Internet of Things (IoT) as described by its name, is the internet of the “things” or physical objects that are embedded with software, sensors, and communication technology. It is a network of physical objects. The objective of connecting these devices called “things” is to communicate and exchange data among them. These devices can be anything from your smartphone to the smartwatch, smart TV to the fridge, your car to the doorbell of your house, even the lights of your room.
IoT and global finance
In the past decade, after the boom of IoT, many industries are taking huge benefits from this technology. The IoT is full of consumer data. It’s like a gold mine of data waiting to be dug and collected with tons of information that can be further used to analyze risks, trends, projections, forecasting, customized marketing, etc.
IoT is changing the way banks and financial services work and its market cap is expected to grow to $2 Billion by 2023. IoT is everywhere now, collecting data and information on almost everything a consumer does. The main driving force of IoT in the Banking and Financial Market includes the convergence of IT and operational technologies and the increased use of IoT devices in products, applications, connected banking, etc.
The impact of IoT in finance
IoT is the future and it will change the way every industry works. Let us see the impact of IoT in the Global Finance and Banking sector and how it can improve, change and somewhat revolutionize the current model:
Tailored Customer Service
The data gathered from the IoT devices of clients is analyzed to know what the customers’ requirements and needs are. After that, the business can offer customized/tailored services or products to the customer.
Financial companies can collect and use the gathered data for risk management. They can use IoT devices to look after assets like vehicles, insured packages, and retails and react to a particular situation instantly.
Real-Time Data and Information
The biggest benefit of IoT devices is that they can provide real-time data. The IoT servers can continuously watch the activities of the consumer and can render the services instantly. This can also help the customer in smart decision-making.
Interactions become smarter with IoT
IoT devices and tools can make smarter interactions with different financial activities. The consumer can use the smart wearable for transactions or payments. Smart cards can be used to make payments at tolls or booths. It can also keep an eye on those activities and react as per the requirement.
Smart Communication b/w Financial Devices
Inter-Device communication poses huge benefits to the financial industry. The latest example of it is Amazon’s Smart Shops, where a customer picks up anything from the shelf and can go away with it without paying. The bill is automatically deducted from the account of the customer. This will all be possible by the different IoT devices (smartphones of the customer, store cameras, motion sensors, RFID tags, counting sensors, etc) working together.
Safety & Security
Various IoT devices can be used to create a business safe and secure. Like GPS and RFID, toll tags can be used to track bank-leased vehicles. Smart security cameras and motion sensors to secure the critical areas. Smart Keys to control the access to prohibited areas, etc.
AI and IoT
In recent times, technology companies have integrated Artificial Intelligence with IoT devices and networks. The AI can automate the Finance & Banking system and provide more flexibility to the Business as well as to the Customer without compromising the security. For example, from the business point of view, the AI can analyze the customers browsing history, his visits to different stores, and his routine habits, and can create custom marketing offers with flexible payment options. For customers, it can watch their position relative to their credit card and can create a pre-warning or partially block the payment if any unusual activity is detected.
ATMs are an essential part of banking services. Now Smart ATMs have been introduced which can inter-link with your IoT devices (Smartphone, Smart Card, Wearables) and perform the required transactions. Non-Banking Smart ATMs are also becoming popular in which a business credit or debit the payment on your IoT device like Smart Card e.g. a smart loyalty card from a supermarket.
Cons of IoT in finance
IoT is no doubt a paradigm shift in Global Finance and Banking system. All the benefits stated above are just the start of IoT technology in this industry. There is a lot of research and development going on around the world which will further open new ways to get the most out of this technology. It has enabled Finance to be more secure and flexible, but as with all other technologies, it comes with some drawbacks too.
As IoT devices are collecting too much personal and business data, it has grabbed the attention of the hacking market. IoT devices are much less secure and vulnerable to hacks. The data on the devices can be tracked, collected, and then used to perform pirated financial transactions. This can be avoided by using encrypted data transfers and data handling only on the server-side.
Smart Card Tempering
Smart Cards like RFID-enabled cards can be tempered easily without the consent of the user. Their information can be copied to other fake cards and thus can be used to perform financial or security activities. But there are a few companies providing additional layers of embedded security solutions on these cards to counter these attempts. They are encrypted as well as PIN-protected and therefore almost invulnerable.
There are thousands of new devices adding to the IoT network every moment. All of these are developing and upgrading so fast that it’s becoming very difficult to entertain all of them. New communication and authentication methods are being introduced in every newer version of a device. But the pace of integration of IoT with financial business is slower than that which makes it very complex to adopt and sustain.