The various applications of the Internet of Things (IoT) have helped companies across the board to automate processes and improve their bottom line. This technology is doing wonders for the finance sector in improving service delivery, making customer transactions more transparent, and making the overall process of money exchange more efficient.
IoT applications are being reimagined to transform the finance sector in general as well as the finance side of other sectors. While finance today deals in more and more intangible assets, IoT, which is on the other side of the spectrum in how it has prominent hardware components, is still seeing considerable growth in its implementation in finance.
The financial services industry stands to benefit in the short-term as well as the long-term, from IoT in more ways than one. In this article, we will discover how IoT is working well for finance by leveraging IoT data to push through business bottlenecks. We will also look at the tremendous scope for future adoption of IoT in this sector.
Financial Services And IoT
Premature knowledge of IoT tells us that it is just a combination of interrelated concepts such as machine-to-machine (M2M) communication or big data. But there is a lot more to it than just that and that is where it finds its implementation in finance. Its scope of application is far beyond even just data communication and analysis.
In basic terms, IoT is a technology by which we connect devices and even people to provide information about the connected entity's condition, its position as well as movement. IoT-generated information creates immense value addition for financial companies and banks and also consumers. Sensor data can be utilized to boost operational performance, customer experience, and help model product design and pricing.
A majority of financial transactions have their basis in intangible sources but at some point in the transaction, there must be a layer of physical devices. So financial institutions can use the data collected from consumer durables and automobiles that have sensors to gauge consumer movement and behavior.
Real-Time Data Collection
Sensors in mobile phones used by their consumers can give banks a constant stream of data that is ready to be used. The banks or intermediate financial outfits can then use this data to quickly update their customers with notifications about information that could help with their financial decision-making. In this way, relevant data can be collected and dispatched swiftly, thus helping with the investment decisions on the fly.
As per a Gartner research report, over 25 billion new IoT endpoints spread over 200 consumer, business and vertical-specific categories of sensors will be added in the next three years. Even in 2018, IoT spending in the financial industry came to an average of $ 153 million annually, which has grown much further since then.
In addition to saving financial institutions a lot of time and money, IoT also helps them improve their customer experience and better detect any fraudulent activity. Risk mitigation and completely reinvigorating entire banking systems in a variety of ways are important contributions that IoT brings to the table for finance.
Tangible Applications For IoT
Consumer behavior related to driving habits, health monitoring, and so on is already being utilized by financial services institutions. These firms are measuring and analyzing these elements that impact their business in a tangible manner. A popular approach with this type of thinking involves research about the sensors that have the most in common with the business at hand.
Sensors of all types that analyze the kind of information that yields results that are most in line or are at least tangentially associated with the finance industry are the end goal of this approach. Finance-based applications that utilize IoT must then be synced with these sensors which are the most physical components of this type of setup.
There are several categories of sensors that see their application in education, in terms of lab equipment and smart boards, and in entertainment, like smart TVs and gaming consoles. However, the data collected by these sensors are of no actual use for financial institutions. So, out of over 200 categories of IoT data collection alternatives, there are many that the financial industry might have to stay away from. About one-third to half of all these categories can provide valuable information to these institutions.
Security And Fraud Detection
When it comes to a financial institution's customer account, there are several possibilities for fraud and security breaches. A Google report suggests that over 15 million COVID-19 phishing emails were blocked every day by the company in 2020. With such a high occurrence of such incidents, it is only natural that financial institutions are employing more resources towards preventing them.
IoT endpoints can at the same time provide several entryways for cybercrime and also serve as solutions to the problem of security in finance. These devices have often helped mitigate risks that are associated with phishing and fraud while helping pinpoint the accounts and malpractices that could possibly put entire banking systems at risk.
By gathering and analyzing the data of every user that logs into a banking system it becomes easier to zero in on potential threats. This data is sent over the cloud, wherein, if it does not match typical user behavioral patterns, it is taken up by security experts. By being able to look at unusual usage data in real-time, security breaches can be averted much before they happen.
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The Long-Term Impact Of IoT On The Finance Industry
The banking financial services industries have had a profound impact from IoT in the past and the future is going to see more of the same for years to come. Institutions must continually improve the way data is gathered and distributed across IoT setups and take great efforts to make sure that this data is clean and free from redundancies.
Among the many real-life implementations of IoT, the finance sector can find several applications that can be easily demonstrated. To know how Daffodil's expertise in the finance sector can help upgrade your service delivery, book a consultation with us today.