Financial Industry

Digital Technology and Financial Industry
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How Digital Technologies Are Profoundly Transforming the Industry
Technology is drastically changing day in day out; hence all sectors are adjusting to fit in the latest global world. According to Scardovi (2017), the financial industry is one of the sectors that is receiving profound transformation due to digital technologies. For instance, the way people bank is slowly changing to technological advancements. The financial markets are also changing drastically in several ways. For example, unlike in the past when one had to visit a bank for any transaction such as cash withdrawal or deposit, currently this can be done without having to really hit the financial institution. With the latest digital technologies expansion of banks through opening up of new branches in different streets is also decreasing with some financial services shutting down some of their departments. The transformations result from the introduction of advanced and transformed tools, thinking, and user applications in the industry (Deshmukh, 2006). With the high level of mobility people are altering the manner in which they bank, shop, and pay for goods and services. Additionally, more people who did not have accounts in the past can get bank accounts and other financial accounts thanks to digital technology. Digital technology allows access to monetary solutions and services to people who would never have the privileges to access them.

The industry is also changing to a more innovative industry thanks to digital technology. For instance, as Choi & Chin (2015) explain, the traditional modes of running businesses are changing due to technology-based disruptions. Finally, digital technology makes it easy, and convenient to conduct financial transactions since it can be done from anywhere regardless of the time.
New Competitive Environment/drivers and Enablers in the Financial Service Industry
Essentially, there are four main factors which are driving competition in the financial industry environments:
Technology and Distribution; this is the main driver of the new competitive markets that the financial industry is growing to. For the past ten years, for example, numerous transformations have occurred in the industry. Without growth in technology, none of these would have been possible (Park & Han, 2014). However, technology cannot change the environments on its own. As a result, the other side of the equation consists of distribution hence the critical role that mobile money agents play in the industry.
Policy and Regulation; these play a crucial role in the industry. However, over the past few years’ policies and regulations governing financial industry are changing hence resulting in new and more competitive market environments. As Park & Han (2014) highlight, the current settings accommodate cross-border commercial transactions which were not the case a while ago. The governments have a better understanding of the impacts of world monetary policies on the emerging markets especially the results of market de-risking. Policies and regulations play an essential role in any market and help solve the issue of traditional banking that results from financial technology disruptions.
Open Ecosystems; Ecosystems help in broadening the magnitude of digital technology. The most crucial open ecosystems are interoperability and open application programming interfaces. For instance, interoperability is essential as it enlarges the existing network systems, allows user compensation on each other’s infrastructure, and creates a financial experience with no friction amongst the users. For example, having a technology that allows mobile money transfer without having to switch SIM cards. On the other hand, well-established APIs ensures that even small financial service providers can engage in mobile banking hence promoting the growth of the financial industry.
Data; this is presently playing a critical role in ensuring that data of any user whether rich or poor is traceable. Data helps drive growth in the financial service industry as services providers can easily receive customer’s feedback on their services, and monitor customers’ behaviors hence enabling companies to build profiles for the poor and the rich. Consequently, data makes it possible for services providers to develop services that they could never have thought of themselves.
Winners and Losers Attributes
The level of customers purchasing products and services that a financial institution offers determines if the company wins or losses in the battle of succeeding in the financial industry. Customer’s behaviors are among the determinants of the level of purchase which differs from one institution to the other (Choin & Chin, 2015). The crucial characteristics of winners are customer value attributes which attract customers into purchasing their services. Consequently, a winner in the financial market has positive performance, is available to customers whenever they need them, have attractive prices, and attractive design with a clear reflection of the needs and wants of all customers. Additionally, winners seek to have services that motivate customers into purchasing their services. According to Scardovi (2017), the difference between winners and losers in the financial service industry is that winners are keener on offering services that are customer-centered. To winners, customers’ satisfaction comes first. On the contrary, losers’ central interest is in the company hence efforts are on maximizing company profits. Losers show less concern in focusing on how they can increase customer satisfaction. Winners concentrate on creating reasons why customers will continuously choose to accept or reject their services hence improving their services from time to time to meet the changing needs of customers.
Actions and Strategies Recommendations for an Incumbent Company in the Industry
The changes and disruptions occurring in the financial service industry due to digital technology affect both new and incumbent companies. However, if necessary measures are put in place, incumbent companies should not suffer the disruptions of digital technologies. In ensuring they do not suffer from technological disruptions, incumbent firms should recognize the essential thresholds in the company’s lifecycle and take timely actions. For instance, the incumbent businesses should make courageous decisions and be the first ones to offer online services free of charge. The best strategy to survive the effects of digital technology for an incumbent is to attack the disruption rather than waiting for the disturbances and act on them. Incumbent firms should take time to learn the position of other companies in the industry regarding digital technology. After studying the opinions of others, the company should be willing to boldly respond to the issues before it is too late to act. As Deshmukh (2006) explains, companies should explore the needs of their customers and develop without fear of hurting the companies’ core business. In summary, incumbent corporations should focus on challenging their own stories and long-standing beliefs about money making strategies and focus on moving with the wave of digital technology rather than trying to create resistance against its disruptions (Deshmukh, 2006). The company should identify and nurture new initiatives that relate to digital technology after accepting that transformations are inevitable if one is to survive in the present business world.
References
Choi, S. W., & Shin, Y. J. (2015). Economy Effects of IT Industry on Financial and Insurance Services. Journal of Digital Convergence, 13(1), 195-201, doi: 10.14400/jdc.2015.13.1.191
Deshmukh, A. (2006). Financial Management, Strategic Management and Digital Accounting. Digital Accounting, doi: 10.4018/978159147386.ch009
Park, S., & Han, K. (2014). A Study on the Prospects of the Financial IT Services Industry using the Correlation Analysis of the IT Budget in the Financial Industry. Journal of Digital Convergence, 12(3), 57-65, doi: 10.14400/jdc.2014.12.3.55
Scardovi, C. (2017). Digital transformation in financial services. Cham: Springer