Evolution of Finance in Digital India
Finance is one of the most important business functions. It deals with the money aspect of a business, which is an important reason for a business to exist. Traditionally, this business function has dealt with accounting and fund procurement. With evolving business landscapes, growing globalization, increasing competition, and international compliance requirements, the traditional finance function is also evolving to meet the current needs.
The business environment is complex and requires finance to handle and provide sophisticated details within sufficient safety parameters. In modern times, finance function typically takes care of the cost of capital, firm valuation as well as an optimum allocation of financial and other resources. Moreover, finance now entails a managerial role in that it is an ongoing part of a business and not one that happens episodically.
The current, post-modern digital era has heralded an increasing data-driven and complex business environment. Finance professionals now need to be up to speed with the financial, managerial and technological knowledge in order to provide valuable service to their companies and customers. They are involved in performance-driven processes that prove to be the guiding light for their companies. Good finance companies and professionals looking to leverage technological advancements for greater business intelligence, heightened efficiency and greater profitability.
Another key feature of the digital era is an increase in demand for transparency and accountability from the organizations as well as professionals. With great technology come great risks. Finance companies need to consistently deal with threats of hacking, phishing and other such technological threats which can harm their own database as well as their customer accounts. Hence, there is a need for greater risk management policies. Also, with rising expenses and overall inflation, finance companies and professionals need to focus more on revenue-generating activities.
With the increase in industrialization, there was also a growing need for the development and delivery of applications. In fact, the development of apps has become an absolute imperative. It helps organizations deal with their customers to a great extent. Applications are also helpful in the increase of profitability of the revenue streams.
According to research by Deloitte, there are four faces of finance - catalyst, strategist, steward and operator. The catalyst is the face which steers the behaviors within the organization to achieve financial and strategic objectives. The strategist's face deals with fixing a direction for financial strategy and aligns its overall organizational strategy. The shareholder value and asset protection are taken care of by the steward. Service delivery and operational costs are balanced through the operator face of finance.
Already, a great amount of technological advancement has enabled finance with various tools and technologies to take care of each of these functions with much ease. The Deloitte report predicts that there will be six key impacts of digital technology on the evolution of finance:
- Predictive and prescriptive analytics - The finance function will have collected huge amounts of structured and unstructured data. Analysing this data for increasing business intelligence and providing competitive advantage will be a key expectation from finance.
- Processes as utilities - In future, most processes of finance will function as utilities. Automation would lead to a globally interconnected data circuit leading to a continuous exchange of data, globally.
- Ubiquitous and real-time presence - In future, digital technology will be available everywhere in real time. This will enable real-time information for all functions including finance. The finance function will have to ensure that this data is made available to the right stakeholders on time and in the correct format. The leaders of finance teams will have cybersecurity as one of their key responsibilities as a cyber threat will increase as a result of advancement in technologies.
- Social impact of business - The finance reports will also cover the social impact of the business. With the popularity of social media and the power that technology has given in the hands of the consumer, all businesses will have to report social outcomes. The measurement and reporting models will evolve over time with regard to their maturity and acceptance.
- All pervasive technology - Technology will pervade all functions and will not just remain a platform or enabler. Digital finance will have eight core technologies forming its core. Finance will in fact function digitally as the major ethos instead of simply being enabled by digital technology.
- Future finance talent a mix - Generation Y and generation Z would both be a part of the digital evolution of the finance function. Their expectations with work and values would be different. Millennials as well as centennials will be part of this digital finance talent pool and will have great expertise in digital technology as well as a highly analytical mindset.
This evolution will mean a data-driven finance function. With so much data all around, the finance leaders will have to consistently solve inconsistencies in data. Data scientists and data science skills will have to be incorporated into finance teams. Companies will have to invest in understanding the potential use of external big data mining. The decision-making process in finance will have to be insight driven.
Financial inclusion due to digital technologies
Apart from the wide-ranging technological upliftments of the finance function, digital technologies are also enabling financial inclusion. For a very large population of the country which resides in remote locations, accessing banking and financial facilities has traditionally been difficult or non-existent. With high internet and mobile penetration in remote areas, financial institutions now have the option of extending banking and financial facilities to these people online. With Gram panchayats being enabled with broadband connection and computers, villagers can now access these facilities and maintain their accounts online. The government and RBI are working together to make digital inclusion a successful initiative. The Pradhan Mantri Jan-Dhan Yojna and other RBI policies are working to make this possible.
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