IoT and Finance – Quick Intermezzo or Never-Ending Love Story?

December 18, 2017

The connection of static, physical objects and making them engage and smart is increasingly entering various sectors – and it does not stop at financial services. But how exactly can IoT and finance be combined?

What is the link between finance and IoT?

IoT’s core value is its transfer of data which is direct connection to finance: the financial sector relies heavily on gathering and analyzing data for monitoring their behavior in order to assess their risk profile and predict their behavior. Moreover, banks increasingly seek to improve their customers’ experience to stay at the top of their game. Lately, numerous developments of technology like smartphones and smartwatches disconnect consumers from traditional banking processes. Apple and Samsung encourage mobile banking via their own payment services. These trends threaten to throw banks and insurances on the scrap heap, if they do not wake up and adapt to digital trends.

Could IoT be the solution of their sleepless nights?

In fact, a few use cases already prove the sweet relation between finance and IoT:

  • The most mature example is that of a usage based insurance model. Sensors in automobiles (telematics) and smartphone apps collect behavioral data of drivers, monitors their performance over time and provides thus relevant information on a driver’s risk profile. Premiums are adapted to the driver’s risk behavior. As a consequence, this usage based premium shall incent lower-risk driving behavior.
  • Another prominent example is the cardless entry to a bank’s branch 24/7 via beacon technology, which additionally sends special offers or information about upcoming events to the user’s smartphone.
  • In commercial real estate the sensors in buildings are used assess motion inside the building in order to control lighting and temperature and better manage the energy use.

More use cases are in the making which manly evolve around assessment of a bank’s or insurance’s client in order to assess or predict their risk or creditworthiness. For an adequate analysis biometric and positional sensor are the future. In general, the interconnection of the financial sector and other industry will increase: Partnerships with smart home providers could enable automated payments from a TV or fridge. Targeted advertisements will become more and more personalized. For example, mortgage offers will be sent via real estate websites.As a consequence, banks especially need to rethink their engagement with their customers as they tend to lose connection. Augmented experience with smartphones or smartwatches could put banks back into the spotlight when they introduce beacon technology to their ecosystem. Like retailers, they could send customized product details, special offers and recommendations to their customers when they approach a branch, ATM or other related locations of the bank.

The magic lies in sensors

Players of the financial sector are already among the Top 10 to invest in sensors according to PwC’s digital IQ survey. They realized that they need to take advantage of data and convert the amount of collected data into customized solutions and engaging customer experience with their financial services provider. Investing in sensor technology is a first step, many more are required for making a profit of unstructured data from different sources: IT experts who are able to analyze these data and powerful computing technology with machine learning capabilities that are able to detect patterns and trends. The combination of finance and IoT is only in its infancy, but collaboration between traditional players of the financial sector and innovative, tech savvy Startups will enhance a promising future for engaging financial services of the digital age.

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