21 September 2017
Matthew Key

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Matthew Key - BT

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The Internet of Things for banks: it’s here, it’s real, and it’s set to grow exponentially

03 July 2017  |  10910 views  |  1

Until recently, only devices such as computers, tablets and phones were able to connect to the internet. But now there are approximately 8 billion ’network aware’ machines globally that are internet enabled and can communicate and interact with other machines, creating the Internet of Things (IoT). And this figure could grow to over 50 billion connected devices in the next five years. 

So there is no question that the Internet of Things (IoT) is set to substantially change our everyday lives.  While this trend is still only in its relative infancy, the progress in increasing internet connectivity has been remarkable.  Consider the development and advances in mobile network connectivity, the rise of ubiquitous wi-fi hot spots and the increased capacity of fibre optics.  If you combine these with improvements in small battery performance and the economics behind small sensors, the IoT’s staggering potential can be realised.

We are already seeing applications in usage, from car insurance (dongles monitoring driving behaviour) to ’intelligent parking’ in Milton Keynes (sensor showing busy/ free bays); from rubbish collection (is the bin full or empty?) to potential uses in water consumption efficiency — detecting leaks easily.  And on in town centres and shopping malls we already have fashion and food location-based services — offers relevant for you as you wander around (we as individuals opt into this).

But how can it work for financial services?  Some banking experts already talk about how the mortgage process could be radically improved by using IoT and advanced data analytics.  So let’s take that as an example.

We talked about location-based services in the retail sector, these could equally be applied to banks, for example using sensors to monitor branch activity.  In branch sensors could detect that the branch is relatively quiet and connect up with location-based services.  Recognising that you — as a customer interested in a mortgage — are in the area could allow them contact you to ask if you would like to speak to a mortgage advisor now.   And that meeting could take place with an in-branch advisor, or via high-quality two-way video.

This, however, is only the start of what’s possible.

The mortgage for most people is their biggest financial transaction and it is very complex, so how can IoT help?

For starters, sensors can give near-live information on the state of the house and local activity.  They can detect the conditions and physical dimensions of the buildings (rather than rely on static plans) as well as local traffic and pollution levels.  And they can provide some in-house survey capabilities (room size, damp etc) as well as ground conditions — water table or erosion data, for example.

These things help with risk profiling for mortgage providers and the underwriters alike.

Overall, with access to the unique data of individual homes, IoT has the potential to create personalised mortgages, factoring in both the property and the person.

In fact, the financial sector can bring progress to the housing market with a whole range of  technologies. The immediacy of transactions run on distributed ledger technology could verify house purchases more efficiently; processing time can be improved by big data stored in the cloud.

But with the rise of data and connected devices, CIOs and CISOs are clearly under increasing pressure.  Not only from the demands for increased scalability, as the sources of data presented by the rise of the IoT grows, but also building trust around security.  So how can financial services firms manage and analyse the huge amount of data the IoT generates, while exploiting the flexibility of on-demand services, without compromising security?

The IoT — and its associated big data —present incalculable opportunities for the financial services sector.  But its success depends on those firms putting the right mechanisms in place, starting with a consolidated cloud network, to mine this enormous data resource in a secure and scalable way.

This could be a cloud solution that combines public and private services to create a single hybrid cloud that financial services firms can manage centrally. Such specialised hybrid services for the financial services world provide a highly secure ecosystem that connects thousands of applications and services with users worldwide.  This helps to build security into the entire cloud environment, permitting employees and customers to connect securely from any location and device to any service and enabling financial services firms to fully capitalise on the benefits that the IoT has to offer.

Some of these ideas discussed in this blog are being worked on already; others are still only conceptual.  But the future potential of IoT is huge: it’s here, it’s real, and it is only going to grow exponentially.

TagsInnovation

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 04 July, 2017, 14:01

Last year, I noted "Maybe it's only me but almost every article I've read on "IoT for Banking" so far seems convoluted." With the passage of time, I've become wiser and am now convinced that some IoT use cases for BFSI are downright counterproductive.

Let's take the oft-quoted one about how Insurers can use OBD / Telemetry / IoT / Dongle to monitor driving behavior. An early adopter actually piloted this technology last year in India. One of its customers happens to be a friend of mine who owns a BMW 5 series car for which the premium was INR 95K. During the course of the year, he changed his chauffeur. His new chauffeur drove the car rashly for a couple of months before my friend fired him. Technology worked perfectly and delivered great insights into driving behavior. When it came time for policy renewal, the insurer had correctly gauged that the risk profile had increased and bumped up the renewal premium to INR 105K. Did my friend thank the insurance company for its fantastic work and decide to engage more deeply with it? Nope. He simply switched to another insurance provider who offered a new policy at the same old premium. He was not the only one. The insurer terminated the pilot. Forget about lack of ROI, here was a classic case of negative returns.

On a side note, any device that can be fitted with a SIM card can communicate with the Internet. This has been possible for at least 15 years in my knowledge. So, sorry if my experience doesn't resonate with your opening line "Until recently, only devices such as computers, tablets and phones were able to connect to the internet."  Singapore successfully implemented toll for automobiles using net-connected gantries on roads 15 years ago. Germany tried a similar technology for commercial vehicles tolling but abandoned it.

Clearly, IoT is not a supply-side issue. Like many other technologies, the key to mainstream adoption of IoT is finding a compelling set of usage scenarios on the demand side that deliver business benefits to the guy who's paying for it.

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job title Head of financial services customer innovation, BT
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Matthew Key has worked in the innovation and new technology field for his whole career. For the past six years he had a particular focus looking at innovation in the banking sector on a global basi...

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Ketharaman Swaminathan