When banking meets the Internet of Things

When banking meets the Internet of Things

The Internet of Things may just hold the key to the future of banking, says Jacqueline Guichelaar, head of infrastructure and service delivery for Lloyds Banking Group.

With the topic of transformation dominating banking industry conversations amid the race towards a digital future, it’s clear that the Internet of Things is driving that change.

The status quo simply cannot continue and the major new force that is IoT is serving to transform the industry from the inside out, pushed by the twin drivers of heightened customer and regulatory demand.

Nevertheless, in my experience, IoT is a frequently misunderstood concept for the banking sector, and must be better engaged with if meaningful change is to take place in tandem with big data and the cloud.

Most are of course aware that IoT represents the staggering number of global connections that are resulting from the vast network of devices, wearables, vehicles, buildings and more that we interact with, and interact with themselves, 24/7 - but what I think is less understood is how it is serving to go beyond big data by making the resultant information available to other systems and networks in real-time.

It thus actually becomes a platform that captures the connectivity of the digital economy and the enormous potential for that information to then be leveraged for huge insights. Such insights in turn boost efficiency, productivity and harness improvements in customer service.

To my mind, another common misconception is that the concept of IoT remains a distant reality that may someday come to fruition; in fact, its benefits are here right now and it’s therefore high time for the industry to proactively react to its wide benefits. While the likes of the insurance and commercial property industries have embraced IoT, the financial services industry - which has remained often justifiably cautious - is only just beginning to tune in to the possibilities that could help to push it to the next level. Some have even suggested that it is helping the industry to now enter the second digital revolution.

As customer demand for a better, faster, more convenient mobile service gather further pace, and banking organisations seek out greater agility for the rapid transformation that will meet their needs, IoT is enabling the collection, correlation and exchange of mass banking data. It thus holds the hitherto unprecedented potential to provide those customers with the truly bespoke service they crave, complete with targeted, personal advice and insight.

It’s obvious to me that the sky is now the limit; IoT can create analytics-based customer rewards that boost loyalty, location-specific discounts in real time, customer cross-sell opportunities, and engaging digital experiences.

The Internet of Things enables a whole new level of personalised banking - indeed, the possibility of branches becoming equipped with sensing technology that can recognise customers as they walk in and respond to their own particular needs suddenly becomes a tantalising reality.

However, for the organisations harnessing IoT, it can also improve risk management, reduce costs, and improve operational efficiency - and the ability for banks to make better informed commercial decisions is a hugely significant one.

An example that immediately springs to my mind is that IoT is helping banks escape the perception that there is little difference between themselves and competitors. The ability to personalise services and anticipate individual needs naturally puts an entirely different complexion on that.

Hand-in-hand with the likes of the cloud and big data, IoT is set to be implemented on a massive scale, creating major new business opportunities as we continue to embrace a world that’s connected like never before. It could even serve to be the differentiator that separates the winners from the losers in the race for true banking innovation.

Change is now a must - and IoT is set to be the key competitive advantage that helps tomorrow’s market leaders set the pace.

Comments: (8)

Dharmesh Mistry
Dharmesh Mistry - AskHomey - Reading 15 August, 2016, 09:50Be the first to give this comment the thumbs up 0 likes

Totally agree (see https://www.finextra.com/blogposting/12580/the-dawn-of-the-bank-of-things---introduction-to-a-4-part-blog-series ).

When I speak to Banks oftenit is seen from the "connected devices" perspective and they are waiting for adoption of devices that can be used for banking. Given the adoption rates of smart watches you can see why there is a wait and see approach. However I think this is wrong as Banks will need to scale up their systems to cope with many more interactions and a huge volume more of data. The ability to process this all in real time and make meaningful, relevant, personalised and timely responses will differentiate the leaders and laggards in customer engagement. Once the issues of scale, volume and velocity are resolved, the next issue will be "how smart" the decisioning and analytics are behid the systems. Hence AI is closely related to IOT as smart things connected to the internet will drive greater adoption than just "things" connected.  

A Finextra member
A Finextra member 16 August, 2016, 02:34Be the first to give this comment the thumbs up 0 likes

Agree with Dharmesh. Setting up infrastructure to capture data from various devices should be the first step!

Once data is available, Analytics should take over! Drawing insights from the Analytics is a different ball game.



Bo Harald
Bo Harald - Transmeri, Demos, Real Time Economy Program,MyData - Helsinki Region 16 August, 2016, 09:531 like 1 like

IoT needs e-id and thereto connected authorisation services - and these are already available in banks for e-banking and in authorisation in corporate banking - both for human roles - and she/he will obviously have to empower IoT units. So big case for reusing the trust-role banks have - seriously good-for-society-at-large..

A Finextra member
A Finextra member 16 August, 2016, 10:153 likes 3 likes

The "Internet of Things" is characterized by machine-to-machine communication, which has been firmly established in the FSI world already decades ago. Banks and payments service providers do serve millions of automatic teller machines and POS terminals worldwide since a very long time with outstanding reliability. A powerful worldwide "payments cloud" has been established at a time when the term "cloud" was only used for describing meteorological effects. 

While there are of course new business models for FSI's made possible by a flood of new devices which may or may not conquer the world, it should not be forgotten that the rest of the world can learn a lot from the payments world about some important features: Reliability, scalability and security ...

Nick Collin
Nick Collin - Collin Consulting Ltd - London 17 August, 2016, 10:191 like 1 like

Interesting!  I agree with Bo.  IoT means new levels of e-ID and e-Trust.  I wonder if the answer lies in leveraging the global card payments network, underpinned by EMV chip technology.  It's already at the heart of mobile payments security.  Presumably all the "things" in the IoT will be chipped and will require some sort of PKI cryptography for the whole thing to work securely and reliably.  An extension of the existing EMV chip infrastructure may be just the job!

A Finextra member
A Finextra member 22 August, 2016, 16:30Be the first to give this comment the thumbs up 0 likes

Changes to authetication and payments will be fantastic. If the shingles on the roof of my house reach the end of their life, will they authenticate as me and order their own replacements on my behalf? It isn't too far-fetched to things that even low cost commodities will be connected and adding burden to payments networks. I think many presumptions about the impact of the speed and scale of IoT driven payment are understated.

Dharmesh Mistry
Dharmesh Mistry - AskHomey - Reading 22 August, 2016, 16:35Be the first to give this comment the thumbs up 0 likes

@Jordan, agree with your final statement, I've seen the number of connected devices by 2020 grow from 10bn to 50bn over the last 10years...

Also would say that likely individual items won't re-order, but more likely an agent that manages household expenses does.. similar to a car ordering new tyres rather than the tyre placing an order itself... because of the challenge of authentication/payments... imho


A Finextra member
A Finextra member 22 August, 2016, 18:23Be the first to give this comment the thumbs up 0 likes

I'd prefer to leave the ordering decision to the human being who is managing the household expenses - I would definitely not want my house or my car to spend my money, nor would I trust some software agent lurking in my smartphone (which, like everybody elses, is pretty vulnerable to malware anyway).

However, some payment providers might like the idea of individual shingles on the roof ordering their own replacement, which would drive the number of transactions significantly ...   (;-))