The Internet of Things has a considerable flair for innovations and is penetrating virtually any sphere of human activities. Surely, we all have noticed how our finances have moved towards becoming all digital and we are gradually forgetting what it is like to use paper cash. More on how businesses are adopting the benefits of the IoT in banking and how this technology can ensure the safety of your financial activities is in our article below.
This is the second article covering Internet of Things applications in banking. Follow the link to pick up the first one.
Some of the most groundbreaking and ambitious projects can be found among Internet of Things use cases in banking.
In this article, we will deal with the most crucial aspect of any software project, and we mean safety, of course. No doubt we all are concerned about how the IoT can handle risks associated with the concept of overall connectivity, since the more devices are connected, the more data is gathered, the greater the resulting risk, right? Let’s dig in.
Surely, security is one of the greatest concerns when it comes to connecting multiple devices into a single network, especially when we are talking about money. In its study for 2018, PwC stated that 49 percent of the surveyed companies encountered fraudulent activities of some kind. No wonder that implementing an IoT system which would prevent financial fraud is crucial in reducing banking losses and has grown into one of the core business issues.
Fraud and financial crimes impact financial institutions on a daily basis and, if not identified adequately and in time, can considerably undermine the reputations of banks that deliver respective services.
However, although IoT devices surely bring along a number of security challenges, a lot of companies are interested in applying IoT technologies in the finance sector to detect fraud, since they could get impressive results from implementing IoT solutions for this purpose.
That’s because IoT devices can be overseen by AI. This allows to gather data on financial transactions to monitor accounts for fake information, screen apps for inconsistent data and create a better profile of customer spending habits. IoT tools could recognize customers across digital devices and channels hassle-free, thus reducing fraud cases and enabling legitimate transactions.
With the IoT in banking and financial services, institutions can track the location of a financial crime, identify the type of device involved in such a crime and even get to the root of it on time. Thus, for example, wearable devices can gather the biometric data of a customer, whilst the combination of such biometrics and strong cryptography makes it possible to securely store sensitive information in the bank’s database.
For example, if a cybercriminal takes hold of customer financial information to buy something, but the device that the customer normally uses for most purchases is located somewhere in a completely different place and not involved in a financial transaction, the financial institution can easily block such fraudulent purchase. Another benefit of the Internet of Things in the banking industry is powerful multifactor authentication, making smart devices much more difficult to use for fraudulent activities than a debit or credit card if they’re stolen.
While the IoT in the banking sector is light years ahead of the financial technology that opened doors to wire transfers in the early 20th century, it illustrates the extension of a trend in the financial industry to engage the latest innovations to make life easier for clients. The latest generation of IoT fintech will assist clients in exercising greater control over how they manage and use their finances, transforming the way we think about our relationship to banking.
Digital banking has difficulty in accurately authenticating digital users. The IoT could help banks innovate risk management and access to banking platforms. This authentication could be supported by biometric sensors and thus certainly improve the existing authentication process. Based on generated data and social media information, banks will be able to serve underserved clients.
Bank statements have long made it possible for customers to track their spending. However, the way those statements are designed are often not especially helpful. They indicate who processed their payments, but on many occasions fail to provide the context people need to really understand their spending patterns over a certain period of time. With IoT devices in place, customers will be able to obtain a more comprehensive picture of how, when, and where they’re spending their money. Some devices can even be set up to help users break particular spending habits.
In the future, the implementation of the Internet of Things in the banking sector will mean that loan providers will obtain detailed data on customers. As a result, financial organizations will be able to use an improved decision-making system for granting loans. IoT-based transparency will offer banks additional support as it scales down the risk of engaging with unreliable debtors in the future.
Banks and other financial institutions will be able to customize the terms and conditions based on customer behavior, objectives, and credit history. They will also have the opportunity to estimate the value of commodities a debtor has with accuracy, which is impossible to achieve as of now.
The Internet of Things in the banking sector will allow new payment forms and tools — including smart cards, biometrical tokens, and many more. ATM transactions as we know them will most likely disappear in favor of devices that are on good terms with smart card technology.
The IoT will enhance wearable payment systems. Instead of carrying credit cards that can be easily lost or stolen, you will be able to pay using a wristband or a smart ring. A couple of years ago, Barclays already released wearables for contactless payments. A PingIt program (formerly bPay) allows users to send and receive payments using wearables, check their balance, credit history, etc.
Prime Indexes forecast that 60% of financial organizations are going to make wearables a commonplace payment method.
Apart from that, this area offers a lot of benefits not only to banks and financial institutions. Any business can make a huge step forward in a race of competitors using payment through the air. The IoT enables payments not just without cash or credit cards but without smartphones as well. The conduct of financial procedures can be approved by biometrics such as voice or face recognition. Imagine the level of convenience when to make a payment you don’t have to look for your card or unlock the device but just smile to the camera.
Wrapping It Up
The Internet of Things is still emerging and businesses need to prove that they are providing meaningful solutions which generate sufficient and attractive returns for investors. As we see it, in the future, bank branches will become extinct and banking as a service (BaaS) will become the most important business model, while cloud-based services will become the main banking platform.
No wonder that in order to sell (products in services in case of banking and financial businesses), you need to invest. In our point of view, though an IoT project will certainly cost a lot to introduce, it will pay off in the long run. To cut to the chase, when you invest in the IoT, you invest in your future. The winners will be organizations which overcome today’s obstacles to embrace change and capitalize on initial uncertainty.