While adoption of IoT technologies in the financial sector isn’t as high as in many other industries, this is understandable, given the conservative nature of the business. But fintech startups, banks, and other financial institutions who are able to see the possibilities that will be enabled by IoT will become the industry leaders of tomorrow.
Nearly every industry is either already digitalizing or making plans to do so, and today it is no different for the banking industry. As more and more customers expect personalized experiences the need for real-time data and analysis is only increasing. In the banking industry, the use of data helps understand buying habits and financial health while also driving new revenue streams and enabling what many of us are already happily enjoying: an entirely digital banking experience.
In the US alone, 81% of consumers already use mobile banking, a number that is even higher in some other regions, such as the Nordics, where the use of online banking services is from 84-95% of the population. With these kinds of numbers, it’s clear that it’s not a matter of if banking will embrace digital transformation into their operations, but when and how – and it’s IoT that is helping drive this change.
Enhanced banking experience
No matter if the consumer visits a physical branch or does their banking online, IoT technologies are enabling more convenient and personalized experiences. We’ve long seen ATMs at the mall, in grocery stores, along busy shopping streets, etc., ATMs are actually an early prototype of an IoT device, allowing real time transactions while doing away with the need to stand in line at the bank to access accounts, which results in reduced staffing costs.
In order to further improve customer experience while also reducing costs banks are turning to new IoT technologies. Some banks have started using beacons to send customized offers to customers’ smartphones as soon as they enter the bank, while some ATMs have live stream video that allows customers to speak to someone at the bank if additional support is needed. This more customer-centered approach allows banks to serve the needs of specific demographics. Additionally, the data collected can be used to create customer profiles that can be leveraged to assist in improving the customer’s financial health, as well as building trust and loyalty.
Speaking of data…
Customers are increasingly using smart devices to do their banking, and data collected from mobile banking and apps, for example, allows banks to anticipate customer needs and provide advice and solutions that help customers make sound decisions regarding their finances. This creates customer loyalty and in an ideal world increases business. Additionally, financial institutions are using IoT functionality to forecasts future trends and market conditions through data analytics and predictive modeling, and these valuable insights can be used to create new products and services. Data can also be used by key decision-makers to judge the worthiness of different features on apps and where to invest in development.
Imagine a scenario where a retail customer or SME can raise short-term financing by offering collateral, such as machinery, cars, or other assets – but without having to head down to the bank to speak with the lender in person. Enabled digital identity, along with IoT technology, changes the whole process. The request for financing, along with transfer of asset ownership, can be automation and digital and achieved in a matter of seconds, which allows the bank to issue the loan immediately while monitoring the collateral status in real time without the need to take physical custody of it. How? Through connecting assets. If the borrower defaults on a payment, that car they used as collateral can be remotely disabled until payment is made. Additionally, the state of the collateral can also be monitored.
Insurance companies already offer devices that plug into the on-board diagnostic port of cars and send driving behavior back to the company. While this might not be advantageous to the more adventurous drivers among us, this data does allow insurance companies to offer discounts based on driver behavior, and also allows for tailor-made insurance based on driving habits, the health of the vehicle’s engine, and general wear and tear on it. Additionally, data can give insurance companies critical insights into the likelihood of accidents in certain areas and price policies accordingly.
A word about security
Banks and other financial institutions are, by their very nature, conservative, which tends to make them later stage adopters of technologies. Like healthcare and other mission-critical solutions, a mis-step can have drastic consequences for both individuals and society. For financial institutions, the early focus was on things like video surveillance in order to reduce fraud and improve both customer service and internal training. But as more and more IoT devices are deployed, it is vital that security measures are put in place. Encryption and vulnerability testing are essential in ensuring the secure transfer of data, while regular updates and firmware on network devices must be installed, and proper password hygiene practiced. You can learn more about security in our IoT & Security White Paper.
If you would like to learn more about how IoT can enable your business, please get in touch.