Mark Aldred, head of international sales at Auriga, explores how IoT devices are transforming the banking industry.
There is tremendous excitement about how internet of things (IoT) devices, services and applications are going to change and transform our homes, our cities and our cars.
The financial services industry is caught up in this excitement too. Insurance is seeing interest in how connected devices can help better manage risk through continually monitoring a customer’s behaviour or property, and even create new insurance products like pay-as-you-drive car insurance.
It is less clear how retail banking will be affected by IoT. The capability of a connected device to collect, analyse and take actions based on customer data in real time suggests IoT could have considerable impact. Banks could learn from how insurers are using IoT data analytics to make better decisions on risk, especially as IoT provides more data intelligence on property, vehicles and other items customers request loans to buy or improve. However, banks are still in the exploratory stage and there are few, if any, implementations on the scale of those in insurance and other sectors.
Any caution is entirely understandable as banks need to define exactly how this technology can be harnessed to enhance customer services and improve banking operations. One early area of focus is how wearable connected devices could be used to significantly strengthen secure access to payments and other sensitive banking services while making the process of multi-factor authentication much less cumbersome. One of the pilots currently in progress, for example, is the Nymi Band bracelet that authorises contactless payments through the wearer’s heart rate.
Any roll out of banking IoT applications is likely to be linked to how banks further develop their mobile banking channels. Customers trust their smartphones to do more of their personal banking than ever before. Last year the British Bankers Association said Internet banking website logins fell to 4.3 million times a day while mobile banking apps were being used 11 million times a day. This translates over 7,000 times a minute and four billion times a year. As banking apps exploit near-field communications and other network technologies like Bluetooth, smartphones can become a platform for interacting with connected devices like ATMs and other self-service banking machines. Indeed, several banks have trialled iBeacon technology to engage with customers’ smartphones as they enter branches.
When considering how these devices might evolve, the immediate reaction is to think of new offerings like Apple Watch or similar smart watches. However, the success of these devices and new payment methods like Google Wallet has so far been very mixed.
Perhaps banks should take a step back and realise that they already offer a connected object that’s doing a great job at collecting data and providing actionable insights – the bank card. By synchronising with payments, a card gives banks precious information on their customers and their behaviours. And like a smartphone a bank card is still nearly always carried by a customer. So considering how the bank card could interact with a customer’s bank card could be a powerful proposition, as would be how together they could communicate with ATMs and other self-service technology inside branches or elsewhere.
Whether IoT in banking is a revolution or evolution, numerous barriers to implementation remain to be overcome. Not least there are serious concerns about the inherent security of many smart connected devices. Common industry standards still need to be hammered out, although pressure from global technology giants like Cisco, Samsung and IBM is likely to change this.
Despite these challenges, banks have learnt to innovate with and for their customers since the start of the digital revolution. Nevertheless, they are still in the early stages when it comes to making use of connected objects and developing services that can reach their intended audience. Indeed, IoT is only one element in a much larger wave of change that also involves Big Data, predictive analytics and artificial intelligence.