4 ways the IoT is revolutionizing the financial industry
The Internet of Things (IoT) is revolutionizing the financial industry by collecting debts, personalizing offers and rewards, detecting fraud and optimizing capacity management.
With the rapid digitization and mobilization of the banking and financial services sector, companies are exploring the possibility of IoT in finance to harness data and minimize the risks endemic to this sector.
The financial sector, which deals with an abstract commodity like money, does not involve many tangible elements in its activity. And this lack of “stuff” may cast doubt on the applicability of the concept of the Internet of Things, which essentially requires a network of physical objects. However, a thoughtful implementation of IoT can reward the financial industry with plenty of growth opportunities.
With an increase in the use of personal, typically mobile, devices for banking, the constant data generated by these devices can give banks and other financial services institutions (FSIs) access to deep customer insights. In addition, data may also be collected through a network of bank-owned assets, such as ATMs and other financial transaction points such as credit/debit card readers. Although the current rate of adoption of IoT in finance is slowly progressing, the increased mobilization of financial services and innovation of use cases will ultimately lead to the adoption of IoT at scale. ‘industry.
1. Advanced debt collection facilities
Debt collection from individual and corporate borrowers involves considerable effort and overhead for lending financial institutions. Monitoring the operations and supply chain activity of debtor companies using sensors and IoT networks can help ISFs determine their willingness to pay without incurring excessive overhead, associated with failed payments. control. Similarly, an IoT network of ATMs, card readers, and other point-of-sale devices can be used to assess a borrower’s expenses and income to determine their ability and intent to repay and spending. defaulters may be reduced until refunded.
2. Personalized offers and rewards
Increase customer engagement and loyalty by offering loans and investment options based on:
will become much easier with the help of IoT enabled data analytics. Offering highly personalized loan and investment options will increase the likelihood that the customer will consider the product.
Banks incentivize customers to use credit/debit cards or some other payment methods by providing reward points, which can be redeemed in specific ways. These rewards may not appeal to all types of consumers, making these reward systems useless in most cases. IoT-based intelligence can be used to attract customers by rewarding relevant tradable options based on buying activity and demographics. For example, a customer who is known to spend most of her money on clothes should receive reward points that will give her discounts on clothes, while another customer who spends more on food should receive points that would be redeemable in the restaurants. These targeted rewards will improve customer engagement and loyalty.
3. Improved Fraud Prevention
Fraud prevention is a major concern for financial institutions, which are constantly investing in and looking for new ways to combat the misuse of their offerings. Major financial firms, such as HSBC, have already successfully implemented AI-based anti-fraud systems. With fraud prevention being such a high priority, the IoT will definitely be a game changer in this area.
Misuse of debit/credit cards can be prevented by having IoT-enabled point-of-use security systems, such as ATMs, which have more personal and secure authorization methods. Citigroup is testing ATMs that use eye-scanning technology to authenticate transactions. Another method to prevent card misuse via IoT is to track user’s mobile location and point of credit card use before approving transactions.
4. Optimized capacity management
Banks are constantly aiming to expand their network of offices and ATMs, while managing existing units with maximum efficiency. By using IoT-enabled monitoring to track the number of customer units per day, the average wait time can be measured to determine the optimal number of staff and counters at each branch. Decisions about new branches can also be aided by using customer distribution data against geography. The same can be done to optimize the number and location of ATMs based on usage.
In addition to these benefits, IoT in finance, with an innovative redesign, can have a major disruptive impact. One example is Interact® IoT, the first-ever IoT banking platform, which aims to help users save money by connecting their bank accounts to IoT-enabled objects. Major benefits can also be achieved by combining the interconnectivity of IoT with blockchain to have a much more reliable and secure network.