As we know, the IoT “Internet of things” has already revolutionized the industries and our daily lives to a great extent. If we talk about its meaning then, IoT means an object or device which is capable of gathering, sharing, and communicating data over the internet.
Many businesses are using IoT in their daily operations, and the financial sector has become one of them. As per the research done by www.MarketsandMarkets.com the market size of IOT’s in the banking and financial sector will be worth more than 2 billion by the year 2023.
Why is IoT becoming a hype these days, and why there is a need for it in the financial sector?
So, without any further due, let’s get started.
Why do you need IoT in your financial industry?
In the upcoming era, the client’s experience will get more priority as compared to making the product and deciding the price. In the financial sector, IoT plays a vital role as the data will be communicated and shared by devices that help financial service providers to develop high-end account profiles for their clients to boost the relationship, engagement, and client retention rates as well. These points help clients to make the best economic decisions or to manage investments.
Moreover, Retail banks can also take advantage of IoT by inducing sensors in banks that send product details, current service offerings, recommendations, and many more to customers directly on their smartphones. As per the research, the clients who receive personalized messages mostly made a purchase.
Before discussing “How IoT revolutionizes the financial sector”? First, let’s talk about what the benefits IoT offer to the financial sector are?
Benefits of IoT in fintech:
1. Early fraud detection – As we know, the financial sector is always surrounded by fraud threats. But with the integration of IoT devices and AI, it is possible to monitor transactions accurately, and it also helps to detect any unusual activity or any kind of unauthorized usage. This advantage will help you to build trust because if you lose the client’s trust, then you might be out of the competition.
2. Offers real-time data collection – One of the coolest advantages of using IoT is, that these devices collect user’s data regularly and process it to keep users up-to-date with their information. For better understanding, let’s take an example: if your customer wants to share some essential car documents with the insurance provider, then they can share it in just a few seconds.
3. Automated payments – Sensors and smart software will lead you to make payments automatically without using banking cards either by smart wearable or with RFID sensors. For instance: In a supermarket, an intelligent desk that reads the number of products in your cart and its type, then it calculates the sum of all goods and connects it to their mobile to make payment automatically. But this solution still needed government approval under all financial regulations.
4. Customer’s smart interaction – Benefits of IoT in the financial sector are not fully disclosed. It recently entered the financial industry. According to experts, there’s a need for developing such devices where customers can connect their bank accounts with their smart devices. For instance: smartwatches will send alerts once the owner exceeds the transaction limit. Yeah, we know that many banking applications already give warnings, but the integration of IoT algorithms will take this to a new level.
5. Big data gathered through devices will surely help banks to identify customer’s needs and offer better solutions.
6. Nowadays, with IoT financial institutions can track the usage of ATMs and take decisions on whether to expand the network or limit the number of kiosk machines.
Above mentioned points are benefits, but there are some challenges which you may face while adopting IoT in your fintech industry.
As we know, coins have two sides. IoT also has its second side. On one end, where it offers immense advantages, the other hand brings some issues as well, which is related to the security of a customer’s personal data. Let’s discuss some of them.
1. Security – It is one of the biggest challenges when customers use IoT in their transactions. As it is a network of devices that increases the risk of hacking. When information is transmitted through the IoT network, the chances are that data can be hacked. Therefore, making your system secured has to be your number one priority and attention should be paid to this.
2. Lack of standards – Every device has its own maintenance approach. Different suppliers manufacture the hardware used in IoT devices, so, therefore, there are no universal standards for maintaining. Unfortunately, the lack of common standards might be the reason for the failure of IoT devices. It can be resolved if there is only one manufacturer of all equipment, but it might be not possible.
3. Data management – The gathering of user’s data from multiple devices complexes the process of data management for financial service providers. Once you have decided to use IoT in your fintech industry, you have to understand that the data collected by devices is enormous, and you have to store processes and analyze them to provide the best experience to customers. Either you have to buy a complete machine by yourself or rent some cloud space nuts. You have overcome this challenge as early as possible.
4. Increases unemployment rate – With the advent of IoT in the financial industry, the financial institution needs to cut many jobs because the process requires the human brain, and some of them might not have relevant skills. The whole scenario will increase the unemployment rate not only in one country but in the entire world.
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Well, as of now, we gave you insights into the benefits and challenges of IoT devices in the financial sector. In this section, we are going to discuss:
How IoT will revolutionize the financial industry?
1. Smart EMV chip technology – EMV chips ATM cards help to reduce losses that occur due to mishaps. EMV technology uses OTP for each transaction in return; it increases security. If someone steals it, he/she won’t be able to do something because the code is valid for one transaction only. Financial institutions and bankers tried to reduce theft attacks by providing high-end security to their clients. EMV chip magnetic strips are more susceptible to frauds because it uses the same pin for all transactions.
2. An increase in biometric sensors – IoT in the financial and banking industry has raised many innovations, and biometric is one of the changes. Nowadays ATMs are now witnessing biometrics sensors and IRIS scanners which reduce the desire of carrying plastic cards or to remember identification pins. ATMs use biometric sensors, palm scanners, and iris scanners to identify account holders to make a secure transaction. And by using micro-veins, the chances of errors of customer recognition by ATMs are reduced to low.
3. Rise to Omni-channels – Many financial institutions are revolving their branch-specific model to a digital specific channel by offering online, mobile, social banking. By switching to this channel, it also decreases the bank’s need for space to carry out its operations. By adopting Omni-channels, we can reduce the number of branches.
4. Transparency – Most of the banks face problems in tracking their credit allocating capability to their clients. But with IoT it’s easy. It helps banks to assign credit to clients based on the data of their past debts. Moreover, it lets financial institutions know about clients and their assets as well.
5. Enhance bank’s decision making – From IoT devices, banks get valuable data to get to know more about their customers and also increases their decision-making power for better strategic planning and customer service. For instance- through the client’s social media or other preferences, banks can lower credit risk by analyzing commercial customers and potential customers. Here all -you need analytics software that assists you if you don’t know the correct way of implementing it.
6. Chatbots – There are so many ways to enhance the customer experience. Remember, higher customer touch means more hours they can pay for. As per the research by BI Intelligence, chatbots integration can close up-to 23billion dollars in savings. As an organization, sometimes you need to answer customer’s queries quickly. But inducing IoT’s chatbots, customers get a response to their question in seconds. One of the best advantages of using chatbots is that they are available 24*7, which is beneficial for competitive analysis.
We hope that with this blog, you’ll get a better understanding of how IoT revolutionizes the financial sector with its services. Nowadays, the financial industry is getting more prominent than ever. And in the next time, it will revolutionize retail banking, core banking, and other banking software. IoT will continue to transform other industries as well. It’s a time to start developing your own IoT powered fintech software. If you don’t know how? Don’t worry, contact us to know everything. Drop us your requirements so that we can see what kind of service we can offer you. We have a bunch of practical cases of using IoT in the financial sector. So, don’t hesitate to reach us.