personalized and targeted services and content.
“The real value of a firm lies in its ability to access and analyze big data,” says Philippe Dintrans, Chief Digital Officer and SVP, Global Consulting Leader, Banking and Financial Services.
Today, big data constitutes 84 percent of the market value of companies listed on the S&P 500 index. All this personal information makes banks and financial institutions vulnerable to online fraud or theft.
“Data security is a valid concern. However, firms that are able to win and maintain customer trust are better suited to face such challenges,” Dintrans says.
The customers know the future is digital and expect the change. But it is important not to fall behind the digital curve. Today, digital laggards in the BFS industry report an economic impact (cost savings plus revenue gains) of 3.1 percent, while digital leaders report 7.4 percent.
“That means it is time for all BFS firms that haven’t already made the shift, to break free of old molds and seize the digital opportunity.”
Download the report at thecognizant.com to learn more about the changing nature of business in the digital economy.