The internet of things (IoT) is a vast global network of interconnected gadgets. Through a network of sensors, these digital gadgets talk to one another. For instance, a smart thermostat can digitally connect to your home’s Heating, Ventilation, and Air Conditioning (HVAC) systems. The ease, security, and accuracy that the IoT enables are advantageous to a wide range of enterprises.
In order to provide their consumers with better service and grow their industry’s market, several banks are implementing this technology. IoT has numerous fascinating and far-reaching uses in the banking industry, and many new developments are still to come. Banking is becoming more convenient and secure thanks to the IoT.
In this article, we’ll talk about the IoT in banking, its benefits, and how you may utilise the fads surrounding IoT banking to gain an advantage over your competitors.
What is IoT in Banking?
IoT in banking is the term used to describe the interconnected webs of IoT devices that collect, transmit, and enable the processing of data in a cloud or on-premise server to improve the banking experience for both clients and bankers.
Advantages of IoT in Banking
Using IoT in banking has numerous benefits, some of which are listed below:
By utilising CCTV cameras, round-the-clock security monitoring, intelligent alarm systems, and other security-focused technologies, banks can increase the security of their branch locations. IoT is relevant because it enables the connectivity and remote management of all of these smart devices. Therefore, the security team can quickly lock up the branch, if necessary, or take other necessary actions if an attack is detected.
2. Real-time monitoring
IoT devices can gather real-time data from the financial environment. Banks can evaluate their customer’s needs at any time or location by utilising this data. One example would be estimating how long a consumer will have to wait in line at the bank, or a more cutting-edge example would be banks notifying customers when their balances are about to run out. The key is that banks will be able to provide data-accurate services thanks to real-time data collection.
3. Detection of fraud
Globally, the number of banking fraud incidents has increased. IoT may be able to stop this disaster. IoT devices have already increased the security of transactions. For example, mobile phones now require a user’s biometrics to complete a transaction. Or websites that ask consumers to enter an authentication number that their banks send to their phones to confirm that they are the ones making the purchase.
The online banking applications that provide notifications each time a purchase is made are the final illustration of how IoT is assisting in the detection and reduction of fraud. This gives the user the ability to pay attention to each transaction and allows them to immediately report a purchase as fraudulent if they don’t recognise it.
4. Better analytics
IoT can give banks recent data on the initiatives or people they are funding, which will enable them to calculate the ROI more precisely.
For instance, by using information from satellites and street cameras to track the level of economic activity nearby. Additional usage cases include:
- To obtain a precise understanding of the borrower’s spending patterns for consumer loans, they may use data from numerous applications and sensors.
- When it comes to securities, they might use data from several analytics systems to compare the volume of trade in publicly-issued bonds vs privately-issued bonds.
5. Enhanced client support
Banks will be able to tailor services for each consumer based on their past by utilising data from mobile applications, websites, or other domains where transactions are conducted and recorded. These services would include custom budgets and money management advice.
6. Expanded services
Money and asset management are just two examples of modern banking. Recently, banks have started using data from customers’ smart devices, such as smartwatches, to monitor their level of fitness. They will then recognise them for their daily routines and fitness regimes by offering cash-backs or lower APRs.
7. Transactions without cards
Mobile banking software now syncs with credit and debit cards to make transactions as simple as possible. This enables customers to make wireless payments using just their phones. This function, in particular during the pandemic, has made it possible to maintain hygiene in stores and other busy areas.
IoT Applications for Smarter Banking and Finance
1. Smart branch
IoT solutions for smart branches improve customer experience by keeping track of lines, alerting clients to how long they will have to wait, or pointing them in the direction of an open counter. Intelligent branches can exchange user information to streamline operations and require fewer staff members.
IoT-enabled data flow for ATMs enables banks to monitor consumer behaviour, identify ATM usage patterns, and decide where to put new ATMs based on demand. Switching to cost-saving operation modes requires information on the ATM site environment (room temperature, light, motion, etc.) from IoT sensors. Adjusting HVAC and lighting to ATM site foot traffic, for example, allows for lower power consumption. IoT solutions aid in the management of events such as the use of skimming devices, card reader issues, cash shortages, and so on. by guaranteeing real-time monitoring of ATM operations and cash levels.
3. Trade finance
IoT allows banks engaged in trade financing to make decisions based on real-time data while ensuring visibility of the physical flows they are financing. The banks may more effectively manage funds, scale up their financing strategies, and better assess risks throughout the trade life cycle thanks to IoT-generated data.
IoT devices keep track of the condition of insured items and notify insurers of any abnormalities so they can intervene and take the necessary precautions to lower risks. Insurance companies use data generated by IoT to predict incidents and develop a preventive strategy. An insurer, for instance, may be able to identify an asset failure and alert a policyholder before it causes damage. This strategy aids in reducing the volume of insurance claims and guards against insurance fraud.
5. Auditing and Accounting
The IoT-enabled communication of the client’s payment systems and the CPAs’ software enables the automation of common bookkeeping tasks such as data entry, reconciliation, invoicing, and so on. IoT enables accountants to monitor financial data in real time and acquire precise insights into a business’s operations to enhance their consulting roles. IoT also improves transparency and automation in auditing, allowing CPAs to monitor transactions and manage audit trails instantly to spot data anomalies and stop fraud.
Use Cases of IoT in Banking
Here are four banking IoT application scenarios:-
1. Wearable Technology
Numerous folks utilise smartwatches and other wrist-worn electronics. Banks may make their services more accessible and convenient for customers by developing an online application compatible with these wearable devices. On the same gadget, clients can monitor their heart rates, respond to business emails, and conduct financial transactions.
Wearable gadgets can potentially enhance security by notifying clients whenever funds are withdrawn from their accounts. Customers can also communicate with banks via their wearable devices. This facilitates multitasking and saves customers time. Having convenient access to their budget via a smart device can also assist clients in achieving their financial objectives and saving money.
2. Mobile Wallets
Throughout the past several centuries, monetary systems have undergone significant changes. Individuals abandoned genuine gold in favour of bank-backed currencies. Eventually, cash was replaced by cards that provided online access to digital funds. Mobile wallets have taken currency a step further; customers can now access their finances by opening the wallet app and tapping their phones.
Mobile wallets are incredibly convenient and enable customers to carry fewer items throughout their daily lives. In the digital age, the majority of individuals already carry a smartphone. Reconfiguring banking technology for use on mobile devices has been one of the most practical IoT developments in banking to date. Naturally, customers must ensure the security of their mobile devices to make phone-based payments.
3. Enhanced security
In the coming years, blockchain may have a profound effect on the banking industry. This new technology enables individuals to conduct secure transactions without a middleman – the traditional function of banking services. However, banks can also use blockchain to increase client security.
Particularly useful for international transactions is blockchain technology. Every action is permanently recorded, making it difficult to commit fraud. When banks adopt blockchain technology, they can reduce expenses and increase customer transparency securely. Additionally, blockchain can be utilised to improve customer identification and safeguard client assets.
4. Smart Piggybanks
Smart piggybanks are another IoT banking innovation. Now, banks offer virtual piggy bank services to assist customers in establishing and achieving financial goals rapidly. This application is a fun way for young children to become involved in money management. The online version of a piggy bank from childhood includes interest rates so that their money grows more quickly.
This retro innovation is equally effective for adults. Some may find the term “investment banking” intimidating, whereas “online piggybank” sounds simple and user-friendly. The IoT enables banks to rebrand and expand their customer base, ultimately resulting in financial benefits for both the banks and their customers.
What are the Challenges of IoT in Banking?
The greatest challenge for IoT in banking is the security of banks and their customers. These are only a few:
1. Data compromises
To optimise their IoT devices and ecosystems, the majority of banks have teamed with major tech companies. A data breach at any of these firms might compromise the data privacy of banks and their customers.
2. Data exploitation
A further difficulty is the utilisation of the data. Even if it may be lucrative for banks to provide individualised services, they may not always reward your fitness routines with cash back. The next time you apply for a loan, they could use your health condition as a reason to boost your interest rate based on a correlation that does not exist.
3. Vulnerable apps
If their mobile banking applications are not regularly maintained and updated, hackers might compromise them and steal the life savings of thousands of consumers. Or, even if their applications are secure, users’ mobile devices, for example, may not be. This again provides an access point via which data can be stolen by intruders.
The Internet of Things is making life easier and more connected than ever before. You probably don’t even think about how many smart devices you use every day. To better serve their customers, banks are adding IoT technology to their user interfaces and apps. This technology also helps them protect their client’s assets and grow their business beyond banking.
IoT technology is being used in many different ways by banks to improve their services. IoT technology lets bank customers use mobile wallets, makes security better with blockchain, and makes saving money faster with smart piggybanks.
1. What is IoT in Banking?
Ans: IoT in banking is the term used to describe the interconnected webs of IoT devices that collect, transmit, and enable the processing of data in a cloud or on-premise server to improve the banking experience for both clients and bankers.
2. How can IoT biometrics be used in the Banking system?
Ans: Biometrics are a safe way to send information because the features that biometric scanners look for are unique and almost impossible to copy. For example, processes that need physical signatures could use “Wet Ink” technology. With “Wet Ink,” the customer could sign from anywhere using a touch screen device, and the signature could be copied onto paper.
3. How can the IoT help with Banking?
Ans: IoT gives BFSI several digitalisation benefits, such as a 360-degree view of the customer, better financial security, detection of fraud, more advanced insurance strategies, and more. Innovations made possible by the Internet of Things (IoT) help banking and finance companies meet their clients’ needs and give them a better experience.
4. How IoT works in Banking?
Ans: IoT-enabled devices, like smartphones and smartwatches, can be used to make contactless payments, so you don’t have to carry cash or cards around with you. This is just one example of how the Internet of Things works and how it is changing how people bank and handle their money.