Integrating Networks, Financial Products, and IT in the Digital Finance Era

The digital age has also progressed in 2023 for the Receivables Finance, Trade Loans and Trade Finance industry with many successes. It is becoming increasingly clear that leading organisations, such as the ICC and ITFA, have established themselves legally and commercially with initiatives for the implementation of digital documents and security instruments in the financial industry. This has laid the foundations for progressive digitalisation.

When implementing digital processes in the economy, it is essential that software companies accompany companies in industry and commerce, financial institutions, and banks as well as credit insurers on the path to digital transformation. Software companies that can fulfil this task in a meaningful way must first understand the business of the industries involved in detail in order to provide suitable and inspiring solutions for their customers.

The software industry is also characterised by significant innovations and regulatory and legal changes. IT companies must therefore not only have the professional and technical capabilities to advise customers and implement the best possible solutions, but also fulfil the requirements for IT performance and security.

In addition, the demands on detailed solutions, e.g. the implementation and handling of digital documents in processes, are now so high that specialists have established themselves on the market. This applies not only to ERP providers, but also to software companies that specialise in certain areas such as fraud prevention and credit risk management, as the number of insolvencies and credit defaults will increase by double digits worldwide in 2024.

As a result, software houses are also increasingly co-operating in order to offer the best possible risk management solutions for the market by combining software products. There is now a heightened awareness that the future lies in digital solutions in a fully networked supply chain with the integration of financial processes and insurance in digital end-to-end processes.

The barriers to entry for new software providers are now very high. Some leading software companies have been active in the market for several decades and have maintained their position by constantly adapting to the market and innovating. The investments of leading providers are in the single digit to double-digit million Euro range per year. New providers therefore have to bring partial solutions to the market with considerable capital and the need to scale very quickly. This does not apply to every new entrant in the software industry. Initially promising new software companies founded since 2005 have left the market in 2023. For companies, financial institutions, banks or insurance companies, gaps in the software landscape are significant commercial and strategic setbacks.

What can financial institutions and banks expect from software solutions in 2024 and beyond?

They can demand that a forward-looking and resilient IT solution is available. AI-based data analytics and communication between man and machine can be utilised and all security criteria are met. And IT-supported fulfilment of ESG requirements can be implemented.

In tenders for software houses, the options for co-operation between software houses should be considered. The focus should not only be on ERP providers who have created all functions through their own software developments. Financial institutions and banks should be open to the combination of software products in the purchasing process, and this should be taken into account in contracts.

The company's resilience in the market should also be considered. In addition to the hard facts in a due diligence on a software company, such as governance, financial data and sustainability of the IT solutions and the company, networking within leading industry organisations and expertise in the relevant sectors are essential.

However, cooperation between financial institutions and banks and insurers is also essential, especially as the proportion of certain insured asset classes is considerable at almost 40% and must also be implemented fully and effectively from a technical perspective. Expertise in insurance products and processes is essential here.

Digital transformation is a social process and a path to the future for financial institutions and banks. It not only enables more efficient processes and massive cost savings as well as a better sustainability balance, but also creates new forms of business opportunities. The need for financial products to support companies with working capital and liquidity is still enormous.