February 2022

Digital transformation in finance is redefining how transactions are carried out within the globalized economy and across borders. These financial transformations are bringing significant benefits in the form of convenience, speed, and efficiency. Having said that, traditional models of banking and finance are challenged by Fintech and BigTech, possibly leading the way for stable financial markets.

The impact of digital transformation in the finance industry is speeding up the deployment of digital technology. Cash payments, rendering services through in-person financial consultants, ATMs are fading slowly.

A Brief History of Digitization in the Financial Sector

Technologies that are transforming the financial service industry on an ongoing basis. 

    • Digital accounts – 1960
    • ATM machines – 1967
    • Electronic trading – 1971
    • Global payment networks – 1973
    • Online banking – 1996
    • Paypal – 1998
    • Mobile banking; SMS and web – 1999
    • Mobile payments – 2000
    • eCheck – 2002
    • Mobile banking via smartphone application – 2007
    • Remote deposits – 2009
    • Google wallet – 2011
    • Apple pay – 2014
    • Banking in the cloud – 2015

The transformation is remarkable! (Jokes apart)


A Tale of Two Financial Institutions

JP Morgan Chase & Co.

A few years back CFO of JPMorgan Chase Marianne Lake announced to the investors, “We are a technology company.” At the time, the company immediately hired 40,000 technologists for innovation. They even planned a $9 billion budget to spend on technology; $2 billion on security and cybersecurity alone.

Many must have previously thought that JP Morgan has gone cuckoo bananas. But if we look at it now, the firm was the sanest of all. The sole reason for JP Morgan to spend billions of dollars on Technology was to meet the needs of the digitally savvy customer. Till today, JPMorgan Chase invests $11 billion per year on technology. 

The financial industry increasingly needs digital solutions to overcome the challenges of traditional banking. JPMorgan Chase & Co realized the importance of digital transformation in finance and therefore, equipped its firm with the best tools to get the job done. 

Now that is just one story. 

Toronto-Dominion Bank Canada

Some of Canada’s biggest banks have spent over $71 billion on technology since the financial crisis. With Toronto-Dominion Bank taking the lead. TD bank is considered a tech-driven powerhouse. It has won the five Global Finance Digital Bank Awards in 2020 and was awarded the most innovative digital bank twice in a row. 

The story doesn’t end here. Back in 2020, TD securities made a strategic investment in data services.

According to Ty Panagoplos, Chief Information Officer for TD Securities, “Embracing the power of data and technology while keeping our clients at the center of the experience is helping accelerate our own digital adoption and transformation while strengthening our competitiveness. At the same time, we continue to add talent to our bench of great people giving us significant momentum to our digital transformation.”

Pro Tip: In order to outperform the competition, financial institutions need to adapt to digitization as soon as possible.

Trends Shaping the FinTech Development

Financial technology or  ‘FinTech’ is growing exponentially and has transformed the entire industry. Institutions that were reluctant to adapt to FinTech are getting on board due to ever-increasing competition. The technology is solely aimed at optimizing financial services. Apart from the US, FinTech in Canada is also seen to be making its mark.

FinTech adoption has evolved significantly in Canada over the past two years alongside the evolution of customer priorities and the rise of money transfers and payments,” says Ron Stokes, EY Canada FinTech Leader. “FinTechs are no longer seen as just disrupters to the traditional financial services industry — they’re sophisticated competitors, ready to meet the changing expectations and needs of customers.

Trends and innovations such as AI, ML, Cloud Computing, and Blockchain are bringing in newer ways of processing payments and doing business. Before I highlight the latest trends in Financial Technology, let’s have a look at some of the general facts and figures that prove the significance of digital transformation in finance in upcoming years.

Cloud Computing – Enhanced Security

The opportunities for growth in the financial sector through cloud technology are endless. Even though financial services are still catching on to cloud computing, a total of 22% of fintech applications are already currently running on the cloud. 

Security is of the utmost importance when it comes to digital transformation in financial services. Through cloud technology industry leaders can ensure that their sensitive customer data is safe. Whereas traditional financial and IT systems are prone to cyberattacks, scams, identity theft, and phishing.

In order to overcome these challenges, choosing a favorable IT infrastructure is crucial for support, growth, and innovation. Cloud computing facilitates Fintech companies to improve the customer experience within their budget. Moreover, it allows FinTech towards easy scalability all the while staying compliant with global regulations.

Speaking of regulations, RegTech (Regulatory Technology) is helping companies to fulfill their compliance requirements. Even RegTech firms have considered Cloud-based solutions mainly because of:

    • Agility
    • Remote maintenance
    • Speed
    • Cost-effectiveness
    • Integration
    • Flexibility
    • Scalability
    • Risk Management
    • Security

Blockchain – Instant Payment Settlements

The global financial industry handles millions of dollars every day and deals with ample sensitive customer data. ‘With great power, comes great responsibility and challenges’. Similar to Cloud Computing, Blockchain technology can bring remarkable solutions for the financial sector and effectively control risks.

Peer to Peer money transfer system allows customers to transfer money without any geographical limitations, or third-party involvements. Besides, blockchain technology can eliminate the risk that comes with loan issuance. Banks do not have to rely on intermediaries for monitoring or tracking of loans since p2p transactions do away with the need. Additionally, data immutability improves reliability.

In the current financial system, payment settlements take time due to the involvement of multiple intermediaries and layers of processes. Even though these intermediaries ensure security but it results in issues such as long waiting times. Block-chain technology reduces long layered processes and makes instant money settlements possible. 

Interesting Fact: Canada has a plethora of blockchain talent and according to the Canadian Blockchain Census 2019, spending on blockchain in Canada is expected to increase from $72 million in 2019 to $644 million by 2023.

AI and ML – Fraud Detection

Artificial Intelligence (AI) is playing a significant role in fintech solutions. Canada is a leader in AI; Toronto has the highest rate of AI startups in the world. 

Apart from accurate decision-making and automated customer support, custom fintech software developed using applications of AI and ML is greatly facilitating digital transformation in the finance sector through fraud detection.

Artificial intelligence is known for learning and monitoring consumers’ behavioral patterns to identify fraudulent transactions or attempts. Above all, with their self-learning capabilities and predictive analysis, they can quickly adapt to unusual cases and further amplify the online crime detection processes. 

Read more about the use-cases of AI in Fintech

Big Data & Data Analytics – Personalization

Big Data collects the information that comes from users’ smartphones, laptops, and any other electronic devices. In FinTech, the information extracted from Big Data (data analytics) can be used to anticipate customer behaviors and preferences and to facilitate future decisions and strategic policies.

Big data analytics plays a great role in providing personalized services. Every day approximately 2.5 quintillion bytes of data are generated. This data can help financial institutions in customer segmentation for higher customer satisfaction.

Bill Gates’ Predictions Came True After All

Getting a glimpse of the future is always exciting. About 20 years ago, Bill Gates made some remarkable predictions that have come true to a greater extent. “People will pay their bills, take care of their finances, and communicate with their doctors over the internet.” If we ponder, we can see how technology has revolutionized the healthcare, transportation, and financial sector.  In conclusion, Bill Gates was right after all. We can take care of our finances online, PayPal and Venmo, are some of the most popular examples.

Gates also predicted, “People will carry around small devices that allow them to constantly stay in touch and do electronic business from wherever they are. They will be able to check the news, see flights they have booked, get information from financial markets, and do just about anything else on these devices.” and we do. 

How Can You Streamline Your FinTech Development?

FinTech app development is so much more than just a buzzword. To meet industry standards, time, and cost-efficiency, business owners are increasingly outsourcing custom fintech software development firms. This kind of strategic partnership has become common for organizations that want to capitalize on external expertise and skills and can not maintain in-house development teams. Therefore, by partnering with the right company, you can not only save development time but also reduce overhead costs.

Specializing in fintech app solutions, ARFASOFTECH has delivered projects to bring about digital transformation in banking and financial services, and other global industries. Hire our expert team of developers for a complete set of services starting from software development, and UX/UI to project management and quality assurance.


Fahad Ali, Author

Fahad is PM at ARFASOFTECH but has a knack for writing. He enjoys writing about the latest technologies and evolving trends. Most of his writings revolve around trending technologies and their integration into operations.

Comments (0)

Leave a comment