by Mike Hoy, Technology Director, at Pulsant

The Internet of Things (IOT) holds enormous potential to positively impact the future of the banking industry, bringing new flexibility and new personalised service offerings, while vastly streamlining and improving the customer experience. The market is already growing fast. According to research from Fortune Business Insights, it is projected to grow from $478.36 billion in 2022 to $2,465.26 billion by 2029, at a compound annual growth rate (CAGR) of 26.4 per cent over that forecast period.

From a commercial perspective, this rapid expansion is enabled by a combination of high-speed, high-bandwidth 5G connectivity and rapidly-developing edge computing platforms. Edge computing, based on a highly connected network of regional data centres, is critical. It enables specialised gateway hubs in those data centres to process or pre-process massive amounts of data generated by the millions of devices that comprise the IoT.

Being close to the source of the data means this processing is accomplished at low latency – a vital requirement for many advanced applications, including artificial intelligence (AI) driven solutions and services. Processing all this data at the main public cloud providers’ data centres is not a viable option because the latency is unsustainable.

Gateway hubs, by contrast, aggregate and filter the data in the edge data centre, while operating actuators and translating between the sensor protocols used to connect to a network. They also perform the critical role of passing on critical information to proprietary applications hosted in the public cloud, using the high speed backhaul connections of the edge platform. The good news is that the increasing ubiquity of the UK’s edge infrastructure platform will bring these advances to almost every business and location in the UK.

Edge computing takes care of processing the data

For banks, one of the most important aspects of IoT technology is its ability to develop use cases from the data generated by billions of smartphones. Statista believes that by 2030, consumer internet and media devices such as smartphones will number more than 17 billion globally. The data is increasing in volume all the time. According to IDC, IoT big data statistics show that, with increased adoption, numbers will reach 73.1 ZB by 2025, which equals 422 per cent of the 2019 output, when 17.3 ZB of data was produced. As companies integrate IoT devices into their network infrastructure, they will need edge infrastructure platforms to manage, process, filer and transmit this data.

The ability to exploit such vast networks of consumer devices will lead to far higher levels of personalisation together with, much greater emphasis on frictionless transactions and higher quality of customer experience. This is vital in a market where fewer customers now have direct relationships with bank managers or their branches. Using personalisation and customer experience to build loyalty is certain to be a key feature of retail banking as consumers are now more likely to switch bank than their parents ever were.

Higher levels of personalisation

Banks can, for example, use a customer’s location  as a trigger not just for offers and discounts related to nearby businesses or facilities, but also simply to provide a more complete information service. In doing so, the compute capacity of the cloud and the edge working in tandem enables them not only to build up a profile of each customer’s preferences, but also to aggregate, analyse and respond to data about consumer trends very quickly.

IoT technology will also improve the quality of integrations with digital assistants and wearable devices, again upgrading personalisation without being intrusive or risking loss of confidentiality. Edge computing plays an important security role in all this, enabling implementation of AI or machine learning-driven anti-fraud and hacking-detection technologies to protect a hugely extended network.

The roll-out of 5G is pivotal for IoT because it enables faster, more stable, and more secure connectivity. For IoT to accelerate, access to high-quality connectivity is essential. Applications focused on real-time and aggregated data analytics need connectivity that has either low jitter, loss and lag or has dedicated high bandwidth. The telecommunications companies have been first movers in this market with 5G, but carrier fibre is an alternative and in many ways, more dependable. Yet we should not forget that strong IoT growth also depends on edge platforms with genuine compute power, network connectivity and resilience, and friction-free, fast access to the proprietary applications hosted with the big names in public cloud.

IoT in insurance and commercial banking

As we look further forward in insurance and commercial banking, the ability of edge platforms to process and transmit data from 5G-enabled telemetry devices is likely to have significant positive impact on the quality and speed of policy and credit approvals, providing accurate, verifiable data on everything from vehicle usage to agricultural or factory outputs.

In trade finance, sensor data in ports, ships, and from containers and vehicles gives banks and insurers a new level of transparency about the transactions, carriers and cargoes they are asked to support. This will reduce costly delays and frauds and increase insight into the efficiency of individual operators. All organisations will improve access to working capital.

Overcoming the remaining hurdles

Admittedly, banks may have some work to do overcoming the challenge of integrating IoT devices and their workloads into an existing business architecture. The growth of artificial intelligence-driven (AI) applications, for example, means architectures will have to facilitate the processing of data at the edge for decision-making in intelligent IoT systems.

And as with all sectors, banking and finance institutions face the problem of acquiring staff with the requisite skills to manage and maintain IoT effectively. The surest way to overcome this endemic difficulty is by selecting partners with deep expertise in the developing relationship between edge platforms and IoT implementations.

Organisations must also ensure they have access to a truly resilient edge infrastructure platform that comprises compute, network and cloud to deliver seamless, high performance. As edge capabilities expand, banks and insurers will want to implement and use IoT applications in the way that cloud applications are currently employed. Their IoT applications must work on edge infrastructure that is proof against outages and operates across a national high-speed fibre network and has fast and diverse backhaul to the public cloud providers such as AWS, Azure, IBM and so forth.

For the finance sector, the evolution of IoT technologies, operating on edge infrastructure promises to be a highly significant development, providing a much higher quality of service and far greater personalisation. If implemented with insight and expertise, it will enable new models of business that are currently only concepts, and lead to substantial increases in customer loyalty and revenues right across retail and commercial banking, and insurance.