Internet of Things (IoT) is one of those technologies that have caused major disruptions in the business world in the past couple of years.
IoT has revolutionized how we do and run our businesses.
It provides seamlessly connected ecosystems of different net-enabled devices. These devices are connected to one another and the backend servers via wired and wireless internet connections.
The data from these devices flows between the backend and other devices in real-time, thus making it possible for the managers and business owners to remotely monitor and control their offices, factories, hospitals, etc.
With the help of a software layer, managers can enhance their IoT implementations and get more advanced features such as smart data analytics, customer behavior analysis, workforce utilization numbers, reports, charts, etc.
IoT presents a smarter and more efficient way to do business. It makes companies more agile and productive and improves their overall functionality and product quality. That is why various industries are investing heavily in IoT implementation, including the finance sector.
IoT can offer great benefits to banking and finance businesses. According to recent stats, the finance and banking IoT market will be worth about $2 billion by the end of 2023. The market value projections clearly show the industry’s growing interest in IoT. And in this article, we will learn how IoT is revolutionizing the banking and financial sector.
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Why Does the Financial Industry Need IoT?
In the internet age, internal business processes and client experiences have become equally important as product quality and revenue generation.
IoT plays a vital role in enhancing customer experiences for the financial sector.
The data collected by IoT devices helps finance and banking businesses learn customer behavior and their spending habits. Sophisticated AI models then use this data to create trends and projection reports. They also allow businesses to retrieve critical business information, which they can then use to build more targeted services and marketing plans.
Based on the acquired data, businesses can create detailed customer profiles. These profiles can then help business owners provide custom services and deals to their customers, thus strengthening their relationship with them.
IoT also helps finance and banking businesses in running their internal workflows smoothly. Asset management and workforce optimization become easier, and companies can ensure maximum productivity and resource utilization. IoT allows finance and banking businesses to run their companies like clockwork and, by extension, improve their revenue.
With IoT and AI, banking and finance businesses can not only earn more profits but improve their market reputation and become the go-to business for the customers also. IoT allows the financial sector to truly become agile and future-ready.
Benefits of IoT in Fintech
Some of the major benefits of IoT in fintech have been stated in this section.
1. Early Fraud Detection
Fraud and theft are nothing new for the banking and finance sector. Every day, banking institutions across the globe are targeted by malignant digital forces. As technology evolves, these fraudsters and thieves become more and more well-equipped and skilled at hacking past security measures and swiping millions of dollars.
But with the help of IoT, businesses can fight back.
By integrating IoT with a well-designed and trained AI, businesses can detect frauds and take measures to thwart them. Transactions can be made more secure and unauthorized access to any account can be flagged immediately.
AI models are trained with a stupendous amount of customer data to make them effective at detecting frauds or any general out-of-ordinary behaviors. So by bringing IoT and AI together, businesses can become safer.
2. Offers Real-time Data Collection
The most significant benefit of IoT is real-time data collection. The data is shared between all the devices in the network. And based on the level of intelligence, these devices can either take action or wait for the backend to send instructions.
For instance, if an alarm is triggered inside a bank, then the automatic shutter doors will react immediately and close all the exits to the bank.
Such a level of sophistication makes banks safer and puts the minds of their patrons at ease.
3. Automated Payments
Wearable devices and RFID sensors can allow customers to make payments without swiping their debit and credit cards.
For instance, a supermarket with IoT can read the contents in a customer’s trolly, calculate the total sum and then connect to their smartphones for the payment. All the customer has to do is give permission, and the payment is made. This adds another layer of ease and fluidity to the fintech sector.
4. Data Management and Analysis
In the internet age, the greatest asset businesses have is customer data.
They can learn about their likes and dislikes, shopping habits, etc., and then make targeted marketing plans for various customer profiles.
IoT is exceptional for this purpose.
Real-time customer data is managed with the help of Big Data technology. Then these massive data stores are studied by advanced AIs to learn critical information.
Also Read- Financial Software Development: A Complete Guide for Businesses
Challenges of IoT in the Banking Sector
So far, we have learned that IoT has countless benefits for the banking and finance sector. But there are some challenges associated with IoT implementation as well that are faced by banking and finance businesses. In this section, we will learn about those challenges.
1. Security
Security is always a concern whenever money is involved. So naturally, the banking and finance sector is always looking for better ways to make their digital infrastructure safer. While IoT implementation offers an enormous scope on the security front, IoT devices are prone to hacking.
When information is transmitted through the IoT network, the chances are that data can be tampered with, corrupted, or even stolen.
What’s more alarming is that only one device in the entire network needs to get corrupted for the hackers and thieves to make their way into your systems and wreak havoc.
But most IoT developers and vendors provide hi-tech security measures to ensure the safety of the infrastructure.
2. Lack of Standards
There is a lack of a global standard for IoT and IoT devices. Every device has its own OS and management tool. Different vendors and manufacturers make devices slightly differently, so there are no universal standards sitting over them.
Unfortunately, the lack of common standards might be the reason for the failure of many IoT implementations.
3. Data Management
Data management is one of the biggest issues for IoT ecosystems. While real-time data makes it possible for business owners to improve their companies and increase their revenues, it also makes it harder for them to manage that data.
In a reasonably large IoT ecosystem, hundreds of IoT devices stream data packets over the network every few seconds.
It is not possible for a human to go through so much data and learn about customer behavior and trends.
Maintaining this data requires an insane amount of data storage resources. And simply storing them doesn’t solve the problem either. Once reserved, the data has to be studied and used, which is why technologies like Big Data are vital for IoT.
4. Unemployment Concerns
For as long as modern technology has existed, workers have been worried about machines replacing them and taking their jobs.
But the truth is more complicated than that.
IoT doesn’t seek to replace humans from the workforce. Instead, it aims to enable them to do complex tasks with ease. Furthermore, automation makes it possible for the human workforce to do more cognitively challenging tasks instead of repetitive jobs like data feeding.
But many people are still concerned that the automated processes will take their jobs, so businesses are hesitant to commit to IoT fully.
Top IoT Trends that are Revolutionizing the Financial Industry
Now that we know the key benefits and challenges of IoT adoption let’s talk about some of the leading IoT trends revolutionizing the financial sector.
1. Smart EMV Chip Technology
EMV chip ATM cards help reduce losses due to mishaps. EMV technology uses OTP for each transaction, thus increasing the security of any bank account. If someone steals it, they won’t be able to do anything because the code is valid for one transaction only.
Financial institutions and bankers try to reduce theft by providing high-end security to their clients. EMV chip magnetic strips are more susceptible to fraud because it uses the same pin for all transactions.
2. An Increase in Biometric Sensors
IoT in the financial and banking industry has given rise to many innovations, and biometric solutions are one of them. Nowadays, ATMs are using biometrics sensors and IRIS scanners, eliminating the need to use debit cards or remember account PINs. ATMs use biometric sensors, palm scanners, and iris scanners to identify account holders to make secure transactions. And by using micro-veins, the chances of errors in customer recognition by ATMs are close to zero.
3. Rise to Omni-channels
Many financial institutions are changing their branch-specific model to a more digital-specific channel by offering online, mobile, and social banking. By switching to this channel, banks decrease the need to keep opening more and more branches. As banking becomes digital and more and more customers start preferring it over traditional banking, we will soon begin to see digital-only banks.
4. Transparency
Most banks face problems tracking their credit allocating capability to their clients. But with IoT, it’s easy. It helps banks assign credit to clients based on the data of their past debts. Moreover, it lets financial institutions know about clients and their assets.
5. Enhance Banks’ Decision-making
From IoT devices, banks get valuable data that allows them to know more about their customers. It also increases their decision-making powers for better strategic planning and customer service.
For instance, banks can lower credit risks by analyzing commercial and potential customers through a client’s social media or other preferences.
6. Chatbots
Studies have shown that customers want their sales and support representatives to be human. Simply asking customers to send you their queries or using Robo-messages is not enough these days.
With the help of chatbots, banks can provide their customers with more human experiences. Chatbots allow customers to get immediate query resolutions. Furthermore, unlike customer support teams, chatbots are operations 24*7. It means that customers can get answers to their questions anytime and any day of the week.
Also Read- IoT Software Development: A Complete Guide
Conclusion
IoT has changed the banking and financial sector in more ways than it is possible to count. And with so much investment flooding in from all sides, IoT will only become more prominent in this sector.
If you are looking for a talented and experienced technology partner to help you bring your banking and financial business to the future, look no further! Matellio has years of experience developing fintech solutions for businesses big and small. Our IoT experts excel at evaluating business needs, your corporate hierarchy, and legacy infrastructure and provide the perfect IoT implementation for you. We follow the Agile development methodology that allows us to put our clients right at the heart of product development.
If you want to learn more about our IoT-based banking and financial solutions, click here.
