Why the financial services industry has to start future-proofing their operations

The digital revolution continues at pace. Yet, whilst many industries are looking to harness the transformative impact of AI and other innovative tech, there are many firms in financial services that are simply unprepared and unable to capitalize on the latest advancements.

A reliance on legacy systems and the use of paper-based forms of communication and record-keeping is holding the sector back. Now is the time for the industry to fully embrace digital transformation strategies or risk being left behind. The benefits of going digital for businesses in the financial services industry are huge, encompassing benefits from streamlining operations and cutting costs, to improving customer experience and overall functionality. Whilst adopting new technologies undoubtedly comes with risks, the sector can ill-afford to stand still in the face of such a rapidly changing world.

Embracing Paperless

With stamp prices in the UK recently rising by 10p -- making the cost of a First Class now £1.35 -- and the possibility of reduced postal schedules looming for Royal Mail, financial organizations need to consider the benefits of digital solutions to retain efficient and reliable customer communication channels. Embracing a paperless approach, such as through portals and secure email solutions incurs several advantages, from being assured information is exchanged in an auditable and time-efficient process, whilst aligning with sustainability goals -- making the transition away from paper-based forms of communication an environmentally sound choice as well.

The transition from paper to digital communications also supports businesses with record keeping and tracking customer interactions, as it enhances the ways in which we can store and process customers' data. Digital filing systems, enhanced by cloud-powered portals and apps, provide convenient access for both customers and businesses, facilitating real-time access to historical data.

Managing cyber threats amid digital transformation

As organizations begin to leverage the benefits of emerging technologies, they equally open themselves up to the threat arena of cyber attacks -- with 50 percent of UK businesses reporting cyber-attacks or security breaches in the past year.

With the majority of businesses now embracing technologies like AI and cloud computing, it's crucial to recognize the threat posed by malicious actors who are leveraging these same technologies for unfair gains. According to a recent report from the NCSC, AI is poised to amplify both the frequency and impact of cyber attacks in the coming years, with threat actors across the board increasingly utilizing AI to target consumers in highly sophisticated ways -- such as through Deepfakes.

Given the substantial amount of personal data held by financial institutions, safeguarding sensitive documents and messages exchanged between organizations and customers is paramount. A 2021 report from the Financial Services Information Sharing and Analysis Centre highlighted a surge in threats to the sector, which can be attributed to the swift uptake of technology without a guiding policy in place to understand and respond to the threat landscape.

Additionally, the ICO has reported a 30 percent uptick in data incidents among UK firms between 2022 and 2023. This underscores a further need for urgency amongst businesses to invest in their digital transformation strategy to safeguard from the costly outcome of a cyber attack - both financially and to their reputation.

For financial services to effectively implement digital transformation, they must mitigate risks and prioritize robust cybersecurity, ensuring that any digital transformation is strategy-led in order to execute cybersecurity best practices.

Understanding the threat landscape

Throughout the digital transformation process, companies must prioritize two key actions: addressing security vulnerabilities in legacy infrastructure, whilst enhancing threat detection and response strategies through refined risk analysis procedures. Secure communications are a fundamental part of cybersecurity strategies for financial organizations, with regard to protecting highly sensitive customer information. This is why businesses must focus beyond simply storing data safely, to implementing robust safeguarding measures to prevent any information from being intercepted in transit.

In addition to deploying strong safeguarding measures and adopting appropriate technologies to facilitate a seamless digital transformation journey, further support is also required from the government and industry leaders, to focus on bridging the digital skills divide and maintain competitiveness amongst the global markets.

Prioritizing people in the digital transformation journey.

Effective implementation of a digital transformation strategy relies on equally upskilling and training individuals responsible for spearheading the transformation process - predominantly employees. Organizations should look to appoint leaders, well-versed in digital technologies, to spearhead change within a business and ensure comprehensive training is provided across all levels.

Having dedicated individuals across all levels of the organization to coordinate cyber defense protocols boosts the success rate of mitigating against threats - with research from McKinsey showing that businesses are two times more likely to succeed with digital transformation when those engaged in key management roles have a deep understanding of digital technologies and strategies. This knowledge is transferable and fosters an innovative culture that encourages continuous learning and agility, helping to drive digital transformation throughout the organization.

Embracing digital capabilities is essential for meeting the ever-changing expectations of customers, improving operational efficiency, and tapping into new revenue streams. Businesses that postpone digital transformation put themselves at risk of missing opportunities to expand their customer base and falling behind their competitors.

Paul Holland is CEO at Beyond Encryption.