IoT has become essential for organizations. It gathers information from systems and devices and throws light on various crucial aspects, such as machine performance, supply chain management, customer data, etc. This modern technology helps enhance service delivery, accelerate operations, improve customer experience, and more. Therefore, IoT has continued to be adopted everywhere over the past few years. According to a report, the global banking and financial services market (BFSI) market for IoT is forecasted to grow from US$ 249.4 million in 2018 to US$ 2,030 million by 2023. Let’s understand how IoT plays out in the BFSI market.
What is IoT?
The Internet of Things (IoT) is a modern technology that describes physical objects or things with software, sensors, and other technologies to exchange and connect data with various devices over the internet. Example: Fitness Trackers, smart locks, thermostats, appliances like bulbs, and many more. Imagine a watch that can track your movement like your distance traveled, steps, heartbeat, etc. Well, it’s not just imagination anymore; it’s already available and is very suitable for the maximum population around the world. There are around seven billion connected devices in today’s world, and experts assume this number will scale up in the future. Using IoT, you can share data between physical objects and leverage analytics, big data, cloud, and more in minimum investment and human intervention. Technologies like connectivity, low power sensors, AI, machine learning, and more make IoT possible. Industries use IoT for smart manufacturing, smart digital supply chains, connected logistics, smart cities, smart power grids, connected assets, and more. At present, its usage is IoT widespread throughout the global marketplace, even in the banking and fintech sector for cybersecurity and other solutions.
How Does IoT Work?
Suppose you are moving in a car and get a notification about your low petrol indicator on your mobile. How about a system that can notify you about nearby petrol stations? This is possible with IoT. But how? To better understand the working principle of IoT, you need to know the IoT components that play a major role. The entire IoT ecosystem consists of four different components:
- Sensors/Devices: Devices or sensors collect data from the environment, such as a temperature reading, nearby places, video feed, etc. A sensor feels the changes in the environment and notes those changes. Thus, sensors or devices are extremely useful in applications. There are a lot of applications around you. Example: Sensors in the phone, such as GPS, can track your location and guide you to the destination. Also, cameras sense your movement to capture pictures.
- Connectivity: After receiving data from sensors or devices, cloud servers process it with the help of platforms. Connectivity thus refers to the connection between all IoT devices in a given IoT ecosystem, such as sensors, gateways, user applications, platforms, and routers. You can control the complete IoT system so that you will be able to choose the perfect connectivity path. Cellular networks, such as 5G or LTE, Bluetooth, Wifi, Zigbee, etc., offer connectivity to communicate with a large amount of data.
- Data Processing: Once half of the part is complete, some functions are performed on the data to process the data in order to send necessary outputs. Data processing is a crucial step in IoT tech to know the nature of data. Data analysis takes place quickly to offer better results.
- User Interface: Once it analyzes the nature of data, it displays it on a screen so that end-users can easily check the data. Each IoT device has its own personality or interface that depends on the purpose or the task. In various industries, it plays a vital role, and it works silently and securely. Take the industry of fintech or banking as an example.
IoT simplifies the debt collection process through supply chain activity with the help of networks and sensors. You will get enhanced security systems to improve fraud detection. IoT can sense every connection and optimize them accordingly to enhance customer experience.
Applications of IoT
IoT has various applications in the modern world, starting from healthcare industries to the banking or finance industry. Let’s find out some of the applications:
Banking and Fintech
IoT has given a lot to the fintech industry when it comes to payment processing and security. Here, IoT works as a cybersecurity tool or mobile point of sale system to securely encrypt payment information. Retail banking has been using IoT culture for decades. The Automated Teller Machine (ATM) is one of the top IoT devices. This allows real-time transactions and displays your account balance on the screen without communicating to any human. Fintech combines AI with industrial IoT to test banks if they are capable of better customer support. Nowadays, fintech firms assist customers promptly in real-time using IoT systems. Since waiting in a queue is a major issue in any bank. With IoT, banks can execute ticketing options electronically so that your customer speaks to the right representative.
Wireless payments and transactions are in heavy use in this modern world. Wearable devices replace traditional credit cards and smartphones in making payments. Automation is another procedure that a banking or fintech industry uses to enhance performance.
CPG, Auto Tech, Healthcare
IoT has never-ending applications in every sector, starting from auto tech to healthcare. The health industry takes advantage of sensors to monitor patients’ conditions in real-time and outside the hospital. In other words, IoT helps the healthcare sector improve the care of needy ones even at the time of risk. Furthermore, hospitals are also using smart beds equipped with sensors to collect data on vital signs, oximeters, body temperature, blood pressure, and more. IoT is also useful in managing traffic in cities using the concept of smart cities. IoT works as smart shelves in CPG companies. It saves a lot of time and money by notifying the stocks available in the room. It also helps in referring the right product to the right consumer in real-time. CPG companies use IoT tech in their industry to benefit both companies as well as consumers. In the automotive industry, IoT has a major role. Whatever you see in a car from the outside but inside, it is filled with automation. You get various notifications like low pressure, gear change after a certain speed, calls, and more when you drive. Automotives integrate with IoT systems to reduce human error and make the driving experience better and smoother. The fleet management solution nowadays plays a vital role in consumer lifelines. From maintenance to logistics, IoT devices allow the driver to perform well. The primary advantage of using IoT is complying with safety and environmental regulations.
Real-life Examples of IoT in Banking and Fintech
Wearables – Wallet of Things
From watches, fitness trackers, and wristbands to smart clothing and jewelry, there is a wide range of wearable devices across the globe that include payment. In simple terms, when it comes to paying at a go, you just need to tap your card that is saved in your wearable device to pay. The advanced technology allows your wearables to make faster payments during checkout in order to save you from waiting forever in the queue. Today’s world defines their lives with the more imaginative step they take. From healthcare to payment and many such things are now possible.
Smart payment contracts
A smart payment contract is again a smart way used by many sellers or companies. This is basically a self-executing contract written into the lines of code. Here, the agreements and the codes are stored in a decentralized blockchain network. The code manages the execution and transaction, which are irreversible and trackable. Smart payment contracts permit true agreements and transactions among anonymous parties without needing a legal system, external enforcement mechanism, and a central authority. The main objective is to build trust between signatories to avoid falsifications, alterations, and misunderstandings.
Security systems
Keeping your standards safe is the main motto, and thus security systems came into the picture. Another frequently used IoT device is security systems. Security systems work in the same principle everywhere, whether it’s a device or an application. When a system works with interworking devices and components to secure something, it is called a security system. Security cameras and motion sensors are major security devices generally used in many households and companies. And glass break sensors and sirens are specially used in banking and fintech sectors as well as related sectors. Banking and fintech industries use a security system to maintain an effective and efficient security strategy.
Benefits of IoT in Banking and Fintech
Data Analysis
Data analysis is essential since it can help people gain valuable insights to improve various aspects of a business or organization. IoT can help banks and financial institutions gather data in real-time and analyze it. They can analyze ATM kiosk usage in real-time by customers from different cities and suburbs. Based on the usage stats, it can help organizations decide whether to decrease or increase the number of kiosks in those areas. Furthermore, IoT can help banks and financial institutions to introduce on-demand services like setting up ATM kiosks in close vicinity to users to enhance their service accessibility. In addition, data analysis helps understand their value chain, from distributors and suppliers to retailers. They can even gain financial insights from the data so that they can improve their turnover rates by employing better strategies.
Customer Relationship Management
Maintaining good relations with your customers can take your business a long way. It will assure the customers that you care about them and they can stay with you for longer. Gathering customer data helps banks and financial institutions identify customers’ needs and concerns. This data will help them address those concerns and better cater to their needs. This way, you can enhance relationships with your customers and make them feel valued.
Cybersecurity
Cybersecurity risks are growing everywhere, and banks and financial institutions are one of the top targets. Attackers use advanced threats to hack into systems and networks to steal data and money. Using IoT, financial institutions can make safer and easier identity verification of users. This helps protect their data and reduce the chances of errors or leaks. For example, Nymi is a smart bracelet that can record users’ heartbeat to access a device. All you need is to touch it while the bracelet is on. Also, IoT devices with artificial intelligence can spot hacking attempts as well so that banks can be alerted on time and prevent any mishaps.
Personalized Marketing
Personalization is key in today’s marketing dynamics. Customers love personalized services and products that can cater to their needs. IoT can help you do that. It can collect valuable data about your customers to put your marketing efforts in a direction that is beneficial for your customers’ needs. You can come with useful products, services, and guides that can help address customers’ pain points and enhance their experience.
Product Planning and Management
The chances for your product to be successful depend on how your customers perceive it. This is why product planning and management are essential. Using data gathered from IoT systems, you can create solid strategies for managing your products. It will help you understand whether your customers like your product or not, what parts they like and what parts are to be improved, check and manage inventory, process orders on time, etc. All these will cater to your customers and help increase your business success.
Improved Decision-Making
Making better decisions in different aspects of your business is crucial, be it product planning, launch, marketing, sales, or anything else. By analyzing a vast amount of data, IoT systems can generate meaningful insights and use them to make informed decisions. It will help increase their profitability, safeguard the organizational data, ensure you are fulfilling customers’ demands on time, and never disappoint a customer.
Smart Interactions
Financial organizations can use smart interactive solutions such as chatbots in their website or applications to help customers any time and anywhere. It will be your customer’s instant support whenever they need you, without waiting for a support representative. So these were some of the many benefits, but IoT still has certain challenges that banks and other fintech organizations face.
Challenges of IoT in Banking and Fintech
Here are some of the main challenges of IoT in fintech and banking:
No set/common standards for maintenance
There is no common standard for IoT devices’ compatibility, management, and maintenance. This creates difficulty for users using devices and systems from different product manufacturers to connect and communicate with one another. Also, banking and fintech deal with massive data stored on multiple IoT devices, which again becomes challenging to manage.
Hacking
In IoT, especially consumer IT, user data about their daily routine is gathered to help them provide improved services. However, this data travels through various nodes present in a network, such as devices, services, and solutions. So, the data storing device becomes vulnerable to risks and policy violations. Cyber attacks such as distributed denial of service (DDoS), Denial of Service (DoS), data theft, etc., are common in IoT systems. And such risks are highly hazardous for banks and fintech organizations where crucial information is stored on their devices, such as customers’ personal information, credit and debit cards data, funds, etc. If this critical information is hacked or leaked, it can translate into fraud, money theft, and whatnot.
Unemployment rate
In this advanced age of IoT, machines seem to do a lot many things. So, what would those humans do that are replaced by those machines? For example, an organization may decide to use a 24×7 chatbot instead of maintaining a panel of customer support representatives. It will be a cost-friendly, error-free, and never-exhausting support alternative. This means that the unemployment rate increases with the introduction of machines in many aspects of banking and fintech. And this is concerning, especially in the scenario after COVID-19, where people are already losing their jobs and livelihood.
Future of IoT
IoT is witnessing massive adoption over the past few years in various fields, including banking and fintech. It is beneficial for both organizations and customers, and that’s why intelligent technologies like intelligent wearable, smart payments, smart security systems, etc., are being used heavily. IoT is still in its infancy, but its future seems to be bigger and brighter by the looks of its widespread usage among customers and organizations alike.
