So far the Internet of things (IoT) has focused on physical objects such as applications and devices that communicate data regarding physical attributes, such as temperature, power or flow rate. However, this is difficult where the Financial Services Industry (FSI) is concerned, as insurance, investment, and retail banking do not necessarily have tangible offerings. Yet the continuous development of smartphones has pushed the FSI to offer its customers services that their mobile devices can support.
There are a lot of benefits the FSI can experience by integrating IoT into more of their processes, services, and products. A lot of value lies in the real time data they would accrue from their client’s physical assets. Data gathered from IoT creates value for companies and consumers through the use of sensor data to improve operational performance, customer experience, and pricing. In this post, I will be exploring various areas within the FSI where this value has been harnessed.
Manufacturers such as Apple are developing cutting edge devices designed to improve and monitor every aspect of a patient’s health. These developments originate from health and fitness devices that monitor and track general fitness, for example heart rate when jogging or calories burnt proportional to steps are taken. However, these devices are becoming more sophisticated and can now be used to monitor life threatening conditions. As a result, health insurance companies can use this data to better productise their offering, such as tailoring their premiums depending on a patient’s activity levels across a reasonable amount of time.
The development of telemetry solutions has allowed insurance companies to collect data by monitoring drivers’ behaviour, including miles driven, speed, acceleration, cornering, braking, and reckless driving. Reliable drivers can therefore benefit from a reduced annual premium, whilst insurers can set higher premiums for more risky drivers.
The development of smart homes has significantly changed traditional home insurance. Smart meters and monitoring systems can now track carbon monoxide levels, fires, smoke, electricity usage, and water leaks, with the aim of making homes safer and more environmentally efficient. This can result in lower premiums for the insured.
The challenge for banks now is to keep up with these developments and create products and services that align with smart devices, beyond what we have started to experience with online banking applications.
The above shows that the FSI has started using IoT technology for analysis of data their business is directly tied to. While there is still room for IoT to progress in the FSI this will be largely dependent on how these existing tangible applications may spread.
How can FSIs benefit from commercial applications?
In retail, industrial, and agricultural environments we have seen sensors that monitor data from shopping habits to livestock activity. The common denominator with these traditional IoT solutions here is the value of this data, which capital firms and commercial lenders can use to support investments and lending activities.
So what do financial services need to do to keep up with the ever evolving connected world?
In the era of the tech savvy, there is less desire to follow traditional financial paths. They therefore need to acknowledge the ever increasing number of mobile users and focus their products and services directly on them. The FSI’s products and services need to be adaptable to any technical environment and platform in order to achieve a wider reach and more targeted approach to their customers.