Ignoring IoT could be perilous for banks, as changes in consumer demand and an overriding threat from fintech revolutionaries shakes up the financial industry landscape. Entering this new era of connectivity, it is imperative that banks reassess the use of constant flow of information, which brings a whole different perspective of Big Data.
The implications of IoT are being felt, none more so than by the financial industry. Gartner forecasts that, on a worldwide basis, “Endpoints of the Internet of Things will grow at a 32.5% CAGR from 2013 to 2020, reaching an installed base of 25.0 billion units.” That’s a lot of data. Be it smart cities, smart cars or smart homes, banks will have a substantial role to play in coming up with major innovations in customer relationships.
In the next decade, how we look at banks, with respect to IoT, will be completely undermined.
Are banks equipped with the right analytical techniques to make use of these large troves of data? Can they find patterns and trends to reach a whole new level of customer experience?
Bankers admit they seriously lag behind other industries when it comes to IoT. A survey by Verizon and SourceMedia found “a mere 13% of banks were implementing an M2M (machine to machine) solution, which means they’re a whole generation behind from certain key sectors like automotive, smart homes, health etc. which have already mainstreamed IoT.” The image below further drives home the point that the penetration of IoT in financial institutions seems to be minimal in the current scenario.
Banks are in grave danger of losing out to the revolutionary fintech innovators and will soon find it impossible to be in touch with their customers. Their notorious legacy systems and the siloed nature of data is a bane that needs to be done away with, sooner rather than later. No wonder, banking/financial executives worldwide predict IoT per-company spending for their sector would grow to $153.5 million by 2018, up nearly 31% from $117.4 million in 2015.
As an example of financial institutions that have indeed taken the first steps towards implementing IoT, Bank of America and U.S. Bank have tied up with Samsung in order to integrate their new iris scanner into mobile banking apps. Visa — partnering with Pizza Hut and Accenture — is working on a proof-of-concept connected car to test mobile and online purchases on the go. Similarly, ‘Groceries by MasterCard’, an IoT application available with Samsung Family Hub Refrigerators, allows effortless purchasing of groceries. Check out the video – here
An example of the collaboration between the financial industry and IoT is the projected deployment of sensors. These sensors leverage big data and AI to solve wide ranging customer problems and improve banking efficiency.
As we move to the future, the marriage of Banking and IoT will not only help to improve risk management, reduce cost and improve operational efficiency, but also create customer delight and generate cross sell opportunities. Also, the most obvious IoT application for banks seems to be in payments.
Further to enhancing the customer experience, banks must look at improving customer stickiness and customer loyalty in the long run in order to increase market share and ultimately, customer share of the wallet.
As is with every path-breaking technology, banks needs to be cautious in the way they accommodate IoT. Privacy concerns, the way banks store and use the accumulated data, should be at the forefront when banks try to mitigate the adverse effects of data storage. To add to this, implementing the latest security measures to make sure that the data is safe and secure will be key.
But before banks jump on the IoT bandwagon, these changes need to be complimented by major advancement in the network infrastructure and big data analytics. The massive scale of data must be integrated with in-depth analytics to assess the true nature of customer experience.
Customer insights can come from all quarters- be it traditional channels or new-age technology like smartphones, wearable devices, etc. These can enhance the way banks not only understand their customers’ needs and habits but also the way a bank interacts with them, potentially transforming what they offer to their customers.
IoT will soon complement the banking and financial services – a landscape driven by the quality, personalization and customer convenience. With its limitless possibilities, it can surely improve the bank’s overall performance, making it an indispensable part of financial industry in the times ahead.