The Internet has donned various avatars over the course of its evolution. What started as a network of documents has rapidly become a platform for applications and people. Today, the Internet of Things, or IoT, is perhaps its most disruptive form. Billions of devices are connected to each other, forming an intelligent system of systems. In 2020, the number of connected devices across the globe is predicted to touch 25 billion, a whopping 30 times the figure in 2009. These connected devices have penetrated several sectors, and banking is no exception.
The IoT infrastructure that facilitates the transmission of data across consumers, financial institutions, and commercial businesses is now being called the Bank of Things. While still in its infancy, the growing adoption of smart devices is expected to trigger its exponential growth in the decade ahead. According to a study by Absolute Market Insights, IoT-based banking and financial services will grow at a CAGR of 55.3 percent between 2019 and 2027. So how is IoT set to change the way we bank?
Creating new payment end points and possibilities
As more devices obtain digital interfaces, digital payments are transcending the realm of personal computers and smartphones. Payments are already now conducted on connected wearables such as Apple’s smartwatch. This is just one example and IoT is creating newer end points with internet connectivity, which are capable of handling digital payments. This exciting paradigm—The Internet of Payments—is unfolding new scenarios, where refrigerators can automatically purchase groceries and cars can pay for parking and fuel. These may sound like science fiction, but such a future is not far off. Further, IoT can handle customer requests, transfer asset ownership, automatically disable cards, and enable loan processing.
Therefore, in today’s increasingly connected ecosystem, banks can rely on IoT-driven data to increase revenue streams and improve customer experiences. Connected smart devices can provide banks with reliable and instant insights into customer behaviour, which they can leverage to improve and customize services. Personalized wealth management portfolios, greater returns on investments, and more transparent operations are some of the benefits to customers that banks can derive with IoT.
Enriching the banking experience
IoT has tremendous potential to benefit both banks and customers alike. Data from sensors and beacons will allow bank managers to optimise a branch’s capacity management. By tracking the number of customers visiting per day, managers can accurately estimate the required personnel and the investments needed to optimize performance. The ‘smart branch’ of tomorrow will be equipped with technologies such as biometric sensors and interactive teller machines (which embed most branch services into a single machine) to enhance customer experiences. While IoT is guaranteed to minimize the need for ATMs, it can also enable bank branches to fully manage their functioning through a smartphone and allow quick repair in case of damage.
Some banks have also used IoT to engage with customers beyond traditional paradigms. The US Bank has an IoT initiative to encourage customers to stay fit by granting bonuses and financial rewards for reaching fitness targets. Another platform, Interact IoT, has created wearables to encourage positive spending habits by tracking customer spending and sending shockwaves to their wrists as a reminder not to overspend.
Tackling potential security threats
Data security is the most imminent challenge in IoT banking today. Increasing reliance on data to provide seamless service has paradoxically increased the anxieties around potential data theft. With billions of interconnected devices capable of transacting money, each of these can also be potential attack points for hackers. When one device is breached, it opens every other device on the IoT network to attack. However, technology is beginning to rise to meet this demand. Today we have devices that implement encryption and authentication tools to protect sensitive data. For instance, Apple Pay provides users with tokens, or unique numbers to make payments. Likewise, geo-location technologies authenticate payments by guaranteeing payment proximity. Integrating biometric data such as fingerprints, iris scans, and voice recognition are proving effective in checking security breaches as well.
With rising IoT adoption across the globe, the future of banking has never looked more promising. The many layers of friction that we take for granted in our banking experiences today will soon be a thing of the past. Given these disruptions, IoT presents much to look forward to.The author is Technical Expert at Hitachi Vantara, India.