IoT in Banking and Fintech: Benefits, Examples, and Cases

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In this article, we talk about the use of the Internet of Things in banking and the challenges that come with it, and also provide you with examples of fintech businesses that use IoT to their advantage.

The next big step in financial services is the Internet of Things (IoT). The Internet of Things is a network of devices connected to the Internet that receive and transmit data. The Internet of Things is an independent communication system between objects that can optimize operations, reduce costs, increase productivity, and improve life. 

The Internet of Things and lower-level hotspots are changing the customer experience in the banking environment. Over the past few decades, the Internet has evolved from a collection of documents or interconnected hypertext to a network of objects, people, applications, and devices.

What is the Internet of Things?

The Internet of Things is a system of interconnected devices that can collect and transmit data over wireless networks, connecting virtual worlds. With the advent of remote and digital IoT devices, the transfer of all types of data has become a daily routine. To receive large amounts of data, these devices must be able to send signals to the server and to other devices.

The benefits of the Internet of Things in banking are attracting a lot of attention from organizations around the world.

Various industries such as healthcare, retail and financial services are exploring ways to harness the potential of the Internet of Things to generate substantial profits from commercial ventures.

In other words, the concept of the Internet of Things (IoT) includes connecting all things in the world to the Internet.

This implies expanding the capabilities of the Internet beyond smartphones and computers to a wide range of additional objects, processes and environments. IoT technologies enable enterprises to improve their understanding of their operations and to control their environment.

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Using IoT in Banking

Banks around the world are trying to harness the power of the Internet of Things to attract more customers to their sector. The mobile banking apps now used by most of the world’s banks are helping to track consumer preferences using sensors, taking financial service providers to the next level. Below are some of the ways the financial sector is using the Internet of Things to reap a range of benefits.

  • The Internet of Things in the financial sector can be used to collect and analyze data to generate meaningful information to meet specific customer needs.
  • The Internet of Things simplifies day-to-day operations by reducing the use of need for human labor. It can also be used to solve financial problems such as analyzing savings and spending patterns, balance sheet appraisal, and financial planning.
  • IoT devices can be used to improve employee productivity and keep them connected.
  • The Internet of Things (IoT) provides strong data protection with multiple authentication options.
  • It can be used to help financial institutions improve risk management by collecting real-time data on customer assets.
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Advantages of IoT in Banking

Prompt customer assistance

FinTech combines the Industrial Internet of Things and Artificial Intelligence to test how banks are using immediate customer support. Smartphones can act as signs, notifying account verifiers at financial institutions when a consumer arrives at their branch. By doing this, FinTech firms can help quickly as well as save customers time.

Indoor customer navigating

By introducing signage into day-to-day work, FinTech firms can help consumers browse the pages in their offices. Unlike clients who manually discover their method at the bank, they can indicate the reason for their visit. Then they find the right person to solve their problem. This simple option increases the efficiency of distribution of the solution and also improves the quality of customer service.

On-site line management

Queues are standard at many banks as well as various  other financial institutions. However, they can be taken care of using internet access points. By helping customers navigate their business structures as well as finding the best spokesperson for communication, IoT tools can also execute e-tickets. In this case, the customer brings his/her problem to the original equipment. They are then given a ticket with information about the agent they must meet and his/her queue number. The device will then alert them when it’s their turn.

Improving customer service

IoT applications in money solutions can also be used to improve customer service. By using smart gadgets that are context sensitive, financial aid can improve customer service by sending personalized messages, directing consumers as they arrive, and more.

Making wireless settlements

The Internet of Things in monetary solutions is further transforming the way payments are made. Wearable devices are replacing smartphones and traditional credit cards for wireless payments and cash withdrawals. Statista predicts that the number of connected wearables will surpass 1.1 billion by 2022, up from 526 million in 2016. Thus, in the coming years, there is no doubt that more and more people will use these devices in their daily activities.

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Authentication and safety

Wearable IoT devices are already being used as a method to improve security in the FinTech sector. A perfect example is the Nymi smart bracelet, which uses a person’s heart rate for biometric authentication. This technology has been tested and proven to be safe for building wireless communities.

Increased business efficiency through automation

By implementing IoT security solutions, companies can increase productivity by automating procedures. Leveraging the Internet of Things in banking and in a lucrative marketplace will help to improve customer service and simplify day-to-day functions. For example, Citibank has used Signs, which allow customers to use their mobile phones to open ATM doors outside of business hours, rather than using vital cards.

Self-checkout services
Nymi smart bracelet

Self-checkout services

IoT FinTech startups can use smart gadgets to deliver wireless self-service services across many domains. Amazon.com is currently applying this concept to all of its self-service stores.

IoT Banking Cases

IoT Banking Cases

IoT-enabled smart contracts

IoT-enabled smart contracts operate on the blockchain and can verify and enforce negotiations or agreements. By creating a smart contract using IoT devices and having a digital identity, you can make offline payments.

For example, paying after a 30-day trial period or controlling access to your home based on a timely lease. While smart contracts are not used as often as the other solutions in this article, their potential is huge when it comes to simple automation and risk mitigation.

Customized car insurance

Some insurance companies have already started to offer devices that can be connected to the vehicle’s on-board diagnostic system. These IoT devices record vehicle behavior data and send feedback to the insurance company. The cost of the car owner’s insurance will be determined partly by the driver’s driving style.

Attentive drivers may be eligible for discounts. Tesla vehicles have a Linux-based operating system that continually and automatically updates its feature set.

New metrics can be set that provide personalized car insurance for customers based not only on driving behavior, but also on engine condition or wear on various critical components.

Driver speed datasets can be overlaid on GPS data to determine the driver’s speed relative to the speed limit at that location (for example, although 50 km/h does not seem to be fast, it would be considered reckless driving if the area is in a residential area or within school grounds). Insurance companies will receive important information that will form the basis for assessing the likelihood of accidents.

Instant life insurance

Fitbit provides integration with Wellcoin, allowing users to buy rewards based on healthy exercise, sleeping habits, and the use of alcoholic beverages using Wellcoin’s virtual currency. Similar to the potential of the Internet of Things in car insurance, the data collected by a fitness watch can be used to determine “wear and tear” (i.e. to predict a person’s health).

While fully automatic life insurance may sound futuristic, IoT solutions already allow us to do  this. By superimposing a person’s medical data collected by wearable IoT devices, biometric digital identification can be created and stored on the blockchain. People can use their digital identity to request and receive life insurance instantly, from anywhere, anytime.

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Peer-to-peer assets

When it comes to lending money, various P2P (peer-to-peer) models have proven to be particularly damaging. In the future, IoT technology could expand P2P models in many new areas and transform other traditional services. (for example, leasing). All assets can be rented to others over the Internet using services that directly link the tenant/lessee to the landlord/lessor.

Using the functionality made possible by digital identity, the lease process can be carried out in real time, as the ownership of an asset can change just a few seconds after receiving confirmation of a key payment. The potential here could hinder banks in some of their key service areas, such as mortgages or leasing, by securing digital asset-based financial transactions using a peer-to-peer solution.

The Internet of Things could completely change the way we think about banking. If banks want to maintain their position in the mortgage, lending and leasing sector, they will need to consider introducing new peer-to-peer technologies to meet the changing demands of their customers.

Dedicated smart wallets

As everyday household devices such as refrigerators, clocks, and cars become digital smart devices, having dedicated pre-installed wallets associated with a specific device could become a new emerging trend.

For example, an offline car wallet can be used to pay rent, parking, gas, or maintenance costs. Any individual device with network capabilities can contain a prepaid wallet that will manage the costs associated with that device. Aside from convenience, it provides a clear understanding of costs and expenses and can help people better understand their spending structure.

Examples of IoT in Banking

Examples of IoT in Banking

Stripe

Stripe software customizes and simplifies payments and organizational aspects for businesses of all sizes using secure, private cloud infrastructure. It also includes applications for revenue management, fraud prevention, and international expansion. Since the vast majority of trading is still done offline, Stripe recently introduced the Stripe Terminal for POS use.

Kontakt.io

Kontakt.io manufactures low energy Bluetooth beacons that can be used for mobile payments and more, replacing traditional (and more expensive) point of sale technologies. Benefits include fewer or no queues, an optimized shopping experience, more time spent exploring other parts of the store, and increased data collection for the business. 

Armis

Armis brings IoT security to businesses, including banks, by allowing them to see and restrict every device on their network. Benefits include automatic identification and disconnection of unmanaged devices, rapid deployment, easy integration with existing business infrastructure, and agentless tracking and control that allows devices to be discovered before they even join the network.

Dynamics, Inc. 

Dynamics creates interactive, battery-powered payment cards connected to the Internet of Things that provide real-time, two-way communication between banks and customers. Each card has a screen through which bank customers can ask questions and get quick answers. The so-called “wallet” sends a notification to the bank containing detailed information about where and how payments were made. Dynamics Wallet won the Best of Innovation award at the Consumer Electronics Show in January 2018.

Mastercard

MasterCard has formed strategic partnerships to create products that simplify several daily tasks. The resulting innovations include contactless payments (with coins), smart refrigerators that can reorder products (with Samsung), and IoT-connected keychains (with General Motors). The company uses IoT technology to optimize fleet management by integrating fuel and service information into the payment process.

Metromile

Using trackers connected to the IoT, Metromile offers cost-effective one-mile insurance plans based on mileage and driving behavior. It also simplifies the claims handling process by allowing drivers to file a full claim from their mobile phones. Metromile has raised nearly $ 300 million in funding to date.

The Challenges of IoT for FinTech Businesses

The Challenges of IoT for FinTech Businesses

While the adoption of the Internet of Things in banking has many benefits for banks and financial institutions, There can also be some major hurdles to face. These include the following:

Data privacy and security

In the world of financial technology, protecting sensitive data has been slow. Banks face a challenge when it comes to providing personalized customer service over the Internet of Things. This is why AI is being used to avoid fraud in fintech applications. AI helps to strengthen and improve the process of combating cybercrime.

IoT Fintech devices and software with built-in artificial intelligence can collect more data about their customers’ financial transactions, which can help improve security and make financial procedures easier and more efficient.

The lack of standards 

Each device has a different approach to service. There are no uniform standards for servicing the equipment used in IoT devices, since they are manufactured by different suppliers. Unfortunately, the failure of IoT devices can be associated with a lack of common standards. It could be solved if all equipment is produced by one company; however, this isn’t practical.

Data management

For financial service providers, collecting user data from multiple devices complicates the data management process. They need to manage data and security risks at multiple levels, be they mobile apps or endpoints. Once the decision has been made to integrate IoT into the financial sector, it must be understood that the amount of data generated by devices is huge, and this data must be properly stored and analyzed to provide customers with the best possible experience.

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The Future of the “IoT” in Fintech

The application of the Internet of Things within finance has become a well-known trend, and will continue to develop in the future. There are a number of IoT trend predictions that will take the financial technology sector to the next level, including the leading IoT platforms, operating system updates, and enhanced device architecture.

Fintech’s expansion has led to heightened security concerns in the industry. The Internet of Things can connect systems using AI and protect them from data leakage, hacking and fraud. Another important capability – data generation – the Internet of Things will support data flow management with large numbers of records, providing real-time analytics.

With tremendous potential to change the way banks and financial service providers operate, the Internet of Things offers a bright future

This major technological transformation will help consumers save time, work smarter, and live easier. While the Internet of Things in the financial industry is still in the planning stages, there is tremendous scope for innovation. This will change everything from increasing business revenue to improving customer service.

Final Thoughts

The finance industry is becoming more significant than ever before. In the future, it will change retail banking, core banking and other financial software. With a combination of customer management, business automation, and transformed transactions, the Internet of Things in fintech has proven to be fruitful.

When it comes to banking, IoT data facilitates the transition from traditional processes to modernized ones that improve the customer experience. Financial technology and banking organizations are already moving beyond their comfort zones to adapt to IoT technology and become market leaders. Banks are increasingly using the Internet of Things to transform data into useful information to help them make better decisions.

If you want to add IoT solutions to your fintech business but don’t know where to start, contact Mobindustry for a free consultation.

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Frequently Asked Questions

The Internet of Things is a system of interconnected devices that can collect and transmit data over wireless networks, connecting virtual worlds. With the advent of remote and digital IoT devices, the transfer of all types of data has become a daily routine. To receive large amounts of data, these devices must be able to send signals to the server and to other devices.

  1. Data privacy and security 
  2. The lack of standards 
  3. Data management

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