We live in a “smart age”; Internet is ubiquitous, data is fast and cheap, everything is connected. Whether phones or watches, television or lightings, home automation systems, security systems, household devices or any appliances, they are all becoming “smart”. The idea of calling a TV (hitherto named “idiot box”) a “smart” device would have been absurd a few years ago whereas it is a basic expectation today. The underlying technology which makes it all possible is the “Internet of Things”, defined as “the interconnection via the Internet of computing devices embedded in everyday objects, enabling them to send and receive data”.
While all the emerging technologies are powerful in themselves when looked at in isolation, the real game-changer is their combination or synergistic effect. For example, IoT and big data combined can be a powerful game changer to the banking industry. In this blog, we will look at some of the applications of IoT in Banking.
- Products and Service offerings: With always connected, real time data at banks’ disposal, they can make better decisions about the products or services to offer and the customer segments to offer them to. Banks can analyse the data sets to offer personalized products or conduct focused, individual marketing strategy etc.
- Approval processes: Today, the approval process at banks is mostly STP. Decisions are made based on the information available in a customer’ request. This also leads to frauds at times, as approval processes only look at the data in the payload and do not have the visibility of external factors or reasons behind a customer request or factors impacting the gathered data. IoT can enable better decision making by considering data on current status or geo location, economic condition of customers etc.
- Tracking of assets, collaterals: IoT-enabled vehicles, houses, IoT-enabled sensors in warehouses etc. will enable better tracking of the loans given and ensure real time data availability on current stock position, working condition of machinery or vehicle, it’s usage etc.
- Device communication: The basic use of IoT is to enable better intercommunication between devices. Banks can use IoT for enabling effortless no-touch cashless payments using RFID scanner to identify products in a shopping cart and mobile wallet.
- Banking on Wearables: Devices like smart watches, fitness bands are the most widely used IoT devices today. Wearables are very useful for applications like contactless payments, trigger action or tracking activities and may not be used for performing complex transactions. Most of the banks have started offering their services on wearable devices.
- Transaction Banking: IoT-based sensors help with better tracking of goods, leading to better tracking of Trade Finance lifecycle, better cash visibility forecasting etc.
Some of the examples of the application of IoT in a bank’s existing process/products are listed below:
- Mobile Location Confirmation: Visa has enabled an option to use real time geographical location data from the customer’s mobile as an additional aspect to consider as part of their predictive fraud analysis. A simple example is using a cardholder’s mobile location and match it with the transaction location which enables the issuer bank to make better decisions w.r.t transaction approval.
- Groceries by MasterCard: MasterCard has partnered with Samsung on an IoT-enabled refrigerator application which enables easy purchase of groceries with connected refrigerators. User can order for groceries based on current stock through e-commerce platforms and the payment is done using NFC technology.
- Alfa Bank Sense: The bank uses customer data for predictive services based on customer preferences, location, financial behavior etc. Customer data is gleaned to offer personalized experience and the bank also offers a user-friendly chat-like interface.
- bPay by Barclaycard: Barclays has launched contactless wearable payment solutions which enable customers to make payments using their bands or keys. The customer can opt for bPay enabled watches, wristband, sticker, fob etc. which can be used to pay (£30 and under) using contactless payments.
The potential of IoT in combination with the other technologies is immense. As illustrated above, IoT can be used in any aspect of banking which involves a “field visit” or where information is required on the status or whereabouts of a person or device. Whether it is a site visit to ensure the veracity of documents or tracking goods sent across the oceans or current/predictive output of a farmer etc., to name a few. With the upgrade in technology, lighting data transfer, faster devices etc., the application of IoT is expected to see significant uptake in the coming years.