What are the 5 Key Phases of Digital Transformation in Finance?

In This Article

What is digital transformation?

Digital transformation involves systematically optimizing every aspect of a business to function in digital and physical space.

Digital transformation can involve things like:

Creating social media profiles.
Engaging with customers, colleagues, clients, and prospects via email and messaging services as well as by phone.
Adding remote video conferencing into your meeting schedule rather than always gathering participants in the same physical location.
Creating important documents digitally, sending them out by email, and signing them with e-signatures.
Making important resources (guidance documents, for example) available online.
Creating an app for your customers.
Digitizing your records.

Digital Transformation In The Finance Industry

The world has been undergoing a digital transformation for some years. Global spending on digital transformation is set to hit $6.8 trillion in 2023 as businesses adapt to this rapidly changing world.

Now, customers expect to be able to engage digitally with organizations. For financial organizations, this can be challenging. Established financial companies may have a huge backlog of paper records, for example, and ingrained analog ways of doing things.

However, it is worth taking the plunge and making 2023 the year your organization turns digital. For a start, governments worldwide are beginning to phase out paper tax returns. So getting your digital transformation underway as quickly as possible is essential to keep up with the times.

For the financial industry, digital transformation offers a way for organizations to give customers more control over their finances in a safe, protected manner. Rather than conducting all their business with you in person or over the phone, they can manage their money through a secure app or via email.

Digital transformation makes life easier for you and your customers. It also enables organizations and customers to stay connected if they can’t visit physical locations or offices are required to close.

If you’re not sure where to start, don’t worry. This guide will take you through the 5 phases of digital transformation in finance and how you can implement them in your organization.

Will digital transformation affect my tax status?

Tax status is important for any organization, particularly for financial organizations. If you are managing your finances and other people’s, it is essential to know the impact digitization will have on taxes.

The good news is that digitization makes taxes more straightforward and secure. Many governments, including the US and UK, prefer you to complete self-assessment tax returns online. This is because they provide a secure portal to complete and submit tax returns.

There are also great software options and tools to help you with digitization. For example, if you’re based in the USA, you can read up on the electronic federal tax payment system here.

To learn about how tax digitization works in the UK and how to engage with it, you can download the Sage Making Tax Digital guide for more information.

Digitizing your taxes makes the process faster, easier, and more secure. It’s a win-win-win for you, your customers, and the authorities.

The 5 phases of digital transformation

1. Build a digital roadmap

The first step in any major change is strategizing. Digital transformation in finance is no different.

Start by mapping out the steps necessary to bring about a true digital transformation. This is a complex, one-step process, but it is worth spending extra time on your digital strategy to get it right.

Every strategy is different, but to get you started, here are some basic steps to building a good digital strategy:

Clarify your goals.
Identify pain points and challenges.
Set a timeline for your goals. For example: “Our transformation will take place between January and August 2023. We will have digitized our taxes by April 2023, have trained all staff in new digital processes by the end of June 2023, and have achieved all our goals by the end of August 2023.”
Assign roles and responsibilities for each goal.
Appraise your resources. Research suitable options if you need new resources to make the digital magic happen.

2. Engage with digital taxes

One of the most critical stages in any digital transformation is dealing with the official paperwork. If your tax records, licenses, certificates, accounts, and other official documentation are on paper, you must prioritize digitizing them.

Taxes are a particularly important part of this. As business taxes can be complicated, it’s worth getting a head start on digitizing them.

Gather together all the tax-related documents that you have, both digital and on paper. As well as return slips, these documents can include receipts, invoices, and accounts.

Scan or photograph any paper documents, and transfer the files to your digital tax system. But don’t throw away your paper copies! File them safely. You may need them if you are audited.

Then, engage with the digital portals provided by the tax office. You may need to set up a new account, but this should be easy to do with your unique tax reference. If you are still trying to figure out what to do, tax offices usually have dedicated assistants who can help you.

If you’re filing your taxes in the USA, you can find more information on how to stay compliant here. For more on digital self-assessment in the UK, click here.

3. Encourage a digital culture

The human element is always the most effective and problematic aspect of any transformation. From occupational fraud to stellar customer service, your staff can be your best asset and your greatest liability.

So, to make a full digital transformation in finance, you need to encourage a ‘digital first’ culture within your organization.

This means doing things like:

Providing the right digital tools throughout your organization. This could range from providing phones, laptops, and tablets for work use to training on cybersecurity best practices.
Training all staff on new software, platforms, apps, and digital systems.
Leading by example. Management should be as engaged as possible with the new digital tools and processes.
Rewarding digital engagement. For example, you might praise proactive and innovative employees with new digital tools.
Appointing effective digital leadership. A dedicated CDO (Chief Digital Officer) can work wonders during a company’s digital transformation.
Keeping a close eye on how your staff is experiencing the transformation. “Innovation fatigue” is a common problem during digital transformation. It occurs when too much change comes all at once. It can leave employees feeling confused, exhausted, and even resentful. Watch out for this, and take steps to help employees who may be struggling.

4. Integrate digital financial practices as standard

This phase integrates with phase 3, but it is worth emphasizing as a phase of its own.

Migrating all systems to digital can be time-consuming, so take it in stages if you have to. But, the endgame should always be to make digital the standard for your organization.

This may involve changing one form of digital for another, more efficient form. For example, you might switch from discussing specific projects in long email chains to a more effective work communications app. You might stop mapping out workflows on digital calendars and switch to a dedicated project management platform.

You should entirely phase out most non-digital systems and ways of doing things. If your team is hesitant or unsure about this process, return to phase 3 and work on strengthening your digital culture.

5. Engage with the cloud

Cloud-based systems and services are the future of the financial sector. Migrating data and systems to the cloud have several advantages, including:

Money and space saved: You don’t have to buy and build your hardware.
Better security: Cloud-based services can dedicate plentiful resources to security and continually update their systems.
Accessible anywhere: Many cloud services offer apps that can be accessed by any device, anywhere. This means remote workers can log into project management software and access documents without entering the office.

Of course, you can keep all your digital tools and systems in-house. But this means building your digital infrastructure and ecosystem from the ground up. You must bring dedicated data managers, cybersecurity experts, IT consultants, and more.

Most financial organizations find that migrating certain systems to the cloud is more cost-effective, secure, and accessible for staff and clients.

SaaS (Software as a Service) has been growing in popularity for years. There are around 14 billion SaaS customers in the world. You can hire a SaaS company to do almost everything in 2023, from storing data to hosting meetings. So, search around, and see what’s available.

Make 2023 the year of your digital transformation

Nowadays, a business can only operate with at least some digital systems. However, for the financial industry, digital transformation is a necessity.

Modern customers want to be able to engage with their financial providers via the internet. They want to be able to access and interact with their accounts using apps. They want their data to be stored securely in the cloud. They want help from advisers using messaging apps rather than over the phone.

So, in 2023, give them what they want! Make 2023 the year of your digital transformation.

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