Howard Berg Senior VP, UK & Ireland at Gemalto
Discussions around the Internet of Things (IoT) are widespread in the technology industry, with many analysts suggesting that we are entering the second digital revolution. Gartner is even predicting that there will be 25 billion smartphones, smartwatches, wearables, connected cars and other devices by 2020, giving IoT the potential to make an even greater impact on society than earlier digital revolutions.
In a future where we are surrounded by intuitive connected devices, there is a dizzying world of possibilities, which could help us to save time, work smarter, drive safer, keep healthy and live a more active lifestyle. In particular, there are a myriad of opportunities for businesses to benefit from IoT, with Gartner further forecasting $2 trillion of economic benefit globally.
However, while many industries like insurance and commercial real estate have shown early signs of innovation and embraced its benefits, the banking industry is just beginning to see how IoT can push business to the next level.
Insurance, in particular, is one sector of the financial services industry that is well positioned to be an early centre of IoT innovation, with insurance FinTech companies already developing valuable new ways of using sensor data in wearable technologies to generate and analyse really high quality risk data on individuals.
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How does the flow of IoT-generated information create value for the banks and their customers?
Modern consumers expect convenience and demand an always-on personalised service – as evidenced by the mass adoption of online banking, mobile banking apps and contactless payments. They also expect and demand total digital security from their banks, which is another major challenge the sector faces in the IoT era.
By enabling the collection and exchange of information from objects, the IoT has the potential to open up numerous opportunities for banks, who will be able to benefit from a whole new set of data about the behaviours and demands of their customers, which can be used to provide them a truly personalised experience with targeted advice, offers and insight. It’s a new level of customer intimacy with benefits for institutions as well as consumers and business banking.
Potential scenarios include using IoT to improve banks’ customer experience, create customer rewards, generate customer cross sell opportunities and generate engaging digital experiences. From a business perspective, IoT will also help banks to devise new ways to improve risk management, reduce cost and improve operational efficiency.
By accessing the data captured by connected devices, banks can provide customers with a holistic view of their personal finances, updated in real time, and anticipate their needs in order to offer products and solutions enabling customers to make the right financial decisions.
Real time data can make a difference to the risk a bank is taking when they provide a financial product. For example, the ability to obtain far more useful information and data on residential and commercial premises, in addition to collecting social media, spending, and credit behaviour data, allow banks to make better commercial decisions.
Boosting business performance and reaching new markets
The same type of process can be applied to assist business customers and to help them achieve better commercial results, thanks to the bank’s ability to access data from across their business customers’ value chain, from suppliers to distributors to retailers.
Conversely, physical performance, and behavioural data generated from biometric and positional sensors for individuals, and shipping and manufacturing control sensors for businesses, could help banks improve underwriting processes and reach new markets.
Those banks that are ahead of the curve in terms of using these types of IoT-generated data streams to make vital decisions on business lending will lead the way.
For example, banks might benefit from various sensors that monitor the activity and condition of retail industrial and agricultural businesses, such as connected field devices in manufacturing or agricultural sensors that monitor livestock.
Plus, real-time data feeds will allow farmers and their banks to continuously and accurately assess the health of the farm’s crops and livestock; and more accurately gauge expected yields, property and overall business value.
Closer to retail banking branches, IoT uses could include video tellers and kiosks in equipped with sensing technology that can recognise customers the moment they walk in and take actions accordingly.
Securing IoT for banking
As IoT impacts on the banking industry over the next five to ten years, there will also be new security challenges for banks to manage. Making the whole connected banking experience safe and secure is vital to gain consumer trust and ease any concerns around their personal privacy and private banking being hacked. Any personal information from customer financial data to location history is potentially a target while on the network. No matter where it is, be it on the device or moving along the network, for example from the bank to the customer’s connected car, it needs to be protected. This is where tools like encryption to protect the data itself and authentication tools to authorise access to this data by only those allowed to, is vital. We’re already starting to see the development of biometric data – fingerprints, voice-recognition software and iris-scans – come into play to prove the customer is who they say they are.
With the proliferation of IoT devices, banks will have a far more detailed picture of the customer. This means that banks need to add an extra layer of security to extend across the entire IoT ecosystem – from the device through to the network and cloud level.
The more devices and points of entry there are on a network, the more opportunities there are for cybercriminals to sneak in. For banks to embrace IoT in an impactful way, security must be built in from the start, and at every level, to win and maintain customer trust.