Even though IoT has already influenced sectors such as manufacturing and healthcare, it is still an emerging technology in the banking world. Research has found that banks have not yet incorporated IoT technology within their organizations or in their products or services.
In the long run, however, this is likely to change. As per the research reports, 40% of financial firms are currently experimenting with IoT and big data.
Internet of Things (IoT) refers to any object that is capable of capturing and communicating and sharing data (such as status, geolocation, etc.) over the Internet.
This communication will often occur between two objects ( i.e. not involving any human being), often referred to as Machine-to-Machine (M2 M) communication. Excellently-known examples are home thermostats, home monitoring devices, fitness and health apps, wearables.
It all sounds modern, but smartphones, laptops & smartwatches can also be called as IoT devices.
Most specifically, in addition to these revolutionary dreams of IoT, the smartphone is likely to remain the core of the connected device universe.
Key Benefits of IoT to Financial Service Industries
Retail Banking
Retail banks will use IoT to offer enhanced personalized services to customers. Instead of providing a ‘one size fits all’ approach, banks use IoT technologies to evaluate various aspects of their customers’ actions – including the frequency with which they visit or buy from traders – and deliver tailored budgeting strategies or financial products that are important to their lifestyles.
In addition, data from wearable payment technologies, for example, may be used to create comprehensive consumer profiles and allow for the detection of frauds.
The same data may also make it possible for banking institutions to create relationships with brands that can drive specific offers to banking customers in the region, allowing even better customer relations and offering more relevant benefits.
Insurance
The benefits of IoT technologies in the financial sector are not limited to retail banks. Insurers can use IoT technologies to help consumer engagement and automate and improve underwriting and claims processing, as well as default prediction.
This can also allow insurance providers to define risks more specifically. Automotive insurers, for example, have traditionally depended on indirect measures such as age, address, and driver’s creditworthiness when setting premiums.
Today, data on the behavior of the driver and the operation of the vehicle, such as how quickly the vehicle is driven and how much it is driven at night, are available. These new data sets will help insurers offer premiums that more accurately represent their customers.
Trade Finance
Another use of IoT in the financial sector, which has the potential for huge implications is in the field of trade finance. International trade movements are generally costly and mostly paper-based due to the inefficiency of the supply chain in the movement of goods.
IoT in trade finance can be used to make these processes quicker by monitoring movement, supply & demand. It will greatly increase the productivity of the process by reducing the expense and risk to the company.
Moreover, in order to have any real effect on trade finance, there will have to be a large-scale, global implementation of IoT – enabling every aspect of the ecosystem to be accounted for and creating a smooth process.
Banking
The Internet of Things enables banks to keep an eye on their own equipment, evaluate the assets used by branches and increase the quality of decision-making when offering loans, enhance the efficiency of risk management, and so on.
Collecting data on the use of ATMs to ensure that the machine is used at its highest capacity or that it is located at a favorable location. The Internet of Things should be able to collect knowledge about how the machine eliminates downtime.
Collecting data on market movements in real-time, enabling banks to increase the number of locations in a smart way.
IoT and banking integration strengthens IoT security challenges and increases the efficiency of borrower’s activity and collateral monitoring.
Maintain Data Privacy & Security
When there are so many devices that transfer huge data, privacy becomes a priority & shared information needs to be secured all the time. This is not new, as devices are linked to a network, there is a possibility of data manipulation, which may lead to negative effects, such as financial risk.
The Internet of Things helps protect customer data from inevitable breaches, such as a secure payment process and information management.
For instance, when a customer connects their refrigerator to the internet, the refrigerator automatically senses that the family is running out of eggs and orders fresh eggs from the local grocery store. IoT based financial app helps to make payments seamlessly in the background.
Here we are concerned with the customer’s bank account, and when paying for grocery stores using the refrigerator, the consumer must have the certificate to prevent any fraudulent transactions. It also gives consumers a positive experience and loyalty that could aid in gathering and using data for marketing and services.
Supporting Sales and CRM Process
IoT would also enable financial service providers to enhance their sales and CRM processes. IoT allows a more precise and rapid recognition of the customer’s needs (even in real-time), allowing even more efficient marketing and targeted sales.
This more intimate awareness of the customer enables more personalized interaction and thus greatly enhances the relationship with the customer.
Beacon or geolocation technology can be used to deliver goods and services when a customer arrives at a specific location.
For Example: If a customer enters a car dealership or a shop for certain expensive products, the bank may alert the buyer to the amount of financing it accepts (and give a preferred interest rate)
Banks may partner with shops through loyalty programs. Real-time location monitoring will allow banks to provide real-time offers and deals. The deal will only work if the customer pays in the store with the bank card.
Conclusion
IoT is a big opportunity for the banking sector and there will definitely be disruptors able to have that exposure – so now is the time for banks to start thinking about technology development and implement this technology to be ahead in the competition
Vinay Varma
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- How IoT has its impact on Financial Service Industry - July 21, 2020
I appreciate that you took a simple article by explaining the process step by step and how to build momentum.
Thanks for article nice good job.