IoT has the potential to impact traditional business processes in banking such as KYC, lending, collateral management, trade finance, payments, PFM, and insurance. Coupled with other emerging technologies, such as digital identity and smart contacts, IoT can create new P2P business models that have the potential to disrupt banking in a few areas. Listed below are few use cases that may be adopted in banking in a time span ranging from near-term to long-term.
- Account Management on Things
As more devices acquire digital interfaces, the term “mobile” or “digital” banking will acquire new meaning and customers will be able to access their bank accounts from practically any “thing” that has a digital interface – for instance, from entertainment systems in autonomous cars or planes.
Banks will be aware of the context of the channel and can provide appropriate contextualized service or advice enriching the interaction experience. Biometrics – voice or touch – can simplify account access in these new “anywhere” digital channels. Processes requiring physical signatures could use “Wet Ink” technology, i.e. The customer can remotely sign through any touch screen device and the signature can be cloned onto physical paper with “Wet Ink”. This will eliminate barriers associated with in-person, paper-based transactions and enable clients to conduct business even when they cannot be physically present.
- Leasing Finance Automation
Real-time monitoring of wear and tear of assets as well as metrics like asset usage and idle time could provide important data points for pricing of leased assets. This could lead to introduction of a new daily leasing model for a wide variety of digitally enabled assets – effectively turning even traditional products into services. Terms of leasing could be simplified and automated as the bank wields greater control over the leased asset. For instance, in case of contract termination or default, the leased asset could be locked or disabled remotely by the bank.
- Smart Collaterals
IoT technology can enable banks to have better control over a customer’s mortgaged assets, such as cars, and also monitor their health. In such a scenario, a retail or SME customer could possibly raise short-term small finance by offering manufacturing machinery, cars, or expensive home appliances as collateral. The request for financing as well as the transfer of ownership could be automatic and completely digital. Enabled by digital identity for people as well as things, the transfer of ownership of an asset can be achieved in a matter of seconds. The bank can then issue the loan immediately, and monitor the collateral status in real-time without the need to take physical custody of the asset. The bank can remotely disable or enable the machine/motor anytime based on defined business rules. For instance, in case loan EMIs are not paid, the engine could be disabled. The quality of the collateral can also be monitored in near real-time.
IoT has the potential to reimagine banking as we know it completely. And it is more important than ever for banks to look at providing services and products on the channels that their customers prefer. In 2017 and beyond we will see progressive banks take it a step further and provide “banking on things” – which can be anything from a smart car, to smart walls.
Click here to read my article on ‘IoT in Banking – Enabling Banks’ Digital Future’ for the complete list of 12 use cases that may be adopted in banking in a time span ranging from near-term to long-term.