The Applications Of IoT In The Banking Industry

The Internet of Things (IoT) is a method of collecting and analyzing data. Along with many other industries like manufacturing, insurance, retail, and even agriculture, IoT in banking generates much interest.

The banking sector uses IoT to improve customer service, security, and management. IoT also helps automate many services and helps improve peer-to-peer transactions.

IoT is helping to streamline many aspects of the fintech industry. Banks use the IoT ecosystem to gather relevant data to leverage for different banking processes. In this article, you will find what those processes are and how IoT is affecting them.

A Brief Overview Of IoT

The Internet of Things is the idea of gathering and processing large quantities of data from various sources. The automatic gathering process can provide real-time feedback about everything on the IoT network.

Many industries have started using this technology to improve their operational efficiency. IoT technology can give accurate insight into underlying issues that people often overlook. It helps reduce labor costs and enhances customer service. As things stand, IoT will become a mandatory tool in every industry.

Advantages Of Using IoT In Banking

There are many advanced applications of IoT in banking and fintech. It has great potential to make more enhanced systems, but it’s sticking to the basics for now. Most IoT applications are very common and familiar to most people. Here are some examples:

1. Real-time Feedback

IoT devices can gather intel from a bank’s user activity. Such data can help the management team understand the financial needs of different clients.

A smart IoT system can automatically send useful notifications. For example, the IoT network can notify the client when their balance is about to run out. The process can work automatically without human assistance.

2. Identifying Fraudulent Activity

Fraudulent activities are very common in the banking scene, and they have increased significantly in the past decade. IoT in banking is a way to combat such fraud.

The biometric system can help reduce the scope of fraudulent activities to a large extent. However, some cases tend to slip through the gaps in the system. IoT management helps make clients aware of potential issues by sending notifications every time they make a transaction.

The user can flag a transaction as fraud, which will freeze their account until further action. That kind of fast action is only possible because of the real-time communication in the automated IoT system.

3. Customer Service

Customer service is one of the primary usage cases of IoT technology. IoT gathers user data and monitors users’ various digital habits. That information is immensely valuable for customer service. Banks can use that information to provide personalized customer service to their clients.

It will act as a record of the client and their financial requirements. The banks can use that to suggest budget plans and other related things.

4. Data Analytics

IoT’s most important contribution to any industry is improving analytical capacity. IoT is all about data. An IoT network can gather a mind-bogglingly high volume of data. Special automated software then processes the data and produces useful information for the industry.

Banks can use it to gather information on their clients. That is very helpful in the case of loans. Like the real estate industry, banks can use an IoT network to monitor the economic activity of potential load applicants.

IoT can also view trading data from various banking sources. The trading volume of private and government-issued bonds helps banks make better management-related decisions.

At [x]cube LABS, we leverage this data to create great customer journeys for better retention and engagement. This has helped many of our customers increase feature adoption and achieve increased loyalty for their businesses.

5. Improved Security

Security is the most crucial aspect of the banking sector. It’s almost entirely built around people’s trust in a bank’s ability to keep their assets safe. IoT technology can improve the fundamental infrastructure of a bank’s security system.

For example, IoT technology can use any device to gather data. The only prerequisite is that the device must be able to send and receive network transmissions. The CCTV, Smart alarms, and other monitoring devices are perfect sources for gathering data.

Connecting all these monitoring devices to an IoT network will help with real-time monitoring. The machines used for the transaction can also be implemented with IoT. An IoT network will also make locking down the system in the case of a security breach easier.

6. Smart Wallets

In the past decade, many wearables have been invented that can make payments. Fitness trackers, smart watches, wristbands, and jewelry have smart features. They can let you access your credit card or checking accounts from anywhere.

These devices can work fine on their own. But they won’t offer you any personalized features. The use of IoT is very prevalent in these devices. They collect data and make adjustments to certain features based on your habits. These devices can help you complete transactions faster with the help of IoT in banking.

7. Automation

Automated systems can dramatically improve productivity in the banking industry. Banks can leverage the IoT system to create automated systems to automate daily functions. 

IoT systems can also make smart gadgets more effective. The IoT infrastructure is also the backbone of self-checkout systems.

Challenges Of IoT In The Banking Sector

There are still several issues with IoT technology in any field. Here are some examples of the primary problems with the IoT network:

1. Security Issue

IoT systems offer increased protection on the client side, but it’s a different story for banks. The concept of IoT is relatively new, and there are no set standards yet. However, the most basic aspect is using many devices to gather data. 

Skilled hackers can exploit the fragile security of connected devices to harm the IoT network. They may not steal confidential information, but they can make the system give wrong feedback.

This list of devices is very broad. It can be humans with various gadgets, smart security cameras, ATM booths, etc. The problem with this system is that it’s impossible to secure all these devices with the same level of security. People can easily tamper with the feedback devices and give false data to the IoT network.

2. Redundancy 

IoT produces a lot of data, a lot with a capital L. An industry as large and active as the banking industry will undoubtedly share this quality. 

The thing about data gathered through such means is that 90% of it is useless. Most of the data won’t give any beneficial information to the banks. So, it will take a lot of data processing to glean the useful bits.

3. Problem With Homogeneity 

IoT technology is still relatively new. There are no international standards for homogenous system interface and compatibility. 

That makes it very hard to link devices from different manufacturers into the same IoT network.

Conclusion

The finance industry is going through a technological upheaval. Much new technology is being tested and added to the industry regularly. While some of that tech receives widespread recognition, some don’t quite make it. 

But it seems IoT in banking is one of the few that can have a large enough impact to change the dynamic of things.