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Internet of Things - Are we ready for Next Generation Financial Services?

As the society is riding the hype of Internet of things, we are beginning to see application of IoT in day to day life & incremental adoption at industrial scale. Mckinsey predicts that there will be approximately 30 Billion objects connected to internet of things by 2020.

Moore's law will ensure we continue to improve the computing capacity in next decade or so. And "Things" will become Smarter and start to weave themselves into the fabric of our life. IoT will enable new business models. It will also help build energy efficient business, reduce operating cost, create smart workforce, enable new business models and improve business resiliency.

Any Technology, which has potentially transformational, also has a potential to cause most damage. While smart sensors and dusts will eventually ensure farier & innovative Financial service, it will pose major challenges around privacy, security, data ownership and damage caused by it.

Potential for IoT in FS industry-

FS industry needs to take notice of IoT trends and align itself to protect and thrive itself in the future.

Key challenges today in most of the FS organizations are:

1) Gaining the trust of customer and improve customer satisfaction

■ Better experience — Better Branch experience through instance recognition of customer and advisory services

■ More interaction — Smart ATM and virtual currency machines and Kiosks to drive customer interactions

2) Explore new business models to generate new revenue streams

■ New bundled services — Mobile wallet services connected to retail and telecom stores can improve Fee based income

■ New revenue model — Pay-as-you-drive insurance can increase higher revenues

■  Revenue uplift — Provide Reward and loyalty services, value added services like Travel booking, Airline booking, Financial Advisory services 

■ New revenue stream - Bank the un-bank in developing markets & build connected devices for credit distribution and collection services

3) Reduce operational cost to improve cost income ratio

■ Reduced costs — Software defined datacentres to optimize & reduce energy use

■ Faster response — Notification services through IoT devices like watch or health bands

■ Downtime avoidance — IoT device management to reduce risk and improve quality of service provided

4) Reduce business risk

■ Fraud detection — Better customer profiling and geo-location tracking to prevent fraud

Are we ready for the IOT economy?

While benefits and ROI of IOT is obvious; in order to drive an Industrial adoptions we need to address some of the early challenges described below:-

1) Low energy connected device: IoT paradigm requires low energy, Nano processors. It also require low power connectivity standards to make the IoT model Viable. Intel has introduced a chip called "Intel Button" which is essentially a processor with Bluetooth low-energy radio, sensors and a dedicated engine to determine different sporting activity. It's able to run for extended periods with a coin-size battery, or can be recharged. Low power Wi-Fi standards like 802.11ah are being developed. These will eventually ensure lower end point cost and make IoT economically viable and Eco-friendly.

2) low bandwidth networks: IoT End Point devices require to send and receive data across and interact with any 3rd party systems. This requires API interfaces & common Messaging standard. Open message protocol like Message queue telemetry transport (MQTT) can be used for IoT M2M communications. Light weight API standards like JSON/REST can be used for interface standards.

3) Security, Authentication & End device management: IoT brings abt challenges around Security at large scale. While lot of work has been done around enterprise security services by building firewalls, physical securities, Application, DB and network level securities. Not much has been done around publicly exposed embedded device securities. A comprehensive network/Message level security and encryption needs to be built for IoT devices. Also, robust two factor authentication needs to be built to make sure  process is required to protect the integrity of the devices and the data. A robust device management ecosystem should be built to make sure devices are updated on regular basic and in the event of breach the device data can be wiped out or taken out of network quickly.

4) Data analytics, monetization: The velocity, variety and volume of data I/O generated through IoT devices will pose great challenges around our ability to analyse it. Transformation of many disparate sensor inputs to provide useful outputs to a device or system is going to be key. That in turn will drive real-time Big-data and Analytics and recommendations to help drive higher customer satisfaction and improve monetization of services.

6) Who is liable for service failure and privacy breaches: There is a larger data Privacy issue around what data IoT devices can collect and who owns the data (is it Device manufacturer, Network provider or Service provider etc) and what type of data can be used to monetize some of the services.

Also, a framework needs to be built around who owns the services and who will be liable if the service fails. Is it going to be Device manufacturer or the Network provider or the Service provider?

 Creation of E2E IOT platform -Once some of the above aspects are thought through and addressed an E2E IoT industrial platforms can be built to drive further innovation and rapid adoption. Some of the early use-case adoption are around mobile health monitoring, smart metering, smart car and home are already looking very attractive. We are seeing early commercial IoT platforms like Google Nest and Apple Homekit, CarPlay. FS industry can learn and build IoT platforms for Car Insurance, Branch experience, Mobile wallets to generate higher fee based revenues, reduce cost of Operations by smart & energy efficient data centre etc.

 Transition from Protected to panoptic society -Just like Computer, Mobile phones in past decades; next decade will drive IoT Economy. Right checks and balances will ensure smoother transition to a next generation financial Service.


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Abhishek Chatterjee

Abhishek Chatterjee

managing Partner

Gartner Inc.

Member since

16 Dec 2014



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