How Will IOT Change Banking?
The banking industry is now starting to see the various potential ways in which IoT can help to take it to the next level.
The Internet of Things (IoT) is, without a doubt, one of the biggest technological transformations on the horizon, with many already claiming that we are entering the second major digital revolution.
Analysts at Gartner predict there will be 25 billion smartphones, smartwatches, wearables, connected cars and other connected devices by 2020. An amazing forecast, that strongly indicates the influence that machine-to-machine (M2M) connectivity is going to have on our society, culture and business.
In a very short space of time, we are all going to be surrounded by intuitive connected devices, from our smartphones and wearable tech, through to millions of sensors in our homes, on our roads and in our workplaces. For consumers, the real promise of the ubiquitous connectivity of the IoT era is to help us save time, work smarter, drive safer and live a healthier and more active lifestyle. For business, there are multiple opportunities to benefit from IoT, with $2 trillion of economic benefit predicted on a global level by Gartner.
Some industries, such as commercial real estate and the insurance industry, have been quick to embrace the benefits of IoT innovation. Insurers, for example, have been quick to learn about and welcome the opportunities to develop new ways of using increasingly widespread sensor data in wearable and smart car technologies to gain much more detailed and valuable risk data on their customers.
Following on from these types of FinTech innovations, the banking industry is now starting to see the various potential ways in which IoT can help to take it to the next level.
IoT generated data adds value for banks and customers
Today’s consumers demand always-on convenience and a personalised service whenever possible, as is clear from the mass adoption of online banking, mobile banking apps and, most recently, contactless payment technologies. Additionally, they also want the highest levels of digital security from their banks, with any data breach or security threat posing a major problem to banks in the IoT era.
Machine-to-machine connectivity that enables the mass collection and exchange of information from sensors and objects also opens up multiple opportunities for banks, who will be able to better track and analyse the behaviors, wants and demands of their customers. This, in turn, will allow banks to provide customers with a far more personalised experience, with targeted advice, context-aware offers and insight. The bank is able to achieve a new level of understanding of the needs of both consumer and business clients, attaining a new level of customer intimacy.
Banks might use IoT technologies to create more engaging and context-aware customer rewards, or to generate more intelligent and personalised customer cross sell opportunities, for example. And IoT will help banks to innovate and devise better ways to improve risk management, reduce costs and improve overall operational efficiency.
Business clients and consumers will be able to access a much more holistic view of their finances wherever and whenever they like. And banks will offer far more tailored products and solutions to help customers make the best financial decisions at all times.
The increased amount of real time data available to banks, from information on residential and commercial properties through to personal data from social media, spending habits and credit behaviour, will all allow banks to make better commercial decisions, based on far more accurate financial risk data.
How will IoT helps banks to stay ahead of the curve
Banks are going to be far more technologically-empowered to assist business customers and help them to achieve better commercial results, due to the banks’ ability to obtain and access data from across the business customers’ value chain, from suppliers through to distributors and retailers, for example.
Biometric and positional sensors, for example, are highly likely to help banks to track both the physical performance of individuals and to track the shipping of goods and manufacturing quality control better than ever before, which in turn will help to improve underwriting processes and reach new markets.
It will be those banks that best use these new types of IoT-generated data streams to make vital decisions on business lending that stay ahead of the curve. One example here might be the potential benefits to banks from new types of sensor that monitor the activity and condition of retail industrial and agricultural businesses, such as connected field devices in manufacturing or agricultural sensors that monitor livestock.
On which note, farming, in particular, could well be a major beneficiary of real-time data feeds which will allow farmers and their banks to continuously assess and value the farm’s crops and livestock, accurately gauging yields, property and overall business value.
In terms of consumer-facing retail banking branches, IoT could also be used to assist customers with new and improved video tellers and kiosks that will be equipped with sensing technology that will be able to biometrically recognise the customer from the moment they enter the branch.
New security challenges for banks in the IoT era
Over the next five to ten years, the banking industry is going to see major changes from IoT technologies, which will also present banks with new security challenges to manage. The need to ensure that the whole connected banking experience is safe and secure will be increasingly vital in order to gain customer trust and ease clients’ concerns around personal and business banking data being hacked.
Sensitive data, from a customer’s financial history to their location history, is always potentially a target while it is stored on or moving around the network. No matter where the data is held, whether it be on a device or moving along the network from the bank to the customer’s connected car, for example, it needs to be properly protected.
Which is exactly where tools such as encryption to protect the data itself and authentication tools to authorise access to this data by only those allowed to, are vital. We’re already starting to see the development of biometric data – fingerprints, voice-recognition software and iris-scans – come into play to prove the customer is who they say they are.
Banks will have a far more detailed and useful picture of the customer, with the abundance of IoT devices, which at the same time means that banks will need to add an extra layer of security across the entire IoT ecosystem – from the devices being used through to the network and cloud level.
Cybercriminals have more opportunities to sneak in or hack a network as there are more points of entry and devices there are connected to that network. All of which means, for banks to fully embrace IoT, they will need to build in security from the start, at every level, to win and maintain customer trust.
