20 years ago, one bank was enough for our parents to manage money transactions, from savings to insurance. The situation changed dramatically when there emerged more financial companies and competition for clients began. Suppliers offer to switch banks enticing people with favorable savings rates, gift cards, or bonus systems. The leader is the one who knows the consumer better and offers relevant services. How do financial companies manage it? One of the options is to use IoT in banking and finance.
IoT market overview
Smartphones, smart speakers, connected vacuum cleaners, fitness trackers have entered our lives and are making them better. The number of IoT and wearable devices is growing rapidly. In 2021 people used 35.8 billion smart devices, and by 2025 their number will double.
FinTech is one of the areas where wearable devices are of special interest. With the help of IoT, banks and financial companies collect customer data, offer relevant services, personalized products, or financial assistance. Moreover, organizations are updating old banking systems, introducing new software solutions, and reducing operating costs. Thus, they cut the cost of operations, attract new customers, and retain regular users. Let’s take a closer look at how this happens.
IoT opportunities in banking and finance
Wearables accompany users everywhere, therefore they become intermediaries between them and an enterprise. IoT software connects businesses with consumers helping them to:
Collect valuable customer data
IoT devices collect a lot of information about users, which helps to better understand them. Banks and financial institutions analyze the clients’ behavior and offer relevant services based on the gathered information. For example, Metromile uses IoT trackers that track the mileage of cars and the driving habits of the insured. The company obeys the following rule: if a driver travels a little, s/he needs to pay lower insurance premiums. This personalized pay-per-mile approach saves policyholders up to 47% compared to what they used to pay.
Improve the quality of service
IoT software helps to trace a client’s behavior model and offer profitable solutions in time. For example, wearable devices allow bank branch managers to track the number of bank visitors. Thus, managers determine how many employees are needed for a shift to cope with the workload. They predict the amount of cash that must be available in ATMs so that people can withdraw enough money.
Another example of improved service is a smart branch. In such an intelligent bank branch, a user is guided by IoT devices. Clients use chatbots if they need to clarify instructions for working with a cash register. With the help of an ITM, clients independently make deposits, transfer funds, receive statements, and apply for cards. Such a branch operates 24/7 and helps consumers to resolve financial issues at a convenient time.
Although credit and debit cards remain the most preferred payment method, smartphones, smartwatches, and smart rings can make a difference. NFC-based wearables allow customers to pay for services or goods with a wave of the hand. Users gradually get accustomed to Android Pay, Samsung Pay, Apple Pat, and other mobile payment methods.
IoT payments are popular with customers. The Dutch bank ABN AMRO has tested smart rings, smartwatches, and trackers with the NFC payment function. Judging by the feedback, about 80% of testing participants preferred to pay for goods using wearable devices rather than cards.
Protect customers’ data
The Internet of Things collects the biometric data of clients and uses it for identification. If a customer wants to pay for goods, a mobile phone asks them to verify their identity by fingerprint, face, iris, or other methods. Even the simplest way to check a user identity, which is a payment confirmation by a code from an SMS, is possible using smartphones.
If a client doesn’t buy anything while an attacker uses bank data, the owner will recognize the theft in time and ask the bank to block the card. Some organizations even use a person’s heartbeat for authentication through smartwatches or bracelets.
Make decisions when issuing loans or insurance
Through the combination of wearable devices and IoT software, banks, insurance companies, and other organizations will learn more about the customers they are to work with.
Wearables collect information about customers’ shopping habits, working hours, breaks, and purchase histories. Such information helps to assess candidates’ solvency and approve or reject their loan applications. Car insurance companies use IoT sensors to track drivers’ behavior on the road and decide under what conditions to issue insurance policies.
IoT in banking and finance helps organizations to keep up with the times, get closer to customers and provide better services. Despite certain restrictions in the use of wearable devices, digital IoT services are constantly developing. If a financial company needs to increase customer loyalty and make services more flexible, it is worth contacting a financial software development company. Such an IT partner will create quality IoT software and implement it in the workflow. It will also provide system maintenance.