The term “Internet of Things” is parlance that’s used to describe interlinked technologies, networks, and entities. The IoT has been nominated by analysts as the “revolution of interconnectedness” that will affect and transform different areas of human endeavor. One of the industries currently feeling the growing IoT wave is the financial services industry. It is the next huge and fast approaching thing that’ll take the financial service industry by storm. Experts have projected its relevance as regards the improved upgrade of financial services on a global scale and its capacity to create even more value for customers. In this digest today, we’ll take a closer look at some of the significant impacts of the IoT on financial services.
1. Security on Smartcard Payments
The production of smart technological devices like smart cards, tokens, biometric-based authentication programs, and other means of making secure payments have caused a paradigm shift in the advancement of transactional security. Most people can now safely make financial transactions with less fear of fraud. In ensuring the safety of payment data, however, a financial security corporation in the United States named Diebold has produced a smart Automated Teller Machine that’s meant to work using smart card technology. It works a lot better than the conventional [and somewhat unreliable] ATM we are all used to. As a result of the Internet of Things (interconnectedness), whenever you want to withdraw some money from the smart ATM, you have to schedule a session with the machine through your phone app. On getting there (at the scheduled time), you would be required to select one of the available options like the iris scanner or the QR Code recognition, this, of course, will be done after inserting your smart card into the dedicated slot. With smart cards technology and the introduction of the IoT (Internet of Things), the financial transaction is a lot safer.
2. The Automation of Financial Transaction and Investment Activities
Most technology-analysts have confessed that IoT is the future of trading in the modern world, as most payments will be generally technologically-controlled shortly. Most leading financial organizations of the world are working on a secure powerhouse called the Internet of Value. This ‘Internet’ is an environment that is connected globally to monitor trading activities through the smart sensor, mobile apps, and bitcoin. The intelligent technology has only been made possible with the introduction of the IoT.
3. Improved Level of Transparency
Retail banks can easily monitor the credits they grant customers through the use of biometrics to determine the reliability of their debtors. With IoT, banks can identify customers with accumulated credit debts and those with impressive credit history. This way, they easily know who is worthy of such credit, and those unworthy, of course. Also, IoT can help financial organizations to obtain exact and current details on both their assets and their clients. Such an instance has been practiced by a leading auto-insurance industry. A car insurance provider in the United States (name of the organization withheld) uses Onboard Diagnostics (OBD) algorithms to observe the behavior of drivers behind the wheels to determine which kinds of drivers’ insurance they can safely cover. With the device, the company has made hundreds of billions of observations. These observations have helped the company in determining the level of risk they are willing to take in insuring some specific automobiles by comparing the driving histories of the owners with what is insured. This process has saved them millions of dollars that would probably have been unnecessarily incurred from blind insurance. Equally, farmers and agricultural stakeholders who rely on banks’ financial services for the progress of their business are not left out. By utilizing IoT tech, crop outputs and other conditions can be factored in to estimate a given commodity’s value using relevant analytical techniques. Based on the expected commodity yield, banks can offer flexible loans and repayment systems; a practice that will go a long way in deepening farmer-banker relationships.
4. Enhanced and Regularized M2M Transactions
The term “M2M” (Machine to Machine) alludes to machines’ communication using wireless data. The Internet of Things in the form of M2M has proven to be a massive technological upgrade in the financial world. With this breakthrough, many have agreed that we are gradually stepping into another digital revolution. A current prediction is that by the year 2020, there will be twenty-five billion smartphones, wearables, smart watches, cars, and various connected gadgets manufactured. In this era of technological graduation, the IoT will help financial bodies save time and work a lot smarter.
5. IoT Will Offer New Challenge in Security
In the next decade, we’ll begin to witness significant changes in IoT operations. These changes, probably unforeseen, might cause some loopholes in security systems, particularly financial services systems. This challenge, which might be more complicated than the regular security threats we are familiar with, might be tough to control if there was no proper defense against it from the outset. It is therefore imperative that banking experience with IoT is made as safe as possible. The data itself should be heavily encrypted to limit its susceptibility to getting hacked. Authentication tools are vital in ensuring that the information is accessed by only authorized users. That is why (more than fingerprint scans) voice-recognition, DNA-determinant, iris-scan software should be increasingly employed to dispel the tactics of impersonators.
Since the IoT is basically the hub of connectivity among various internet gadgets, there will be many open backdoors for internet criminals to gain access into the financial ecosystem. This is why financial institutions have to build watertight financial security right from the introduction of IoT.
In conclusion, the usage of interconnected devices by different segments of customers who use financial services has spiked astronomically over the years. Because of IOT, lives will be transformed; it will no longer be business as usual. Financial service providers must leverage on the level of inter-connectivity that the IoT provides to transform raw data into precious information that can be utilized to provide customers with exceptional services while driving increased revenue for financial organizations.