Undoubtedly, the IoT has deeply embedded in our lives and everything we do. From smart speakers to smart homes, wearables to self driving cars, we directly or indirectly depend on IoT devices to reduce our workload.
For instance, if we take the banking sector into account, various users employ different devices for executing their transactions, the science behind it is IoT.
What actually happens? The information about the users is obtained from various devices and taking this data into consideration the banks offer a variety of services to the users for helping them in making wise and effective decisions. This showcases a simple glimpse of internet-connected devices.
In the scope of this blog, you will observe how IoT is frequently used in financial and banking services and produces more value to the users.
IoT builds an integrated communication between interconnected devices and platforms through the internet and engages the physical and virtual worlds together. The transmission of any kind of data becomes a daily routine with the advent of remote and digital-based IoT systems.
These devices can send signals to the server and to other devices to get a large amount of data. This dataset can provide key insights into various procedures of a company.
With these advantages, IoT is gaining huge attention in businesses across the world. Different industries, like, healthcare, retailing and financial services are exploring the paths to grasp the potential of IoT in order to bring out excellent revenues from business undertakings. However, you can learn more about examples of IoT from here.
IoT and Financial Services
“Everywhere where more data can help you make a decision – that is where IoT adds value to financial services,” - Varun Mittal, Fintech leader, EY
With the swift advent of digitalization and mobilization in banking and financial services, the industries are searching for the chances of IoT in finance to leverage data and to reduce risks.
Also, customers expect easily available and user-friendly technologies,thus banking services are utilizing the latest technologies and hence embracing IoT with open arms and delivering accessible financial resources. As the industries are able to manage highly sensitive data, they also come up with the fear of compliance or security gaps.
IoT has the possibility to transform the financial services, it collects data and analyzes it to know customer’s behaviors and preferences. It permits institutions to improve their services and control over their operations and strategies.
IoT assists banks in multiple ways to reduce cost, improve risk management and general efficiency. We know that IoT provides communication between customers and banks is dynamic; banks have access to gather data and classify the needs of customers to provide the best offers to customers.
This information helps banks to remit more value-based services. Banks provide many services related to IoT such as ATM services, electronic banking, internet banking, online banking, mobile banking, tablet, etc.
(Most related: What is Fintech?)
Role of IoT in Banks
IoT is getting in touch with each and every industry today and comes up with great innovations to have an impact on business. Banks take many parameters into account as the number of assets, frequent customers visit, employees, etc. to get a complete dataset.
Banks require actionable and ingenious insights that could enhance business efficiency and prevent unwanted incidents.
IoT can help finance with the terms of rising working costs, addressing concerns for safety and security, prevention of crime and burglary, monitoring of energy/power in real-time, better customer experience, etc.
Illustration of the internet of things(IoT) in banks
Let’s understand these cases more deeply; Banks always have ample scopes and innovations, I am creating a small picture of the role of IoT plot in banks;
- Planning and Controlling of Products: Banks can utilize mobile data to launch better and more targeted services, they also can answer queries like what and when to launch products, what are key targets, what could be different services to begin, etc, by analyzing past services data.
- Smart Marketing: Demanding personalized designs and solutions for changing requirements, customers’ present economic conditions, purchasing behavior and personal requirements need to be tailored.
This could only be possible after the implementation of IoT successfully in banking services or BFSI. It helps to keep track of all customer activities and deliver solutions to personal requirements.
- Proactive and Dynamic Services: There might be service faults, modifications in products, an underlying concern of a product, etc. which can be easily handled with IoT in banking and financial industries. Customers’ past data also help service providers in contributing to better solutions.
(Most related: Introduction to Personal Finance)
Areas of benefits from IoT in Finance
1. Optimization with Management Capacity
Banks are constantly managing and expanding existing services with maximum performance efficiency.
- To determine the optimal number of counters at each branch, IoT can be used to keep track of the number of customers per day and hence average time in a queue.
- This can further help in deciding to open new branches with respect to location. The same procedure can also be done to optimize the number and location of ATMs.
2. Autonomous Payment Systems
IoT can let you do payments from everywhere, it creates a finance ecosystem for fast and rapid acceleration of payment processes in the finance industry. Wherever you are- you can do payment through your nearest internet-connected devices.
3. In Fraud Prevention
IoT and Artificial Intelligence together make interaction possible with customers, they not only enhance efficiency but also improve the methods and strategies in struggling with cybercrimes.
(Now that I mentioned Artificial Intelligence, you can also check out our blog on Banking on Artificial Intelligence)
IoT-systems can collect user data and interpret the activity. The data can then be transferred to the cloud, where it’s paired against the traditional behaviour patterns of users to confirm if they are consistent. In case suspicious activity has been detected, the account will be temporarily disabled while the user is instantly alerted.
Some popular names that have been executing innovative fraud detection systems are namely American Citibank and the UK-based British Standard Chartered, both of which have invested heavily into AI and IoT-based cybersecurity solutions.
Advantageous model of Internet of Things(IoT) in the financial services industry
4. Easy and Transparent Payment Methods
IoT is the integrated system of sensors and Softwares that aid in transparent payment methods. In development with smart financial procedures like smartwatches, voice-recognition devices, special RFID sensors in Uber cars, etc to make automatic payments even without using mobile phones.
5. Independent Wearables Functioning
The wearable technology has the capacity to transform the way financial service providers allow users to pay the bills, speed up the transaction, and escalate its quality as well as security.
Wearables like VR devices and hi-tech clothes can replace Google or Apple-based transaction apps and dominate as a preferred method for carrying out transactions.
Contactless wallets will allow bank clients to instantly check their account balance or the state of a loan.
Major Concerns While Using IoT in the Finance Industry
One of our previous blogs has clearly explained two sides of a single coin while dealing with market research and data science. Somewhere, the two-sided face of IoT also has become obstacles for each and every industry with some pitfalls that IoT bears to humanity.
When you talk about finances, high accuracy and securities are in demand. All the benefits addressed above also brings some problems interrelated to the security of customers’ personal data.
We came to know that how the financial field is vigorously using internet-equipped devices for better efficiency and performance, but we should also be aware of the weak points of IoT in finance;
1. Privacy and Security:
This is the main thread that comes first while handling any sensitive and personal data to a high rate while using IoT. The hacking risks of data are increasing when personal information gets transmitted through IoT networks.
So, the privacy and security of data should be taken into account while dealing with protection about financial matters.
2. No Mutual Parameters:
IoT is a combined system of different devices, these devices require different maintenance. But, unluckily, IoT hasn’t set any such mutual parameters for maintaining IoT devices.
Actually, hardware devices are manufactured by different suppliers and get in touch within a single IoT system. So, it becomes hard to get common parameters for all hardware devices.
Even if a single manufacturer will begin to design all types of equipment, it can raise a dangerous economic situation worldwide, so a lack of mutual parameters is a great failure in IoT functions.
3. Manifold Finance Ecosystem:
It is explained in the above point that the bigger an IoT system, the higher is its probability of system failure. As we are talking about the financial IoT system, any kind of failure could lead to huge losses and malfunctioning in the whole IoT systems.
IoT is an interconnected network, any kind of breakage will down a complete system to bear loss at a high rate. So all the hardware and software must be built with high-quality materials for more safety of systems and in order to obtain better experience without failure.
(Also read: Introduction to Financial Analysis)
“The IoT is removing mundane repetitive tasks or creating things that just weren’t possible before, enabling more people to do more rewarding tasks and leaving the machines to do the repetitive jobs.” — Grant Notman, Head of Sales and Marketing, Wood & Douglas
The increment in the usage of devices has led to an expansion in IoT data made by customers. IoT has acted as a revolutionary step to transform the lives of individuals; everything is connected with wires or without wires and so in finance products.
(Recommended blog: Introduction to Investment Banking)
To get some important information, IoT data needs to get extracted. This will increase the market values of businesses and provide a much better experience to customers.