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Engaging with the Internet of Things (IoT) and the data generated by it, presents a real opportunity for financial institutions (FIs) to innovate and transform their own products and services. On the flipside, failure to do so may, in time, jeopardise their future prosperity, by leaving them vulnerable to competitors and new, agile players.
The workings of this emerging ecosystem are intricate and quite different to the conventional world of financial services. Billions of connected devices, seemingly unlimited possibilities and a huge tidal wave of data are converging to bring new complexities. Now is the time for FIs to consider the different positions they can take in the IoT ecosystem, the roles they can adopt and the initial use-cases which will give them a commercial foothold.
Power comes from within
With something as hyped as IoT, it’s tempting to focus on grandiose visions of ‘what could be’. Yet, closer-to-home, IoT applications promise to have a big impact on the internal processes and back-office operations of large enterprises, including banks. This is a sensible and realistic place for FIs to start, and one that is often overlooked.
Back-office operations are foundational to the existence and performance of the FI, so optimising them to yield more productivity at a lower cost should be one of the first objectives of the organisation. IoT-based solutions can be used to manage FI branches, head offices and employees’ daily work more efficiently.
What’s in it for the customers?
Customer experience could also be improved through IoT. If customers had IoT-enabled digital financial companions that could receive instructions, such as the Amazon Echo or Google Home, they could automatically trigger appropriate back-office workflows. Services such as opening an account, capturing and verifying know-your-customer documentation and making payments could all be simplified and made more convenient for customers. Supporting the integration of a financial services digital companion could be a stepping-stone to adding value to existing services and products, as well as unlocking new revenues generated from data.
In line with this, FIs can use IoT to move past their basic value proposition and get customers excited about their bank relationship. Collaborating with the wider industry, such as mobile service providers and payments processors, and engaging with data, are key to creating seamless and more personal consumer experiences.
How do you deal with data?
The real value of IoT is the data it generates and its huge potential. Making sense of this data, however, isn’t easy and requires institutional commitment. With so much data comes great complexity over ownership, hosting, processing and understanding how to utilize it to best effect. FIs may be starting to look at putting in place the right talent to help them get their heads around how they can translate this data into better products and services for their customers, as well as navigate all the related compliance and regulation complexities.
Utilising data can improve decision making for credit scoring, mortgage applications and lending practices, with benefits for both the customer and the FI, through higher approval rates. Just like we’ve seen in the insurance industry, where sharing driving or health data can result in reduced premiums, with customer permission, FIs could gather real-time data from specific things, such as wearables, and other interfaces, like open banking APIs. Doing this would enable them to understand lifestyle behaviour, spending patterns and choices made, and provide personalised products and services based on this data.
FIs could also capitalise on other IoT trends, such as geolocation services to offer enhanced customer interactions, enabling them to locate and navigate to their nearest branch via a smartphone app, and learn how long the wait is to see an advisor there.
FIs also have an opportunity to commercialise their data, by anonymising it and selling it on.
What about security?
This is one of the biggest challenges, and not just because of the massive number of devices connected to a bank’s network through APIs. Data sharing can be a risky business and even though consumers may be willing to share their data in exchange for better products and services, questions remain over the inherent risks of doing so. This is where FIs are primed to build on their reputations as trusted entities by adopting the role of identity and data guardians for their customers.
Where to go next
The IoT opportunity for FIs is explored in more detail in Mobey Forum’s report on IoT, entitled IoT in Financial Services: Role and Opportunities for Financial Institutions and is discussed in the organisation’s latest podcast, moderated by Dave Birch form Consult Hyperion and featuring Mobey Forum IoT Expert Group Co-Chairs, Veronica Lange, Head of Digital Engagement, UBS and Sasa Skrgic, Group Retail Strategy, Erste.