The Internet of Things enables people in various sectors, including fintech and banking, to live and work smarter.
IoT has become essential for organizations. It collects information from systems and devices and sheds light on various crucial aspects, such as machine performance, supply chain management, customer data, etc.
This modern technology helps improve service delivery, speed operations, enhance the customer experience and more. Therefore, IoT has been continuously adopted everywhere for the past few years.
According to a report, the global banking and financial services (BFSI) market is projected to grow from 9.4 million in 2018 to .03 billion in 2023. Let’s figure out how IoT develops 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. Examples are fitness trackers, smart locks, thermostats, home appliances like light bulbs, and many others.
Imagine a watch that can track your movement, like distance covered, steps, heartbeat, etc. Well, it's not just imagination anymore, it’s now available and is very suitable for the majority of people around the world.
There are about seven billion connected devices in the world today, and experts expect this number to increase in the future.
With IoT, you can share data between physical objects and take advantage of analytics, big data, cloud technologies, and more with minimal investment and human intervention. Technologies like connectivity, low-power sensors, AI, machine learning, and others make the IoT possible.
Industries use IoT for smart manufacturing, smart digital supply chains, connected logistics, smart cities, smart power grids, connected assets. Today, its use is widespread throughout the global market, including in the banking and fintech sector for cyber security and other solutions.
How IoT Works
Let’s suppose you are driving a car and you receive a notification about your low gas gauge on your mobile phone. How about a system that can alert you to nearby gas stations? This is possible with IoT. But how?
To better understand the IoT working principle, you need to know the IoT components that play an important role. The entire IoT ecosystem consists of four different components.
#1. Sensors/Devices
Devices or sensors collect data from the environment, such as temperature, nearby locations, streaming video, etc. A sensor tracks changes in the environment and make records. Therefore, sensors or devices are extremely useful in applications.
There are many applications around you. For example, your phone's sensors, such as GPS, can track your location and guide you to your destination. In addition, the cameras detect your movement to capture images.
#2. Connectivity
After receiving data from sensors or devices, cloud servers process it with the help of platforms. Therefore, connectivity 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 entire IoT system so you can choose the perfect connectivity path. Cellular networks, such as 5G or LTE, Bluetooth, Wi-Fi, Zigbee, etc., offer connectivity to communicate with a large amount of data.
#3. Data Processing
Then, data gets processed to send the necessary results. Data processing is a crucial step in IoT technology to learn the nature of the data. Data analysis is done quickly to deliver better results.
# 4. User interface
Once the nature of data is analyzed, it gets displayed on a screen so that end users can easily verify the info. Each IoT device has its own personality or interface depending on the purpose or task.
In various industries, it plays a vital role and works quietly and safely. Take, for example, the Fintech industry or banking:
- IoT simplifies the debt collection process through supply chain activity with the help of networks and sensors.
- You'll get enhanced security systems to improve fraud detection.
- IoT can detect each connection and optimize accordingly to improve the customer experience.
Application of IoT
In the modern world, IoT has various ways of application, from the healthcare industry to the banking or finance industry. Let's look at some examples.
Banking and Fintech
IoT has given the Fintech industry a lot 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 main IoT devices. This enables real-time transactions and displays your account balance on the screen without communicating with any human beings.
Fintech combines AI with industrial IoT to test banks if they’re capable of providing better customer service. Today, Fintech companies serve customers in a duly manner in real time using IoT systems. Since waiting in a queue is a major problem in any bank. With IoT, banks can run electronic ticketing options so their customer speaks to the right representative.
- Wireless payments and transactions are widely used in this modern world.
- Wearable devices replace traditional credit cards and smartphones for making payments.
- Automation is another procedure used by a banking or Fintech industry to improve performance.
CPG, automotive technology, healthcare
IoT has endless applications in every sector, from automotive technology to healthcare. The healthcare industry is leveraging sensors to monitor patient conditions in real time and outside of the hospital. IoT helps the healthcare sector improve their services for those in need even at the time of risk.
Additionally, hospitals are also using sensor-equipped smart beds 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 like smart shelves in CPG companies, saving a lot of time and money by notifying the available stock in the room. It also helps refer the right product to the right consumer in real time. CPG companies use IoT technology in their industry to benefit both businesses and consumers.
In the automotive industry, IoT has an important role. Whatever you see in a car, both outside and inside, is full of automation. Receive various notifications such as low pressure, gear change after a certain speed, calls and more when driving.
Cars are integrated 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 the lifelines of the consumers. From maintenance to logistics, IoT devices enable the driver to perform well. The major advantage of using IoT is to comply with environmental and safety regulations.
Real-life Examples of IoT in Banking and Fintech
Wearables. Purse of things
From watches, fitness trackers and bracelets to smart clothing and jewelry, there is a wide range of wearable devices around the world that include payment. In simple terms, when it comes to paying in one click, you just need to tap on your card that is integrated into your wearable to pay.
Advanced technology enables your handheld devices to make payments faster during checkout so you don't have to wait in line forever. Today's world defines their lives with the most imaginative step they take. From medical care to payment and many of those things are now possible.
Smart payment contracts
A smart payment contract is again a smart form used by many sellers or companies. This is basically a self-executing contract written in lines of code. Here, the agreements and codes are stored on a decentralized blockchain network. The code manages execution and transaction, which are irreversible and traceable.
Smart payment contracts enable real agreements and transactions between anonymous parties without the need for a legal system, external enforcement mechanism, and central authority. The main aim is to build trust between the signatories to avoid falsifications, alterations, and misunderstandings.
Security systems
Keeping your standards safe is the main motto, so it’s the right time to take care of security systems.
Another frequently used IoT device is security systems, that work on the same principle everywhere, be it a device or an app. When a system works with devices and components that interword to protect something, it’s called a security system.
Security cameras and motion sensors are the main security devices that are commonly used in many homes and businesses. Glass break sensors and sound alarms are especially used in the banking and Fintech sectors, as well as in other related sectors.
Banking and Fintech industries use a security system to maintain an effective security strategy.
Benefits of IoT in Banking and Fintech
# Analysis of data
Data analytics is essential as it can help people gain valuable insights to improve various aspects of a business or organization.
IoT can help banks and financial institutions collect data in real time and analyze it. They can analyze real-time ATM usage by customers from different cities and regions. Based on usage statistics, it can help organizations decide whether to reduce or increase the number of machines in those areas.
Additionally, IoT can help banks and financial institutions introduce on-demand services, such as installing ATM close to users to improve the accessibility of their services.
Moreover, data analytics help understand your value chain, from distributors and suppliers to retailers. They can even gain financial insights from the data so they can improve their churn rates by establishing better strategies.
# Customer Relationship Management
Maintaining good relationships with your customers can take your business a long way. It’ll reassure customers that you care about them and that they can stay with you longer.
Gathering customer data helps banks and financial institutions identify customer needs and concerns. This data will help them address those concerns and better serve your needs. In this way, you can improve relationships with your customers and make them feel valued.
# Cybersecurity
Cybersecurity risks are growing everywhere, and banks and financial institutions are one of the main targets. Attackers use advanced threats to hack into systems and networks to steal data and money.
With IoT, financial institutions can make user identity verification more secured and easy. This helps protect your data and reduce the chances of errors or leaks.
For example, Nymi is a smart bracelet that can record users' heartbeats to access a device. All you need is to touch it while the bracelet is on. In addition, AI-enabled IoT devices can also detect hacking attempts so that banks can be alerted in time and prevent mishaps.
# Personalized marketing
Personalization is key in today's marketing dynamics. Customers love personalized services and products that can meet their needs.
IoT can help you do that. You can collect valuable data about your customers to focus your marketing efforts on what is beneficial to your customers' needs. It can come with helpful products, services, and guides that can help address customer pain points and improve their experience.
# Product planning and management
The chances of your product being successful depend on how your customers perceive it. That’s why product planning and management are essential.
With the data collected from IoT systems, you can create robust strategies to manage your products. It’ll help you understand whether your customers like your product or not, what elements they like and what aspects need to be improved, check and manage inventory, process orders on time, etc. All of this will serve your customers and help increase your business success.
# Improved decision making
Making better decisions in different aspects of your business is crucial, whether it's product planning, launch, marketing, sales, or anything else.
By analyzing vast amounts of data, IoT systems can generate meaningful insights and use them to make informed decisions. It’ll help increase your profitability, protect your organization's data, make sure you meet customer demands on time, and never disappoint a customer.
# Smart interactions
Financial organizations can use smart interactive solutions like chatbots on their website or apps to help customers anytime, anywhere. It‘ll be your customer's instant support whenever you need it, without waiting for a support representative.
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
These are some of the main IoT challenges in Fintech and banking:
No established/common standards for maintenance
There is no common standard for compatibility, management, and maintenance of IoT devices. This creates difficulties for users using devices and systems from different product manufacturers to connect and communicate with each other.
Additionally, banking and Fintech deal with massive data stored on multiple IoT devices, which again becomes a challenge to manage.
Hacking
In IoT, especially in consumer IT, user data about their daily routine is collected to help them deliver improved services.
However, this data travels through various nodes present in a network, such as devices, services, and solutions. Therefore, the data storage becomes vulnerable to risks and policy violations.
Cyber attacks like Distributed Denial of Service (DDoS), Denial of Service (DoS), data theft, etc., are common in IoT systems. And such risks are very dangerous for banks and Fintech organizations, where crucial information is stored on the devices, such as personal customer information, credit and debit card data, funds, etc.
If this critical information is hacked or leaked, it can lead to fraud, money theft, and more.
Unemployment rate
In this advanced age of IoT, machines seem to do many things. So what would those humans who are replaced by those machines do?
For example, an organization may decide to use a 24x7 chatbot instead of maintaining a panel of customer service representatives. It’ll be a cost-effective, error-free, and never tiring support alternative.
This means that the unemployment rate increases with the introduction of machines in many aspects of banking and financial technology. And this is worrying, especially in the post-COVID-19 scenario, where people are already losing their jobs and livelihoods.
Future of IoT
IoT is seeing massive adoption in recent years in various fields, including banking and Fintech. I’is beneficial for both organizations and customers, and that’s why smart technologies like smart payments, smart laptops, smart security systems, are being used a lot.
IoT is still in its infancy, but its future looks bigger and brighter from the looks of its widespread use among customers and organizations alike.
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