If you are looking for a blog post that discusses IoT in banking and fintech, then you are on the right page.
In this article, we will be covering important areas of IoT in the financial industry, mainly banking and fintech.
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Julia Matyunina who is a writer at Mobindustry asserts that “The next big step in financial services is the Internet of Things (IoT)”. She describes IoT as a “network of devices connected to the Internet that receive and transmit data”. This purpose includes optimizing operations, reducing costs, increasing productivity, and ultimately improving life.
If you look at the application of this technology in different industries around the world, you will find similar benefits. This of course does not exclude banking and fintech.
Therefore, in our discussion on IoT in banking and fintech, we will look at some of the benefits of the technology as well as some examples. To help you have a broader and more comprehensive understanding of the topic, we will also discuss some important use cases.
As Julia posits, IoT is a system of interconnected devices that among other things, gather and transmit data. The technology uses wireless networks for data transmission and in connecting different virtual worlds.
IoT technologies are transforming our digital landscape in many ways. But very important is that they make it possible for users to share and exchange different types of data on a daily basis.
IoT is important in different industries and human lives for a lot of reasons. According to Oracle, the technology enables us to “connect everyday objects to the internet via embedded devices; seamless communication is possible between people, processes, and things.” Taking the importance of IoT further, IBM claims that it allows businesses to improve efficiency and make data-driven decisions. They also affirm that IoT offers opportunities for cost savings, and enhancing customer experiences.
As this technology comes with many benefits, it extends to different industries, this is why we can today, discuss the benefits of IoT in banking and fintech.
AImultiple identifies 7 benefits of IoT in banking and fintech, these are in areas of security, real-time monitoring, fraud detection and data analytics.
Other benefits are improved customer service, expanded services and enhanced cardless transactions.
Let us discuss these benefits one by one.
IoT in banking and finance offers connected security-focused technologies which include, smart CCTV cameras, and smart alarm systems.
Also, with IoT, the banking industry has the option of installing smart alarm systems which help in sending quick notifications in terms of dangers or data breaches. The systems are connected to a central server and network which are remotely controlled.
But that is not all. IoT plays another role in security by being an integral part of smart bank buildings. A smart banking building will have doors with smart locks and smart sensors which helps in automated processes. More importantly, is that whenever there is an intrusion, these smart doors can auto-self lock for security reasons.
In fintech, IoT technology is used for improving security through the use of advanced security systems and devices. For example, the use of biometrics and other password-less security options like face recognition, thumbprinting and voice recognition.
If you are familiar with the benefits of IoT to businesses, you will know that the technology plays an important role in real-time monitoring. In fact, IoT enables real-time monitoring in different areas of the banking industry.
For example, the use of smart sensors is very important for data gathering in real-time. This allows the bank management or a security person to gain insights into useful information.
These insights may come with precise customer location as well as the time of the event.
The use of IoT in the banking and fintech industry enhances the process by automatically sending notifications to users on log-ins and low balances.
Another benefit of IoT in banking and fintech is fraud detection. Fraud is increasing at both local and international levels across different continents. Luckily, IoT offers viable means of curtailing fraudulent activities in banks.
Think of the introduction of biometrics, face recognition, voice recognition and other non-password means of authorisation. Also, IoT enables online banking websites to use OTP or authentication codes before granting access to users.
IoT does not only collect data in real-time, but it also offers improved analytics which includes up-to-date information. This information cuts across different banking departments, transactions, user behaviours, investments and others.
The importance of improved analytics by IoT in banking offers many benefits because it enables security, user satisfaction, and enhanced operations.
According to AImultiple, the use cases of IoT in banking which also pass as benefits may include;
- Surveillance and real-time monitoring
- Consumer loan innovations
- Enhancing security
These use cases show that banks and fintech can use IoT for monitoring the banking vicinity in real time and collecting real-time data.
Banks and fintech can also use the technology to collect and analyze various data which you can use in designing policies and services on loans.
Lastly, using IoT to enhance security entails harnessing data from different terminals and banking components (online and offline tools) to gain insights into user activities as well as insights on abnormal user behaviors.
One of the common performances of IoT in every sector is in data collection and analytics for improving customer service experience. The banking and fintech industry is a big beneficiary in these aspects because they need to leverage data for improving certain services. These services may include designing and implementing personalized services for users.
So, based on user behaviours, IoT offers banks and fintech insights on increasing changes and preferences from users which enable them to implement new policies that will serve customers.
There are also the benefits of helping customers in managing their money/investments or planning their budgets. IoT further offers important updates to customers on their financial statements, their spending habits and other money management suggestions.
We have in one way or the other touched on how IoT helps in service expansion in the banking and fintech industry. But let us have a dedicated discussion here.
Traditional banking finds it difficult to expand its services in a way that meets user requirements. This may be tied to the fact that they have very limited data and insights on needs, market changes and industry trends.
However, with IoT, modern banking takes a different turn. One that takes banking further than just being confined to money and asset management.
IoT transforms the banking sector by offering useful data and insights that help keep track of and monitor important activities. The result of all these often leads to service expansion in different banking and fintech institutions. This is why today; we see the rise of wearables for contactless payments.
Also, the data from IoT helps in the design and formulation of useful financial policies and programs for both experts and customers/investors.
This is an obvious benefit of IoT in the banking industry. It is very common as most people with bank accounts no longer use ATMs. They simply just tap to pay.
When asked “What does contactless payment tap to pay entail?” Visa.com answers thus; “Tapping to pay uses short-range wireless technology to make secure payments between a contactless card or payment-enabled mobile/wearable device”. It also entails the use of “a contactless-enabled checkout terminal.” With this IoT technology, “when you tap your card or device near the Contactless Symbol, your payment is sent for authorization.”
Affirming that this technology is here to stay, Visa.com, “In the U.S., thousands of merchants of all sizes accept contactless payments. Tap to pay at many of your favorite places like fast-food restaurants, grocery stores, pharmacies, vending machines and more.”
Also, with the use of IoT, banks can offer their services through cardless ATMs that use customer thumbprints. Many ATMs are also allowing customers to use facial recognition technologies to initiate financial transactions.
Common IoT trends in the banking industry include the following;
The IoT Wearables for banking is a trend that has come to stay. Although still evolving, it looks very promising as it is already delivering important banking services to customers at different levels.
Patrick Maitwe, observes that; the technology actually works with mobile banking apps but is specially designed and built for devices with compatibility with different devices. Wearables work with applications that come from banking institutions and the apps allow wearables to be installed for financial transactions.
With this IoT device, users can perform specific functions including checking their account statement, balances, and their financial history. Customers can also use wearables for financial transfers, pay bills and get notifications.
The evolution of this IoT technology in the financial industry means that we can have wearable money right at our fingertips. They come with improved security and data protection features. Patrick posits that the future of banking will witness wider acceptance of wearable devices which will impact wearable banking acceptance. Even more, “wearable banking is expected to gain traction and become more widely adopted”
This is one of the common IoT trends in the banking industry. From traditional to modern and now smart banking, customer-centric services are relevant in all types of banking systems.
IoT plays a major role in driving this trend in the banking sector because of its powerful role in data collection and analytics.
Every service, policy, bank and fintech app feature as well as functions are customer-centric. These innovations and services are only possible and effective as they should be with the right data and insights. This is why Xebia puts it; “IoT provides an excellent opportunity for banks and financial institutions to customize services as per the needs of their clientele.” IoT also plays a huge role in driving “frictionless delivery at the grassroots level of banking”.
Another important IoT trend in the banking industry is how IoT is leading smarter banking and finance. In this area, IoT is transforming processes in ATMs, smart branches, trade finance, insurance accounting and audit.
IoT is powering automation which makes it a viable tool for making different processes seamless and hassle-free. In other words, the technology offers a more robust way of performing repetitive tasks which often take the time of banking staff.
Now they can invest that time in other important areas of their work for more optimal results. Supporting this, Boris Shiklo says because IoT can perform these functions among others, “process requests, open bank accounts, disable credit cards, it is minimizing the need for human inputs which reduces human errors.
The financial world places a high priority on the structure of its security posture, including its mobile apps and websites. From the traditional banking system to modern and smart banking, security issues continue to trail developments. IoT plays a huge role here because the technology introduces enhanced security measures and fraud detection tools.
There are many challenging issues with the adoption and implementation of IoT technologies in the banking and fintech industry. We all know that the banking and finance sector is a sensitive business. It involves dealing with a huge number of investments which need optimal protection. The industry also needs to be very functional as all customers need to be sure to access their funds.
Some challenges of IoT in banking include the following;
- Privacy and security
- Workflow recognition
- System complexity
- Lack of global regulations and standards
These are the most critical challenges that every bank and fintech company need to know to stay organized and develop their processes accordingly. Knowing these challenges and how they can impact business will play a vital role in ensuring security, effectiveness and hitch-free financial services.
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What is the Internet of Things
The Internet of Things also known as IoT technology is actually a collection of networks of physical objects which are otherwise called things.
These objects or things have (smart) sensors, hardware, software, WIFI features, and other important technologies for connectivity.
Also, IoT is an exceptional technology for the collection and exchange of data as it works with other devices as well as different internet systems.
What is IoT in Banking?
When you hear IoT in banking what should come to your mind is the basic performance of IoT in the banking industry. To this end, the technologies play crucial roles in enhancing operational, and maintenance processes in banks.
Their sensors are also important in real-time tracking of ATMs as well as monitoring. With the embedded sensors, IoT in banks collect important data which are analyzed for improving customer-centric services. There are many other uses, but these are just a few.
What are the benefits of IoT in Banking and Fintech?
There are many benefits of IoT in banking and fintech.
These benefits can be summarized as personalized and seamless services, security, contactless payment, monitoring, and authentication.
Also, IoT technologies are important for risk assessments, data collection and data analytics, as well as fraud prevention.
What are the challenges of IoT in banking and fintech?
There are several challenges of IoT in banking and fintech but the most common border around security issues, and data privacy.
There is also an issue of unregulated standards at the global level which is not helping data management processes with IoT. You may also consider legacy systems, lack of staff training and knowledge on new technologies and the cost of IoT investment resources.
What are the Examples of IoT in Banking and Fintech?
There are so many examples of IoT applications in banking and finTech as the technology is capable of transforming different processes. For example, with the applications of IoT in the banking sector, financial agencies have the opportunity to benefit from the following;
- Automation of repetitive tasks
- The use of sensors and AI for monitoring
- IoT for maintenance services and predictive analysis
- IoT for designing and implementing ATM queues
- Banks and fintech companies use IoT to scale up their transaction processes
- The technologies are also important for reducing insurance and fraudulent claims.