The proliferation of “always online” devices in our digital-first world has created immense possibilities of integrating them on to a common network that potentially provides real-time data for a wide array of use cases. More commonly known as “Internet of Things” (IoT), these devices bring their own myriad applications that support personalized customer experiences across industries ranging from healthcare, automobiles, retail and banking, insurance and financial services or the BFSI sector. The coming of age of this technology aligns itself well with the financial sector’s ever-growing need for data served on a real time basis. Wireless communication networks, perception and smart sensor systems and applications and operations support are the three categories where the finance industry stands to benefit.
From automating loan repayment notifications to making real-time adjustments in insurance prices and creating personalized banking experiences, the technology is ready to influence multiple aspects of financial processes. A recent research report says IoT market size in the BFSI sector is projected to reach $2 billion in 2023 from barely $250 million recorded five years ago.
The power of real-time data
From a broader perspective IoT devices assist in data collection from multiple sources for analytics and actionable business insights. And while supporting device to device communication, it also enables users to automate a variety of tasks, the impact of which could potentially be measured on a real-time basis. The earliest example of an IoT device is the automated teller machines (ATM) that not only helped banks drive down costs, it also eased the entire process of withdrawing money for the customers. Today these same ATM kiosks allow customers to receive live stream support from their branches for additional assistance. Today, one can bank via smart speakers, issuing voice instructions rather than physically tapping a mobile phone to make transactions. In 2019, NatWest had piloted a voice banking feature using Google Assistant, which functioned off the Google Home smart speaker.
Big benefits for businesses
It is not as though only customer centricity is in focus the BFSI businesses gravitate towards IoT devices. For starters, decision-making becomes more data-driven and faster. Enterprises can use data analytics, business pattern studies and market research to devise new investments. If the company is directly engaged with customers, IoT networks on which these customers are available can gather and analyze data to provide insights into customer needs and preferences. Moreover, use of artificial intelligence, machine learning and robotic process automation could help CFOs take informed decisions based on these large data sets.
Another obvious benefit that has come to the fore post the digital transformation initiatives is the ease of setting up and managing the finance and accounting workflows. What was at one time a painstaking process of collating data from multiple business units using disparate modes of communication ranging from emails to chats and phone calls, today companies simply automate this workflow using bot-enabled systems. Teams collate data and upload it to the cloud in real time so that finance divisions have access to these reliable data in real time.
Both the above measures result in enhanced business efficiency as IoT also helps the business leaders to monitor employee performance and its impact on the division. Although the use of wearables to monitor productivity is limited in the finance sector, they can still help track the work hours of field workers in the insurance segment. Then there is also the obvious use of IoT devices in accident claims in the insurance industry where health data can make or break a claim. Banks have been using IoT technologies to check that their devices such as ATMs, cash deposit machines and other customer kiosks are working properly.
The road ahead for IoT devices in finance
As IoT systems become more mature and secure, companies in the financial sector will also get new opportunities to improve customer experience. Today, banking apps already alert customers about their financial transactions in real time. Going forward, we may see new smartwatch features that can give owners a signal when their spending reaches a predefined limit, enabling them to rethink their budget allocation for different expenses. What’s more, organizations could easily look beyond IoT benefits to customer service and see how they could apply the same technology for maximizing returns on investment. Here are some use cases:
- Contactless payments – Based on a set of rules, contactless payments are common now and are made through devices such as chip-based cards, digital wallets and mobile banking applications. By integrating applications for IoT-backed contactless payments in their accounts receivable processes, companies can make it easier for customers to pay from any location and reconcile their own records faster.
- Customer service – IoT devices allow companies to offer timely service to their customers. Mobile applications can be built to notify account managers when a customer walks into their office. The notifications can help them to stay prepared for addressing their customers’ concerns promptly. The outcome is stronger trust and loyalty. With IoT enabled devices connected to a company’s office premises map, customers can also find their way easily to meet the executives they need
- Credit risk management – Organizations in the finance sector can capitalize upon IoT technology to access potential customers’ credit scores and financial history to improve their own cruet risk management. They can gather and process the relevant information to build a system that sends alerts to salespersons who may be offering loans or credit cards to high-risk customers. Such alerts help to minimize bad debt and open new possibilities for marketing credit products to customers who can actually afford such financial services.
- Fraud detection – Connected devices working with machine learning applications are now used to identify cyber threats and fraudulent users of an account. This ability helps to prevent financial scams and large scale attacks on an organization’s data repositories. By collecting inputs from different devices, web applications and multi-factor authentication processes, IoT makes it easier to differentiate between genuine account holders and hackers. As soon as an instance of fraudulent activity or misuse of assets is detected, cyber security teams can take corrective actions to prevent losses.
- Smoother audits – Legacy auditing processes involve a lot of paperwork and siloed spreadsheets. With its ability to keep systems connected, IoT removes such inefficiencies – it enables accounting teams to maintain a centralized track of all transactions in real-time. They can keep records of audit trails for all employees and business units, whether they make any purchase or receive money from customers. As the accounting process becomes more streamlined and error-free, it also reduces the efforts that go into audits and helps to ensure more compliance.
The road ahead for IoT deployment
Decisions about technology investments are not easy to make. On the other hand, no growth oriented enterprise can afford to ignore them in the age of digital transformation. To ensure that it gets optimum returns after adopting IoT, a business should focus on some key points. The first step is to consider proven use cases. For example, is invoicing and accounting a bigger priority than payroll and expense management? A risk-to-reward analysis might help here.
Then there is the question of data management before implementing IoT across any process stream. Users need to add security laters to strengthen data management structures because IoT devices could potentially generate mountains of data. Can the organization sustain this kind of data volumes? Of course, it goes without saying that data security comes into the picture here. IoT devices have long been a hacker favorite, so not only does the onus fall on the device makers to ensure data safety, the responsibility also rests squarely on the data accumulators.
Companies that understand the impact of IoT on their business also need to quantify the improvements it actually brings for them. They make sure that their CapEx and OpEx on the systems implemented reduce time taken to complete tasks, improve employee and customer experience, streamline audits and fetch measurable RoI. The growing conversations around Web 3.0 also means that participants would need to interact with each other and brands without the presence of a trusted intermediary. It would also be permission-free as anyone could potentially participate in any transaction without authorization of a governing body. Distributed ledger technology enabled by blockchains would be the next challenge that could potentially be resolved as even IoT devices get smarter in the future. A PwC note says the arrival of Web 3.0 could witness decentralization of data capture and utilization that could pose newer challenges for the IoT devices and their utility in data mining, management and analytics.