How Digital Transformation Will Affect the Finance Industry
Technology has provided many benefits to the finance sector. However, there are some drawbacks to the digital transformation of the industry. The use of AI and automation will lead to job loss for many people in various departments; tasks like accounting, data collection, and analysis are preferred to be completed by machines rather than humans.
Most of the tedious and repetitive tasks are being carried out using automated software. They do offer an advantage as a large number of transactions can now be processed in less time.
According to the reports by a company, ‘By 2020, the robotic process automation (RPA) including bots and software will take over the repetitive tasks that are now being done by humans. It is estimated that 20% of the task will be automated within the finance sector’. The automation will help the companies to cut costs and improve their efficiency by eliminating human errors.
The Economist Intelligence Unit reported that 83% of the large companies are expected to invest in digital transformation. Finance departments in larger firms are working together with IT and risk department departments to step into the biggest tech trend: digital transformation. Finance staffs are now spending more time analyzing the data and explaining how the financial data can be utilized to improve the company’s performance.
The use of AI and big data technologies let the company board visualize future predictions like the cashflow or pros and cons of a product that they launch or how they can expand into new markets. The predictions can be based on non-financial metrics, including social or environmental impact. The companies can disclose more information to their consumers, shareholders, and regulators.
Most finance departments are currently not fit to adopt the technologies. They focus on the historical data of the company- the financial data of the past six months or year to plan the strategies. Not many firms focus on present or future risks and opportunities. However, with the automation software, the role of the finance department has changed in the last few years. Companies that would not invest in digital transformation would be left behind.
The finance department employees also lack the skills and knowledge about technology and digitalization. The delayed response of the predictions can also set the company behind its competitors.
Although technology will sort out a few things for the finance department, there will always be a risk of fraud through phishing or hacking. As technology is crawling faster in the sector, the staff needs to be prepared with enough skill, resources, and knowledge.