The banking, financial services, and insurance (BFSI) industry has undergone a significant transformation since the days of the barter system, evolving dramatically with each technological advance. Today, we’ve entered an age of digital money, where the Internet of Things (IoT) in Fintech has made transferring funds easier than ever without the need for physical cash. While cryptocurrencies are also gaining momentum as potential replacements for fiat currency, the mainstream adoption of such digital assets remains speculative at this stage.
This digital revolution owes much to the intersection of finance and IoT technology. This modern innovation accelerates operations, enhances service delivery, improves customer experiences, and offers numerous other benefits within the finance sector.
According to a report by Markets and Markets, the global market for IoT in banking and financial services is projected to grow from $249.4 million in 2018 to a staggering $2,030 million by 2023, representing a compound annual growth rate of 52.1% during the forecast period.
The advantages of IoT in the finance industry are extensive and transformative, leading to the rise of concepts such as the “Bank of Things.” This technology is particularly invaluable in providing actionable data for banking and insurance institutions, allowing them to refine and enhance their services. Let’s explore some of the core benefits IoT brings to the table.
The Shift to Cashless Payment Modes
The era of cash-based transactions is swiftly becoming a relic of the past. Today, even credit and debit cards are facing obsolescence with the rise of IoT-enabled wearable payment systems. These advanced systems allow users to pay directly through wristbands, watches, smart clothing, jewelry, or other connected devices, facilitating seamless transactions and easy access to credit histories and balances. Statista reports that the number of IoT-connected devices worldwide is expected to surge from 8.6 billion in 2019 to 29.42 billion by 2030.
Fintech mobility solution providers developing peer-to-peer (P2P) apps play a significant role in driving this cashless trend. IoT in banking is set to introduce new payment trends in the coming years, including smart cards and biometric tokens.
Immediate Support and Enhanced Personalization
The potential for personalized customer services enabled by IoT technology is closer than ever. Fintech institutions are leveraging AI in conjunction with IoT to offer instantaneous customer support. For example, IoT devices such as smartphones can notify branch managers of a customer’s arrival, facilitating the automatic allocation of service providers and significantly boosting customer satisfaction.
Furthermore, financial institutions can optimize their offerings by utilizing context-aware smart devices to send personalized messages to customers as they arrive, enhancing their overall experience.
Smart Bank Branches and ATMs
IoT heralds a renaissance for traditional banks by creating a more connected environment focused on customer value. With IoT, banks can deliver real-time services through IoT-based mobile apps that provide comprehensive account details upon a customer’s arrival at a branch. This technology also enables customers to schedule cash withdrawals from nearby ATMs and helps banks strategically position ATMs and branches based on customer demand patterns.
Utilization of Voice Technology
Voice technology has made significant strides since its introduction, and fintech companies have ingeniously integrated this technology into their services. In 2016, Capital One pioneered the integration of financial capabilities with Amazon’s Alexa, allowing users to manage sensitive financial data, such as credit and debit card balances and pending transactions, via voice commands.
Enhanced Spending Pattern Insights
While many financial mobile applications track spending and savings, IoT technology goes a step further by helping users identify and modify their spending patterns. This capability offers a more comprehensive understanding than traditional payment statements, which focus only on expenses.
Advanced Authentication and Security
Since the incorporation of biometric technology, IoT devices such as smartphones and wearables have revolutionized security models in the banking sector. Customers can now log into their IoT-enabled mobile apps, make payments, and perform other transactions using just their fingerprint or a selfie. One notable example is the Nymi smart wristband, which uses biometric authentication by analyzing and recording users’ heartbeats.
While storing sensitive data raises some privacy concerns, Blockchain technology offers a reliable solution through smart contracts, which securely store user credentials and protect them from tampering.
Fraud Detection and Prevention
AI-powered IoT devices enhance security by detecting unauthorized activities and alerting financial institutions to potential cyber threats. For instance, if a cyber-fraudster attempts a transaction using stolen credentials from an unrecognized device, the system can quickly flag and block the transaction, preventing potential fraud.
Risk Assessment for Insurance and Loans
Manual risk assessment processes in insurance and loans are becoming obsolete with IoT technology. By utilizing IoT sensors, insurance companies can monitor and analyze individual habits and historical patterns, enabling them to identify qualified candidates for insurance based on real-time data. For example, vehicle insurers can offer customized protection plans by reviewing customers’ driving behaviors and other factors through IoT sensors.
Connected Cars in Retail Banking
Smart vehicles present an excellent opportunity for banking institutions. An innovative example is Idea Bank’s ‘mobile ATM’ initiative, which equips a fleet of cars with security deposit boxes and ATMs. Customers can request these mobile ATMs to visit them, enhancing convenience and personalization.
Smart Housing
IoT solutions have paved the way for new opportunities in the insurance sector. Companies like Allianz are collaborating with smart home products, such as Google Nest, offering insurance discounts to customers who integrate their homes with smart devices.
Wearable Banking
The adoption of wearable devices by banks has been rapid due to their relatively low start-up costs and widespread consumer use. Numerous banks now offer applications compatible with popular wearables like the Apple Watch and FitPay. Some banks have even developed their own devices, such as Barclays’ bPay wearable contactless payment solutions and similar products from Caixa Bank, Hellenic Bank, and Australia’s WestPac.
Applications of IoT in Banking and Financial Services
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Cash App: This leading mobile payment service in the US and UK allows effortless money transfers and transactions, representing an advanced IoT and finance alternative to traditional point-of-sale technology.
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Mastercard: As a global leader in payment innovation, Mastercard leverages IoT to create innovations like IoT-connected key fobs, contactless payments, and smart refrigerators for re-ordering groceries, connecting millions of consumers and businesses worldwide.
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Metromile: Utilizing IoT-connected trackers, Metromile offers per-mile insurance plans based on mileage and driving behavior, revolutionizing traditional insurance models.
The Future of IoT in Financial Services
The future of IoT in the financial services sector appears vibrant and expansive. With its current success and growing adoption, IoT technology is set to further evolve, creating robust interconnections capable of protecting against fraud and addressing numerous challenges faced by fintech companies. The vast data collection capability of IoT solutions will shape the future of the banking industry, with distributed stream computing platforms emerging as the new norm due to their real-time analytics and pattern identification capabilities.
According to Markets and Markets, the IoT market in the banking and financial sector is projected to grow by $566.4 billion by 2027, indicating its continuing influence on the future of online banking. By 2023-2024, we anticipate greater integration of IoT, AI, Blockchain, and other advanced technologies in financial transactions. As a result, consumers will benefit from more sophisticated and tailored services, while banking and financial institutions must adapt or risk obsolescence.
Leverage the Benefits of IoT in Fintech with Appinventiv
The growing adoption of IoT in the banking and finance sector benefits both customers and businesses alike. Smart security systems, digital wearables, and other intelligent technologies are becoming increasingly prevalent in the fintech industry, enhancing payment processing and security. IoT enables mobile point-of-sale systems, allowing customers to make payments from anywhere and providing secure ways to process and encrypt payment information, making the financial industry more efficient, reliable, and secure.
Creating a robust IoT solution requires strategic planning and careful execution. Appinventiv has a proven approach, validated by our successful projects such as ActiDrive. Here’s a glimpse of our strategic action plan for IoT in financial services:
- Validation of Concept: Our business managers conduct extensive market research to ensure the solution provides growth and revenue while delivering value to users.
- Data Structure: Our engineers determine the types of data to be generated, gathered, and processed, ensuring it aligns with the product’s functionality requirements.
- Hardware Dissection: Our system architects meticulously assess hardware sensors, wearables, and other IoT components to ensure seamless connections.
- Software Development: Our engineers create a multi-layer backend and integrate third-party solutions, addressing security challenges and setting benchmarks for IoT usage in finance.
- Testing & Maintenance: Quality assurance is crucial for IoT benefits in financial services. Our QA experts rigorously test solutions to set global standards for IoT fintech startups.
At Appinventiv, we help clients leverage the latest IoT technology for better ROI. Our cutting-edge solutions offer competitive advantages through improved security, data-driven customer service, and process automation. Contact our team to learn how our IoT in Fintech services can advance your BFSI business, providing expert consulting and end-to-end IoT development.
FAQs
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What is IoT finance?
IoT finance, also known as the Bank of Things, involves the application of IoT technology in the Fintech domain to enhance financial services.
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How are FinTech companies implementing IoT trends?
Financial institutions use IoT technology for tracking customer data, improving security, and automating processes like fraud detection and customer service. IoT helps institutions gain insights into customer behavior, thus personalizing services and improving efficiency.
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What is the impact of IoT on the banking industry?
IoT significantly impacts the banking industry by offering personalized services, enhancing security, and optimizing operations. Banks can monitor spending habits, provide tailored financial advice, and implement secure authentication methods such as biometric technology and fraud detection.