For a very long while, new market entrants found it difficult to break into the financial service industry. However, this is not the case anymore. FinTech (Financial Technologies) disruptors, which are fast-moving tech companies focused primarily on innovative technologies and processes, have been making significant strides into the financial sector by leveraging business insights and undergoing digital transformation. Over the past five years, the impact of new technology on financial services has been tremendous, leading to many success stories in the sector. In order to remain competitive on the market, many businesses today are compelled to move away from their traditional financial practices and embrace a more agile and innovative approach.
From 2020 onwards, financial institutions will start leveraging more and more technology trends as a means of building new business models. Statistics indicate that the financial technology market is growing at a continuous rate. In 2018, the FinTech market was valued at around $127.66 billion, and by 2020, it’s expected to reach $309.98 billion. That’s an annual growth rate of 24.8%. In 2019, the FinTech adoption rate around the world grew by around 64%.
Current Challenges Facing CFOs
Due to the Covid-19 pandemic, the many challenges facing today’s CFOs are quite complex. From a regulatory point of view, CFOs need to manage their financial regulations, tax laws, risk management, as well as their labor and contracts. In addition, the global economy is having a much greater influence on the day-to-day operation of middle-market organizations. This increased complexity only puts a greater strain on most companies and requires their CFOs to streamline their performance by leveraging tools that will allow them to operate quickly and effectively on the global market.
Rapidly-evolving technologies can help to alleviate these problems by increasing efficiency and productivity throughout the organization. And while these technologies used to only be affordable for large multinationals, they are now available for middle-market organizations as well. It’s been some time now since finance professionals have realized that automation and digitization will be the key to their ability to drive performance.
In the meantime, the role of CFO has also evolved. It went from simply tracking and controlling revenue associated with finance and accounting to a more company-wide strategic role. Being more management and planning-focused, the CFO can leverage financial services technology tools to increase both business value and growth. They can do this by:
- Enabling more sophisticated levels of data collection and analysis. In doing so, they will be providing actionable insights into growing the organizations and provide them with a significant competitive advantage.
- Connecting departments, functions, operations, and individuals across the entire organization and in real-time, increasing visibility and access to relevant information.
Technology as a Success Enabler
Several existing and emerging information technology and data science applications are set to enhance the value of finance functions, as well as other key areas within the business. These will help CFOs further elevate themselves as strategic leaders in their respective organizations. Many finance professionals have recognized the need to take advantage of these emerging financial services technology to build stronger financial processes and data analytics.
Robotic process automation (RPA), for example, was shown to offer huge potential in terms of financial integrity and continuous improvement. This artificial intelligence (AI) and machine learning (ML) technology is able to deliver actionable and real-time business intelligence, all the while capturing process efficiencies that weren’t possible before. Yet, in order to capture these benefits, CFOs will have to identify which innovations are attainable for their organizations, as well as be able to justify the costs of these new solutions in a tangible way. Gartner predicts that robotic process automation (RPA) will eliminate roughly 20% of the repetitive and “non-value-added tasks” within the finance department by 2020.
What is Finance Technology Optimization?
Plenty of middle-market financial service providers leverage an enterprise resource planning (ERP) platform to manage and connect their business across the enterprise. However, these on-premise ERP systems are being steadily replaced by cloud computing solutions. These modern solutions have allowed middle-market companies to monitor and measure the effectiveness of their business, as well as drive efficiencies and cost-saving capabilities.
Many CFOs believe that there is plenty of room for improvement in terms of their ERP solutions, particularly in terms of their reporting and analysis capabilities, integration, customization, and ease of implementation. Mobile technology can also help improve the performance of finance organizations by delivering on-demand reporting, as well as timely data analytics that help in decision-making.
When it comes to finance technology optimization, companies need to find ways to extract more value from their accounting and enterprise resource planning (ERP) system, while also adopting new technologies able to improve their finance processes. FinTech literacy is still in its early stages, meaning that businesses will have to rely on their IT departments or external partners capable of providing them with all the benefits that FinTech has to offer.
Unfortunately, however, finance technology implementation takes too long. In fact, around 66% of CFOs report a lag in their tech investments ROI. This is due, in large part, to the overly long implementation process. In fact, only about 24% of all CFOs feel confident enough in their ability to overcome this challenge. In the meantime, however, slow adoption rates will continue to stifle the overall effectiveness of this emerging technology’s function.
Finance Technology Implementation
While ERP systems, cloud applications, and mobility are beneficial and essential for CFOs to do their job, several other emerging technologies can help enhance visibility of data and analytics capabilities, in order to get a competitive advantage. Big data is a significant tool to help finance organizations sift through and discover actionable insights for huge volumes of information that most organizations now possess. As such, CFOs need to get involved in data management and governance so as to better understand the data available and how it can be analyzed and used for better decision-making.
By implementing an effective big data platform, CFOs can identify behavioral patterns and trends, predicting future behavior of their employees, partners, and customers. This data can be used for enhanced wealth management, as well as to establish better internal financial control over key processes and information, and to create a mechanism used for industry comparisons. The ultimate goal here will be to enhance the organization’s operational performance. Big data can also be used to drive change within the company by providing more clarity to highly complex information and a more comprehensive overview of organizational analytics that are able to strengthen business processes.
Finance leaders should also assess the potential of both cognitive and predictive analytics within their organizations. While predictive analytics helps to forecast potential risks and outcomes from existing data trends and real-time information, cognitive analytics will provide additional learning capabilities to enable more efficient data analysis and help with decision-making.
To further optimize big data within the organization, finance leaders will need to leverage data visualization technologies that are able to present complex information in a more easily-understandable format for users. This will help your organizations better understand and analyze the key trends and metrics, as well as determine your financial drivers. Additionally, data visualization will help CFOs develop more compelling insights for various stakeholders that are outside of the finance department.
Analytical tools can also be used to increase the speed of dissemination and reporting of data. There are plenty of middle-market technologies that will allow CFOs to make better sense of the large amounts of data and translate them into actionable insights that the company can use. These technologies have allowed many CFOs to expand their responsibilities and drive significant value for their companies.
As the financial demands of organizations become more complex, the role of the CFO has never had as many responsibilities. While some tools can increase efficiency and visibility, others will enhance the company’s analytical capabilities. Finance organizations need to be tech-savvy enough to leverage and optimize it, as well as drive strategic initiatives based on enhanced data insight and analysis. By understanding your available options and by developing the right technology roadmap, you will be able to take advantage of the necessary emerging technologies and the many benefits that they have to offer.
How Consero Can Help Guide Your Company
Consero has a long history of developing a successful growth business strategy for its partners with the right technology solutions. While there are other organizations out there that provide FP&A services, Consero also has its Finance as a Service (FaaS) software platform. It provides a unique and transparent approach to business growth. In addition, our financial experts can support you in terms of banking and financial leadership, decision-making, financial data analysis, planning, budgeting, and forecasting, as well as acquisition integration support, among other such finance services. Contact our team at Consero to schedule a free demo. We’ll walk you through our guiding principles and processes and what you can expect as a Consero partner. We’re ready to answer any questions you have on improving customer experiences, optimizing management systems, and actionable business insights.