By now, we all have heard about the Internet of Things as a revolutionary technology, making a radical change in our daily lives. But is it a real evolution when it comes to the financial services industry? What impact does it have on the FinServ industry, and what are its benefits to the users? Let us explore.
To Understand the newbies into it, IoT refers to any object that can collect data and share information over the internet. This communication ideally occurs between two objects without the involvement of any human, which is often known as machine to machine or M2M communication. Some well-known fundamental examples of IoT devices are home thermostats, security systems, health monitors, fitness bands, etc.
IoT may be seemingly a futuristic technology for many people, but smartphones, smartwatches, tablets, etc., which we are using, can also be considered IoT devices now. Most importantly, besides all these futuristic equations of IoT, a smartphone will continue to be the center of all the connected device universes. IoT is expected to have a serious impact on both the businesses and IT departments of financial institutions. Flexible implementation of IoT frameworks and high performance of the runtime platforms are becoming a necessity lately.
Impact of IoT on us Financial Services Industry
IoT now lets us make production services and deliver them in a more personalized manner. Furthermore, IoT also offers companies to capture real-time data in a huge amount about consumer preferences and behavior by allowing a more intimate understanding of individual customers. IoT also means a revolution in data analytics which turns a continuous stream of data into actionable insights in real-time.
It also helps in predicting the behavior of customers/In the financial services industry, which is a highly data-driven sector, offering intangible products may not have a lot of direct impacts on IoT. Still, all the IoT devices‘ impacts will be used to enhance financial products and services with far-reaching after-effects.
For example, in the insurance industry, It may enable increased user engagement, which is very low compared to the banking industry. As of late, customers have no incentives to interact with the insurance, and so the result interactions remain very limited to claim request for yearly premium review, etc. On the other hand, IoT will lead to a much more intense customer relation by letting the insurance providers develop more value-added services on top of their basic insurance contracts.
Exploring some use cases
The different new services and products resulting from IoT in the financial services industry are very hard to predict and limited only by the extent of our imagination. If you seek IoT-based services in database administration, you may explore services offered by providers like RemoteDBA.com. We can classify these use cases according to two fundamental axes.
- Usage of delivered IoT data
- Delivering innovative products and services over personalized preferences based on IoT data.
- Help to fine-tune the risk management by enhancing fraud detection and improve quality checks.
- Help improve the sales process for the existing products by identifying the opportunities for cross-selling and delivering more personalized messages.
- Executing the payments through automated payment interfaces.
- Identifying and authenticating the use of IoT devices for authenticating the users more accurately.
- Types of data sent or received by IoT devices
- Usage of the condition of the monitored objects or individuals.
- Payment-related data.
- Biometric data.
- Customer communication
- Human readable information.
As we can expect, IoT will surely result in the creation of new personalized and innovative products and services for the financial sector, which may not be otherwise possible. Let us explore some such areas by considering the first axis as we discussed above.
Home sensors– Connecting the home sensors to a financial institution will allow the providers to offer more innovative services.
For example, by connecting smart meters and utilities for electricity, water, gas, etc., to the bank account, you can pay the utility bills automatically. Moreover, the providers can offer a more personalized service to the customers to switch between the supplies and get the best available deals.
In another example, connecting the home sensors to an insurance provider will let the insurer improve the protection of the insured houses against any threats and reduce the risk of Insurance claims. It will also help provide a better-personalized insurance quote. For example, the insurance premium may increase if the customers regularly forget to lock the doors or turn off their oven.
The security monitoring system can also contact the policyholder through a smartphone if a threat is detected and automatically dispatch an emergency response team. They can also provide a monitoring view of the house statistics to the customers. It is also possible to offer advice on potential house improvements to the customers, increasing security, and reducing the insurance premium.
We can also use IoT sensors like structural integrity sensors or dampness detectors for determining the condition of the house and as loan collateral. This will permit the loan providers to issue a home improvement loan automatically to cover the cost for repair and also if there is a work order for affiliated repairs. Furthermore, banks can also propose a loan that has a variable interest rate for which the interest rate may fluctuate with the central bank interest rate and based on the data received from the home senses.
Car sensors– many of the IoT examples we discuss above are futuristic. However, car sensors or telematics provide financial products and services that are already in practice by financial institutions. For example, usage-based auto Insurance measures the driver’s behavior like the hard breaks, miles driven, driving at night, driving in bad weather conditions, average speed, accident history, etc., to adapt their insurance pricing accordingly.
All these types of IoT interventions can be used effectively in various other industries, such as supply chain management, fine-tuning risk management, supporting sales in and CRM applications, and automating payment executions. The possibilities of IoT are unlimited and limited only by imagination, as we said above. You need to make the most of all the options available.