Banking on IoT: How IoT is transforming finance

Using data to prove and approve

IoT is primed to help the traditionally risk averse finance sector with a host of opportunities that could redesign how risk management, insurance, application screening, and credit collection work.

The insurance industry has already successfully positioned itself at the centre of IoT innovation, adopting sensors, devices, and machine learning programmes that collect, monitor, and analyse  high quality risk data on individuals. Driver classification models are already being used in car insurance to formulate prices on a “how well you drive” model, rather than statistical data related to your age, driving history, or type of car you own. Reliable drivers can therefore benefit from a reduced annual premium, whilst insurers can set higher premiums for more risky drivers.

The development of telemetry solutions has also allowed insurance companies to collect data by monitoring drivers’ behaviour, including excessive acceleration, harsh braking, lane swerving, and accident notifications that can be used to reconstruct accidents and settle claims in vehicle collisions.

It’s theorised that a similar process of data collection and analysis can be applied to the credit underwriting process for banks. Banks can now also use devices, sensors, and RFID to track the assets of businesses, meaning they’ll have an accurate account balance and be able to ensure loans are paid once inventory has been sold, effectively eliminating fraudulent practices.

Using data for automated decision making in investment and trading

If you haven’t heard of Internet of Value, you’re about to! A lot of focus in IoT is on the transferral of information across the Internet. That information is typically transferred at the drop of a hat… unlike when it comes to financial trading. Step forward the Internet of Value. Looking at the specific relationship between finance and the Internet, it aims for money to be exchanged as quickly as information using bitcoin, apps, and sensors.

Companies are already looking at how information on stock market activity, social media, and physical goods can be converged into a real-time market surveillance tool that can aid, or even automate, decision making when it comes to trading and investment.

This idea of converging data from multiple sources is a major strength of IoT (read more about how this works and how to set up your own multi-source analytics platforms here), but what’s most interesting here is the monitoring of both the tangible and intangible, effectively signalling IoT doesn’t always have to be about monitoring physical ‘things’.

Making payments and managing money easier

We’re all familiar with ATMs, online banking, mobile banking apps, POS machines, and contactless payments—all of which have made making payments and managing money as easy as a few swipes, button pushes, or clicks. However, IoT can not only make banking and paying even more easy, but a much smarter experience too.  

You might already know we’re a sucker for a connected beer pump, but trials in London are taking it one step further, adding payment to the mix. Users of the pumps can order, pay, and pour in under 60 seconds, cutting down those agonising waits at the bar for service.

Meanwhile banks are ditching cards for payments. And while there aren’t any chips being implanted under people’s skin yet, banks are creating their own wearables for payment that avoid the dreaded moment you realise you’ve forgotten your wallet or phone. bPay by Barclays gives you a choice of a key fob, wristband, a loop that goes around your watch band, or even a sticker so you can pay with pretty much anything.

So what about managing your money? Banks can now come to you when you need to deposit cash with fleets of cars kitted out with deposit boxes and ATMs. Idea Bank has reported that deposits are three times higher using the connected cars compared to in branch.

Finally, we’re back to using all that data collected by connected devices. Information on buying habits and finance status can be teamed with machine learning to give personal suggestions and updates on how best to manage your money.

Using sensors to secure transactions

Security and privacy are unmistakably one of the biggest challenges for the finance industry. On the one hand there are the concerns from consumers who want to ensure their transactions and data are secure, and on the other are the banks themselves who have to look after everybody’s money and are traditionally reluctant to take risks.

A plethora of software and gadgets are tackling the challenge of making payments safer and more secure including tokens, location tracking, biometric authentication programs, and even cardiac signatures. You can now book appointments with smart ATMs from you phone that will give you your cash in less than 10 seconds after a quick tap of an NFC, QR code, or an iris scan—all of which are deemed to be much safer than traditional chip and pin.

Improving customer experience

Finally, just like IoT is on track to save the brick and mortar retail store, the same can be argued for the brick and mortar bank. Smart branches can operate in a similar way to smart retail stores, using the data IoT collects to improve customer engagement, generate cross sell opportunities, and make experiences more reactive and personalised.

IoT can bring customers walking by inside branches using beacons that send out targeted offers and loyalty rewards, whilst others can receive personal welcomes to appointments and tailored recommendations based on previous data collected by other smart devices.