Scopes of Internet of Things (IoT) in the Banking and Financial Industry
Introduction
In the last few years, technology has not only made life easier for people. It has also turned the world to a global village where people are connected through the phone, laptops, and other machines that makes communications and business transactions easier to carry out.
At present, different sectors of the economy are making make use of various forms of technologies to simplify the task, automate actions and automate processes. One of such industry is the banking and financial sector where stakeholders are continuously seeking new ways of improving customers experience while providing better services.
Banks and financial institutions now make use of IoT technologies in reducing fraud cases, detecting risk ahead of time, staying ahead of their competitors and providing better services to their customers.
What is IoT?
IoT is an acronym that stands for “Internet of Things.” The IoT concept entails bringing together all things in the world and connecting them to the internet. In other words, it means expanding the capability of the internet beyond smartphones and computers to many other things, environment and processes.
IoT technologies provide better insight into business and allow organizations to become in better control of their businesses and things around them.
IoT in the Financial Sector
IoT plays a huge role in the financial sector; it has the potentials of changing the financial and banking sectors. In fact, research has shown that there will be high growth in the use of IoT in the financial industry with its market estimated to increase to $25 billion by next year. Since banks deal with the gathering of data, and massive data transfer, IoT will help banks and financial institutions save time, and work smarter. Also, with the introduction of mobile banking where customers can carry out various forms of transactions without visiting the banks and self-assisted customer care services where issues can be resolved by a virtual assistant, IOT helps financial institutions improve customer experience, manage risk, secure funds from cyber attack, and improve the entire banking security system.
Role of IoT in the banking and financial industry
• Improve security: Security is considered a top priority in every financial institution. IoT technologies help to improve security by detecting and preventing fraud even before they occur. With IoT, financial institutions can track the location of a financial crime, identify the type of device used in carrying out such crime and even get to the root of it on time. IoT also prevents fraud through authentication where wearable devices can be used to gather the biometric data of a customer; the combination of such biometrics and strong cryptography make it possible for the information to be secure in the bank’s database.
• Enhances customers experience through privacy: IoT makes use of networks of microsensors that helps banks and financial institutions to gather and secure financial data of their customer. With IoT, customer experience can be enhanced because the technology helps to reduce queues at the banks; it also guides customers on how to carry out self-service with the help of a virtual assistant.
• Determine the right placement of banks and ATMs: IOT provides insight to banks on areas that require more branches and locations where new ATM machines can be installed to meets the customers need. With this, banks do not have to waste fund in creating banks where customer demand isn’t on the increase.
• Make transactions easier: Imagine making payments without the need for cash or credit cards but with biometrics such as voice and face recognition. Isn’t that much easier? That’s what IoT does. It brings a lot of benefits to the financial industry especially in carrying out a transaction which is the core of the business.
• Data Analysis: IoT also helps banks and other financial institutions to collect data through the use of digital sensors and mobile apps. Through this, banks and financial institutions can analyze customer’s behaviors and make better decisions that will profit the customers.
• Proactive Services: IoT makes it possible for banks and other financial institution to detect service faults and find solutions to them before it becomes serious. With this type of technologies, banks can track past activities, customer’s behavior, and unusual activities in customers account. • Manage customer relationship: It helps banks and financial institutions to have a healthy relationship with their customers and provide better customers experience. In addition, with IoT, banks can offer services that meet customers need.
Ways IoT can be used in the financial sector
There are various ways in which IoT can be used in the financial sector. Some of these ways are
• IoT can be used to gather and analyze customer’s data in order to gain useful insights into the customers need.
• IoT simplifies daily operations by reducing dependency on the human workforce.
• It can also be used to facilitate financial operations such as saving and spending pattern analysis, estimation of balance, as well as financial planning.
• Devices powered by IoT (microsensors and wearables), can be used to enhance productivity manifold of an employee and always keeps them connected.
• IoT provides robust security of data through its many authentication tools
• It can be used to facilitate effective risk management in financial organization by gathering real-time data of assets of clients
• IoT technology drives automation in investment and trading because it provides real-time market surveillance and pricing engines which investors can use to monitor market trends and strategize accordingly.
• IoT can be used by providers to enhance customer satisfaction by adopting geolocation marketing strategies.
Possible challenges of adopting IoT in the financial sector
Although the use of IoT technologies has so many benefits on the banking and financial institutions, some major challenges may be faced by financial institutions when adopting IoT.
Some of these challenges include:
• IoT is prone to hacking: IoT features a whole network of connected devices and software. Therefore, there is a high risk of data and personal information regarding the customer’s privacy and security of funds being compromised through “hacking.” In the financial industry, privacy and security are considered very important and are not treated with levity. However, with IoT, data and personal information are being transmitted through the IoT network which can be breached by hackers. This is one major challenge that may stop some financial businesses from adopting this technology.
• There are no set/common standards for equipment maintenance: IoT hardware equipment are of different types; they are built by different types of manufacturers and require different maintenance approach. It is this lack of a common standard that can lead to failure in the functionality of IoT devices; even if all hardware manufacturers agree to use one specific standard, there would still be the problem of technical issues to tackle. This can only be solved if there is only one supplier of these IoT devices and even at that, the monopoly will damage the economic situation of the entire world.
• IoT technologies are complex: A lot of people find it difficult understanding what IoT technologies are all about because they are quite complex to use. IoT technologies as mentioned earlier require the connection of lots of devices through a network; however, if there is a break in that connection or if one of such devices is removed, there would be a complete breakdown in the system thus leading to huge losses. And that is why financial and banking institutions that want to adopt the use of IoT technology must only choose hardware from high quality and reputable manufacturers as well as experienced software development companies.
• IoT increases unemployment rate: IoT technology reduces the dependency on human efforts as work processes that require the human brain are automated with this technology. As time goes on, banks, as well as other financial institution, may cut down on the workforce due to this technology leading to a high increase in the unemployment rate which may be of negative impact to the economy of so many countries.
Top benefits of using IoT for banking
Some of the benefits of IoT for banking include the following:
• It saves time and simplifies work processes
• It provides insight for banks to understand customers’ needs.
• It enables financial institutions and banks to manage risk effectively
• It enables banks to provide better customer services to clients.
• Banks that make use of IoT can stay ahead of competitors• It helps banks improve the security of their customers’ accounts through encryption and authentication where these accounts can only be accessed by the customer only.
• It is cost saving.
Examples of IoT in the banking and finance industry
• Banking on wearables: At present, there is a growing ecosystem of wearable devices sold at low cost. Many banks now provide various types of apps for wearables like FitPay, Apply watch and others. Some banks even have their own devices and payment solutions.
• Tailored Marketing: At present customers are n demands of personalized solutions that meet their varying needs. In order to tailor a banking solution, the banks need to get the right information about a client need, economic conditions, and buying behaviors. IoT makes it possible for banks to keep track of all consumer activities and present a solution which meets their need.
• Branching out to connected cars: Smart vehicles also provide opportunities for banks to improve their customer’s experience and offers various services through connected cars. For instance, Idea bank has a fleet of smart cars that are customized with an integrated security deposit box and ATM.
• Blockchain-based smart contracts: A lot of banks are already trailing the potentials of the blockchain to secure records of authenticated transactions. For instance, the Commonwealth Bank of Australia has already completed the first global trade transactions between two banks using blockchain smart contracts and the IoT.
• Smarter branches: Use of IoT technologies also lead to the creation of smarter branches which may be a threat to the retails bank branches but provides better customer experience.
• Chatbots for improved customers experience: Chatbotshelps the banking and financial institutions to automate customer service inquiries easily. Already so many startups are adopting the use of chatbotsimplify processes and automate tasks.
What the future holds for IoT in the Banking and Finance industry
The future of IoT in banking and finance looks so bright. At present, this technology is being incorporated into most banking and financial service firms, and the masses are buying heavily into this.
IoT has the potentials of totally disrupting the financial sector in the future and causing all banks to embrace its use due to the benefits it has to offer. Even companies such as Apple and Google have taken to developing IoT devices such as smartwatches, wristbands, etc. which enables easier access to bank information. For instance, smartwatches when connected to customers’ accounts through IoT, allows the person to receive notifications such as alerts, balance as well as reward points. At present, banks are in continuous demand for these types of IoT-based products and more from companies that make such products.
Conclusion
Finally, although IoT in the financial and banking sector is still at the planning stage, there are immense potentials in what it can do. This amazing technology will do a whole lot of good to the banking and financial firms that adopt its use