Top 10 Technologies Enabling Finance Digital Transformation in 2024
Digital transformation is rapidly changing the landscape of finance and accounting. From large enterprises to small businesses, finance departments are increasingly adopting advanced technologies to modernize legacy processes, harness data insights, and provide strategic value.
What‘s driving this shift? Pressures to improve efficiency, reduce costs, and provide real-time visibility into financial data. Competitive threats from digitally-savvy startups. And rising customer expectations for digital financial services.
According to Mckinsey research, the COVID-19 pandemic accelerated digital adoption, with the finance function digitalizing at two to three times the pace of pre-pandemic. Leading companies are using technology to reimagine everything from routine accounting to advanced analytics.
So which technologies are enabling this transformation in finance? Here are 10 of the top technologies set to make an impact in 2024 and beyond.
1. Robotic Process Automation (RPA)
Robotic process automation (RPA) uses software bots to automate routine, repetitive finance processes. For example, RPA can automatically input invoices or reconcile accounts – tasks traditionally handled manually.
According to Deloitte, up to 80% of finance tasks can be automated using RPA. This frees up employees for higher value work like data analysis.
Key benefits include:
- Increased efficiency and productivity
- Cost reduction
- Improved accuracy by eliminating human errors
- Better compliance with accounting rules/standards
- 24/7 availability of bots vs human workers
Leading financial institutions like JP Morgan and American Express have adopted RPA to drive efficiency gains. Continued development of cognitive RPA will expand functionality for more complex tasks.
2. Artificial Intelligence & Machine Learning
AI and its subset ML are powering intelligent automation in finance. Rather than just automating rote tasks, AI-enabled systems can analyze data, identify patterns, and make predictions or recommendations.
Use cases include:
- Predictive analytics for forecasting and planning
- Anomaly detection in transactions to flag potential fraud
- Automated expense report auditing
- Automated invoice processing with "smart OCR"
- Personalized customer product recommendations
Benefits include:
- Deeper data-driven insights for forecasting and strategy
- Risk reduction from enhanced fraud detection
- Faster processing and decision making
- Improved customer experience with personalization
According to PwC, 86% of financial services executives believe AI will enable them to make better decisions. Adoption is surging as AI capabilities grow.
3. Cloud Computing
Cloud computing allows financial data storage and applications to reside remotely on the internet. This provides anywhere, anytime access and reduces reliance on on-premises IT infrastructure.
Cloud enables scalability, faster deployment, and streamlined maintenance without large upfront costs. It‘s essential for supporting data analytics and AI applications that require vast computing power.
Benefits include:
- Flexibility to scale services up or down
- Lower costs by eliminating hardware investments
- Increased mobility and remote working capabilities
- Enhanced security and resiliency versus on-prem
- Faster updates and new releases for software
Top cloud providers like AWS and Microsoft Azure offer specialized services for finance. According to Gartner, worldwide public cloud spending will exceed $590 billion in 2024.
4. Blockchain
Blockchain brings enhanced transparency, security, and accuracy to financial transactions. The decentralized ledger is shared across multiple parties, prevents tampering, and enables trustless auditing.
In finance, blockchain is being applied to:
- Cross-border payments and transfers
- Trade finance and supply chain transactions
- Accounting systems of record
- Digital currencies
- Smart contracts
Benefits include:
- Reduced transaction costs and faster settlements
- Lower fraud/error rates with immutable ledger
- Increased trust through transparency
- Streamlined audits and compliance processes
- Decentralized structure avoids single point of failure
Leading financial institutions are investing heavily in blockchain. Per IDC, worldwide spending on blockchain solutions will reach $19 billion by 2024.
5. Process Mining
Process mining analyzes system logs to provide visibility into business processes. It identifies bottlenecks, deviations, and optimization opportunities.
In finance, it helps uncover insights like:
- Where delays occur in order-to-cash
- Variations in time for approving expenses
- Frequency of invoice errors requiring rework
Armed with these insights, companies can streamline workflows and improve process efficiency. This enables sustainable transformation versus one-off optimization.
Benefits include:
- Quantifiable view of process health and performance
- Objective assessment of improvement opportunities
- Ongoing process monitoring versus periodic reviews
- Automated visualization without reliance on humans
Per Gartner, at least 20% of large organizations will be using process mining by 2023. It‘s a key analytics tool for finance leaders.
6. Big Data & Analytics
Big data analytics examines large, diverse datasets to uncover correlations and insights for competitive advantage. This helps finance better understand customers, markets, risks, and profitability drivers.
Applications include:
- Customer persona analysis
- Predictive modeling for revenues and expenses
- Risk modeling and forecasting
- Identifying cross-selling opportunities
Benefits include:
- Data-driven forecasting, planning, and decision making
- More targeted products and experiences
- Proactive mitigation of emerging risks
- Earlier fraud detection
Per IDC, companies leveraging big data analytics enjoy 8% higher revenue growth and 6% higher profit margins than competitors. Big data is pivotal for data-driven finance strategies.
7. Internet of Things (IoT)
The Internet of Things (IoT) connects physical assets and devices via sensors and the internet. In finance, IoT generates real-time data to enhance visibility and decision making.
Use cases include:
- Fleet tracking for leasing/financing businesses
- Inventory management using RFID tags
- Real-time data from POS systems
- Automated payments upon asset delivery
Benefits include:
- Faster automated accounting of payments and assets
- Preventing inventory shrinkage/waste
- Proactive maintenance to reduce equipment downtime
- Enhanced risk monitoring from remote asset tracking
According to Forbes, global IoT investment in banking will reach $250 billion by 2024. Connected devices provide real-time financial insights.
8. Digital Workforce Solutions
Digital workforce platforms integrate RPA, AI, and people to efficiently handle high-volume, repetitive finance tasks. By automating lower-level work, finance staff can focus on strategic, value-added activities.
These solutions combine benefits like:
- RPA bots for efficient task execution
- AI for enhancing bot capabilities over time
- Humans training bots and handling exceptions
- Centralized control over digital labor
This creates a flexible digital workforce that can scale cost-efficiently. Processes get handled faster with higher quality results.
Per MGI Research, up to 30% of finance activities could be automated using these digital workforce platforms.
9. Application Programming Interfaces (APIs)
APIs enable software systems to exchange data and functionality. This allows seamless integration between fintech apps, legacy systems, and third-party solutions.
In finance, APIs facilitate innovations like:
- Open banking platforms
- Embedded finance offerings
- Faster onboarding with instant verification
- Real-time data syncing across systems
Benefits include:
- Accelerated digital product development
- Innovation through fintech partnerships
- Enriched customer experiences
- Lower maintenance costs versus point-to-point
Banks with open API platforms enjoy up to 20% higher profits than peers per Accenture. APIs are crucial for connected finance tech ecosystems.
10. Cybersecurity & Privacy
As finance digitizes, cybersecurity becomes paramount. Solutions like encryption, access controls, AI-powered threat detection, and data loss prevention safeguard against risks.
Benefits include:
- Protection of sensitive customer financial data
- Blocking fraud and financial crime
- Ensuring systems availability and resilience
- Avoiding regulatory non-compliance fines
Cloud-based cybersecurity enables scalability and centralized control without complex on-prem infrastructure.
According to IBM, the average data breach costs $4.35 million for financial services firms. Cybersecurity is a must-have, not a nice-to-have.
Finance is undergoing rapid digital change. RPA, AI, cloud, and other technologies provide tangible benefits like improved efficiency, insights, speed, and experiences. They are disrupting legacy processes and operating models.
Leading finance teams will continue embracing these technologies to reduce costs, manage risks, and get more value from data. While challenges exist, the benefits far outweigh the drawbacks.
By proactively digitizing, finance organizations can advance their strategies and performance. They can shift from reactive number crunching to providing foresight and strategic direction. The future looks bright for finance teams who digitally transform with purpose and vision.
