The advancements made in the field of technology and Internet have paved the way for Internet of Things or IoT, as it is fondly known.
When IoT devices communicate and network with one another, they can share information in real time. The devices would be integrated with sensors that would make use of artificial intelligence, big data (capturing information and storing it) and analytics for seamless communication bordered on security.
It is believed that by 2020, a staggering 75 billion connections will be made through various mobile devices. IoT has touched everyone, everywhere; it is not possible to be immune to the changes that have been happening in the world.
The financial services industry, which had been lagging behind in their developments when compared to other industries by continuing with their traditional banking systems, have learnt to leverage the benefits offered through IoT, and are going to make huge changes that would benefit both the customer and the financial services industry as a whole.
One of the major reasons that kept the banking sector from shifting big time into technical advancements was lack of customer pressure. But now, thanks to the extensive benefits offered through IoT, the inherent desire by the banking sector to ease the cumbersome ancient system and make banking a hassle-free process, flowered.
The financial service sector began to understand the importance of maintaining prompt communication through intelligent devices for the future of business. It is only the banks that adopt IoT that would be able to engage audience, boost productivity and improve customer experience.
If you can have refrigerators that can order milk or groceries for you, or own self-driving cars, then it is no wonder that financial transactions would be completely automated in the near future. The process has already begun and will soon see completion. Innovations and changes have already prepared customers for a new reality.
You can expect the financial services industry to benefit in three different ways with IoT:
- Automated identification and authentication
- Optimizing the services and providing the right context
- Innovations in the way payments are going to be made (if it is your refrigerator that is going to buy milk, you need to have a payment method that is equally automated, right?)
Here is an example of how IoT’s influence in the banking sector will benefit a customer.
A customer with risky demographics applies for a loan. In normal circumstances, the customer’s chances of getting a loan is poor, but sensor data provided to the bank shows that the customer is a sensible driver. Who has more chance of getting a loan? Will it be a customer with sensible driving record or a comparatively richer person with poor driving record? Through sensor data, the bank will come to the conclusion that the first customer is far more likely to pay back his loan. He might even win an affordable loan.
Luckily, the banking sector has begun to embrace the IoT technology of late, and through its infrastructure, banks have been able to monitor the borrower and check whether he is indulging in fraudulent activities. In the past, this was a painstakingly slow process because the borrower’s papers have to be verified and this would be shuttled among the loan officer, loan administration staff and the credit officer. Now, all the bank has to do would be to install sensors and the inventory would be done, account balances synced and loan amount paid appropriately.
With IoT, the bank would also be able to work with the insurance company, like say, for example, by giving incentives to customers who install sensors to prevent auto-theft.
Security in the Banking World
In the world of banks, the more data points the bank has to cross and verify, the better the degree of protection offered to customers. This protects the privacy and financial information of customers and warns them in case of identity theft. When there are more data points for the banks to cross, the better the risk management decisions they would make. It would also help them to conduct commercial operations in a better way because they are able to monitor spending habits, credit behavior, social media behavior, and so on.
Just like there are two sides to a coin, IoT in the banking sector or any other sector for that matter, poses certain negative aspects as well. The most important one being lack of privacy, but that can be solved with proper and updated security measures.
IoT can change the way employees are paid, the way people shop, make investments, and so on. Eventually, with IoT’s stronghold on the financial services sector, you can save the most valuable thing in the world – time.
Within five years’ time you can expect more and more people to switch to internet banking, and visit brick and mortar banks only rarely. A good majority of these people would be happier only when these people have superior security systems. Traditional providers are going to face stiff competition from digital-only banks where security loopholes are covered.
When the banking system is fully into IoT, you can do practically everything through the internet, buy groceries – pay for them online, book a ticket to Africa – pay for it online, or get location based benefits when you are shopping in a new location while on tour; there is no area in life that would remain untouched.
Want to know how IoT can transform the financial aspects your business?