IoT in Banking - Trends
Four trends that are related to the use of Internet of Things (IoT) in banking are connected cars banking, blockchain-based smart contracts, personalization with beacons, and wearables banking. Details of these trends are below.
Connected Cars Banking
- The use of connected smart cars to perform and enhance various banking experiences is being adopted by both banks and car manufacturers. For example, Blueshore, a Canadian credit union, offer installable wealth management applications that are displayed on car windscreens, and Idea Bank has a fleet of smart cars that serve as deposit boxes and ATMs. This trend is identified by Temenos, Internet of Business, and PWC, and is being practiced by Blueshore and Idea Bank.
- Instead of customers visiting banks and ATMs, these smart connected cars now visit them.
- Data from idea bank suggests that with these smart connected cars for banking, cash deposits at one car is three times higher than at a normal branch.
- The regulation changes (such as the Payment Service Directive in the EU) that accompany the use of connected cars in banking allow banks and financial institutions to sell each other’s products and services. This helps to broaden competition among banks and creates new frontiers that can foster the innovation of banks and financial institutions.
- By using smart IoT devices and sensors, cars with internet connectivity allow passengers to perform many financial operations seamlessly, such as reviewing their portfolios, which are displayed on their windscreens, as they are driven to their destinations.
Blockchain-Based Smart Contracts
- Smart contracts are digital programs that help to facilitate the performance or execution of a contract. A combination of IoT, smart contracts, and some form of digital identity (provided by blockchain technology) can be used to make payments self-executing and self-enforcing.
- The IoT, in combination with blockchain technology, can be incorporated into banking and financial processes used to carry out trade transactions between banks, as well as facilitate smart contracts by leveraging blockchain technology. Blockchain technology also has the potential to keep secure records of authenticated transactions. This trend is identified by Temenos, Datafloq, and Edgeverve.
- By leveraging the possibilities of Blockchain-based smart contracts, the Commonwealth Bank of Australia, Wells Fargo, and Birmingham Cotton, a trading company, were believed to have completed the first ever global trade transaction between two banks, using the IoT, smart contracts and blockchain technology.
- As there is no need for intermediaries, blockchain significantly reduces payment processing fees.
- When leveraged, blockchain technology can enable banks to improve risk assessment and threat reduction when performing contract processes. This will help banks and financial institutions reduce losses and increase efficiency as 40% of financial institutions and intermediaries are susceptible to heavy losses that result from economic crimes every year.
- In simple terms, blockchain link transactions together as part of an interconnected global distributed ledger that can be accessed globally. Being part of the blockchain, transactions cannot be tampered with and can have global visibility (with anonymity).
- Blockchain technology helps to make transactions more secure and efficient by reducing fraudulent activities and labor costs.
- By using blockchain with smart contracts, only transactions whose conditions are met would be allowed to proceed. This can help in enforcing transaction limits and thus provide added security.
Personalisation with Beacons
- Wearable devices (such as smartwatches, fitness trackers, and eyewears such as google glass) contain sensors and software that can collect information about its users. The collected information (data) is then pre-processed in order to extract essential insights about the user, which can be leveraged for banking services and payments. This trend is identified by Datafloq, Internet of Business, and PWC.
- Barclays Bank uses beacon technology to help guide disabled passengers while navigating their branches. Also, Chase Bank used beacon technology to pre-announce customers who signed up for the service, before they approach an ATM or a human teller.
- According to Tata Consultancy Services, 31.6% of companies leverage IoT technologies by using digital sensors and devices in various business locations. The information are extracted, pre-processed and explored to deduce customer insights informed by the personal preferences of consumers.
- The use of wearable IoT devices to facilitate different banking operations and services is a well-established trend among many banks. For example, Barclays bank has bPay, a contact-less wearable payment solution, and Australia’s WestPac Bank has PayWear. This trend is identified by Temenos, Tata Consultancy Services, and Finextra.
- While some banks have their own wearable devices, others develop applications for popular wearable devices such as Apple watch and Fitpay.
- Wearable devices such as fitness trackers and smart watches offers the possibility of allowing bank customers to perform financial operations right from where they are, such as invisible payments for transports and restaurant services.
- By fostering customer satisfaction and spending preferences, wearables banking help banks to retain and acquire more customers. For example, the company ieDigital offers a service called Interact IoT, that allows customers to log in to and connect their bank accounts with many compatible IoT gadgets that help in checking their spending. An example of a device compatible with Interact IoT is Nest Smart Thermostat, which allows customers to set the amount they want to spend on home heating every month; when that amount is used up, the device turns itself down to a set temperature to help save cost.
- According to Tata Consultancy Services, 15.8% of financial institutions leverage IoT technologies through wearables and allows the company to track how customers use products and services.
- Being internet enabled devices, wearables act as additions or extensions to mobile technologies to optimise operations and boost productivity in financial operations.