Has Banking Industry embraced the Internet of Things?

Internet of Things has created quite a buzz in the technology landscape for the past few years. So much efforts are put forth to drive the focus on machine to machine communication (M2M), making smarter machines, cloud computing and real time data analytics. Industrial IoT is projected to have huge potential of around 150 Billion USD by 2020. Similar stride of focus and development is not seen in Finance sector for IoT. This may be because the term IoT was coined keeping machines in mind whereas the world of Finance revolves around people. This setback or situation is not for long as slowly banks and financial institutions have understood the significance of IoT and have started developing real life business cases and started investing a large portion of their IT budget for IoT. In the last year 2015, approximate spend on IoT by banks stood at 118 Million USD with the figure expected to grow around 35% by 2020.

The major reasons for increase in the budget and expenditure for IoT by banks is because of

  • Changing landscapes of the way in which businesses are carried out –Traditional banking had customer walk in for his transactional needs and the banks also offered only very basic products. Today the way in which banks carry out business has changed. Banks are offering most of their services to customer at his doorstep, started providing innovative products for social networks or products based on demographic understanding, Paperless process of customer applications etc.
  • Advent of mobile apps and its adoptability – Customers have grown out of the fear of data insecurity and have started adopting the mobile applications and mobile websites for financial transactions. Mobile has become an equivalent of a branch to process many of the requests of customer.
  • Change in customer’s perception about the service industry – Customers have started expecting more from the banks and the expectation of standards of service delivery is set high. Banks need to be up to date with all kinds of services and they are in need of providing personalized or customized services to each customer. This has become an important parameter for customer retention in this competitive world.
  • Technological improvements of big data and cloud – Big Data and Cloud computing has opened new avenues for improvement for banks. This has increased the processing capability of banks and helped them to understand the customer better. Post analysis, to provide the best solution banks are still in need of technology like IoT to take it to the customer.

With that being said about why banks have started using IoT, majority of the applications and usage of IoT revolves around the above reasons. Increased security measures and improved customer service are the two major focus of current IoT applications. Some of the existing and possible IoT applications are

  • Cash Management and Security – Small sized GPS tracking devices and wearables have advanced a lot to be made useful for cash management and movement. Security measures can be improved with these devices and tracking of them can be easily achieved. ATM loading and cash replenishment can be analyzed based on demographics and patterns using Big Data and the optimized loading route can be derived using IoT applications.
  • Inventory tracking – Banks have many products based out of limits and collaterals based on inventory of the customers. With the use of sensors and RFID tracking the quantity of inventory can be easily tracked in real time. When the real time data is coupled with the core banking system, automatic updation of the collateral value and limit value in periodical intervals can be done. Banks will have better credit security and lesser risk using this feature and the customer can benefit instantly with the increase in inventory without walking to the bank.
  • Customers as Beacons – Mobiles (Mobile apps) or wearables can be used as beacons for customer interaction. Whenever a customer walks in the mobile or the wearable act as beacon and provide full profile of the customer in a dashboard. Using this the branch can provide a personalized service like greeting him with his name, understanding his requests in faster and efficient manner and provide him elite services if he belongs to high networth group. The set of customer beacons can also be used for branch lobby management.
  • Car Banking – Cars can be linked to the customer’s bank account and insurance policies. For motor insurance, the financial institutions can tie up with OEM’s and install onboard diagnostics and a box similar to black box in the airplanes. The data captured from these devices can be used for eliminating fraudulent claims and thereby providing faster and efficient claims processing. Apart from this, cars can act as payment channels like making payments for takeout of foods, paying for the parking, payments for the fuel and gas, payments for the toll gates, payments for the garage etc.
  • Dynamic Rewards – The existing rewards program are paper based and static. Using IoT we can develop a Dynamic Rewards program which will be based on customer’s geographic location and based out of the set of retailers that are around him. If the customer signs up for this rewards program, the customer data will be constantly mined and patterns will be established using big data. Based on the location, rewards will be designed from the participating retailers. When the customer walks in to the location, he will get the information on the available rewards from different retailers in that region. From the retailers perspective they can see a high level profile of the customers around his region and they can publish instant rewards to attract customer walk-ins.
  • Wearables – The wearables have advanced in a rapid pace and they can be used to design highly secured banking services for customers. Wearables coupled with bio metrics can be used to operate the bank accounts, automated safety deposits (Lockers), authentication of payments over different channels etc. Wearables can be used to improve the security mechanism of the bank itself like enhancing security using bio metrics, alarm management and informing authorities (Police and Fire), remote management and monitoring of CCTV and security measures etc.

The applications are endless and can rapidly evolve based on customer needs and regulatory policies. IoT is rapidly being embraced by the banking industry but there are few areas of concern that the IoT developers and integrators need to address for a wider adoption of the same.

  • Data security – With rise of internet banking and mobile banking usage, the number of cyber frauds and the spinster schemes also has increased. When going towards IoT the data is being accessed by many more devices and machines. So the main concern for IoT in banking applications is data security and preventive measures from cyber attacks.
  • Customer privacy – Customers like to receive more offers and best in class deals but at the same time they don’t like someone to invade their privacy or scrutinizing their account details. In IoT applications if data sources are exposed to third parties like retailers or OEMs the anonymity of the customer name, address and contact number should be maintained and only the profiles to be shared in a broader manner. This has to be strongly thought as the application or the use case also should not be made weak by sharing a limited data.
  • Cost vs Benefits – The costs of the technology should not outweigh the benefits in any case. With respect to IoT, the case is even stronger and the applications must be adoptable, usable and beneficiary to both customers and banks.

The banking industry is constantly evolving and the way in which we bank is getting better and better. The banks that offer personal touch in customer service often has more customer retention and profitability. Following Big Data, IoT is yet another boon for making this evolution of banks and customer service smoother and fruitful.

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Sri Sabari Nathan

Sri Sabari Nathan Chief Customer Officer, Maxbyte Technologies. Sabari is involved in various activities involving customers and partners of Maxbyte. He interacts with the customers for pre-sales, business research, business development and business consulting. Sabari demonstrates thought leadership on technology, innovative pricing methods, business transformation and Internet of Things. He will continue to reach out to you with his blog posts on these areas.

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