Digital Transformation in the Financial Sector: Democratization, Innovation, and Sustainability
Digitalization is revolutionizing financial services worldwide, democratizing access to the financial system. With the increasing use of digital technologies, consumers can access financial products and services anytime and anywhere, facilitating transactions and personal finance management in a more convenient and efficient manner. This increased access creates more informed and demanding customers who expect quick responses and immediate solutions to their financial needs.
One of the main changes in the banking sector is how customers access financial services. Access to smartphones is essential and will continue to grow. The population uses smartphones to transfer money and make payments, accelerating economic activity. Additionally, digitalization enables the financial sector to meet these new demands more effectively, especially as observed in some countries during pandemics.
It is also closely linked to sustainability, enhancing the banking sector’s potential to significantly contribute to the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement. Access to mobile phones is crucial in this context, as it facilitates the expansion of the banking sector’s and financial system’s potential to promote sustainability and financial inclusion. Financial inclusion is a critical area where digitalization can make a significant difference, allowing more people to access essential financial services. Moreover, the use of sustainability-related data helps banks integrate environmental and social risks into their risk management, promoting a more holistic and responsible approach.
The digital financial revolution serves as a means to democratize access to the financial system, unlocking potential that can be harnessed to achieve economic growth in today’s businesses
Digital security is a fundamental concern in adopting financial technologies. Information security management tools and practices are essential to ensure trust in online transactions. On the other hand, digitalization in many countries has reduced bank robberies and ATM explosions, enhancing the security of the financial system. Additionally, reducing the expenditure on printing paper currency contributes to sustainability and cost reduction.
134 countries and monetary unions, representing 98% of global GDP, are exploring a Central Bank Digital Currency (CBDC). In May 2020, this number was only 35. Currently, 68 countries are in the advanced stages of exploration — development, pilot, or launch.
The Central Bank Digital Currency (CBDC) can benefit the entire population and position the country on the path to a digital economy with financial inclusion. This digital service can help record economic activities, especially in countries with many informal workers, such as those providing services for ride-sharing and cleaning apps. This enables a better understanding of these workers and the creation of public policies tailored for them.
Traditional financial institutions and fintechs
Here is where SORAMITSU comes in — a boutique fintech startup company specializing in blockchain technology. A proponent of Iroha, which aims to promote productive growth to elevate economies and improve people’s lives. This shared vision is a unique synergy that would allow Central Banks to manage their tokenized assets on the SORA network, leveraging scalability, speed, and affordable transaction costs.
Fintechs are playing a crucial role in transforming the financial sector, introducing innovations that make money management simpler, cheaper, and more accessible. Collaboration between fintechs and traditional financial institutions is becoming a common practice, enabling co-creation that accelerates the development of new solutions. This collaborative environment is essential for fostering innovation and enhancing services offered to consumers. With the expansion of innovation, your country has everything it needs to become a global innovation hub.
Improving technological infrastructure is essential to promote financial and digital education, ensuring that everyone can benefit from financial digitization and reduce inequalities. By investing in educational technologies and continuous training, we can ensure that more people are prepared to fully participate in the digital economy, creating a fairer and more efficient financial system for all.
