The Impact of the Internet of Things on Financial Services

Rahul Singh

President – Financial Services at HCL Technologies
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The Impact of the Internet of Things on Financial Services

06.10.2017 12:23 pm

Financial IT: What role does the IoT play in our daily life? How great is the impact of IoT on financial industry? 

Rahul Singh: We are starting to see IoT everywhere. Connected devices are perforating almost every area of our daily lives and really is the hot topic in IT right now – just look at the innovations emerging from CES this year. Everything from coffee dispensers, to medical devices, to city infrastructure; even your hairbrush, is starting to go online, with the ability to connect and share data with other devices.

Right now, we are starting to see IoT have a profound effect on the financial services industry – particularly within the insurance sector. Innovative IoT solutions are being used to track drivers, with insurance premiums being altered according to the behaviour of the person behind the wheel. Using the huge amounts of real-time data available to them, insurance companies are able to re-risk compliance by taking all sorts of factors into account through powerful statistical analysis.

As IoT becomes ever more prevalent in our daily lives, the sources of this information will continue to grow, opening up further possibilities for insurance providers to offer personalised premiums based on our lifestyle habits and personal sentiments. Insurers like Allstate are already offering policy-holders a discount of up-to 25% on insurance premiums if they install smart monitoring systems to increase home security.

Financial IT: How does your company deliver the solution? What are the challenges and opportunities of applying your solution for the customers?

Rahul: Our IoT Platform, IoTWorksTM, consists of four solution categories that we offer to our customers – workforce, asset, worksite and operational transformation. We have over 80 innovation labs across the globe that work on implementing these solutions, with the aim of driving business value for our customers by generating new sources of revenue, reducing operational costs and creating new lines of business.

The challenges are the same across the majority of our customers. The primary challenge they face is deciding which business functions can benefit from the adoption of IoT and which will not. Identifying the right technology partner is the crucial first step in ensuring IoT deployments are a success. Organisations should be looking for a partner that will work collaboratively with their IT department to gain an understanding of the unique challenges they face and then help identify the areas of their businesses that could best be transformed by IoT to deliver efficiency.

Security is another challenge that is raised regularly, but this shouldn’t be too much of a problem if IoT deployments are implemented correctly. Standard best practises of network security will need to be adhered to and built on, with areas such as device patching, data encryption, privacy protection and access management all getting an overhaul before IoT is implemented.

Financial IT: Can you mention the use case of your IoT solution?

Rahul: IoT is playing a key role in transforming the insurance world – it being a data driven industry.  We see several use cases in insurance industry for enhancing financial performance by improving rating, pricing, loss control and fraud mitigation. We have also seen cases for enhancing customer engagement and offer value added services.

One such example is around the use of telematics for the auto insurance. You can collect data for analysis of driving behaviour. Parameters such as hard breaking and hard turns, and driving patterns such as time of the day or the average journey length are captured for analysis and correlation with losses. The solution enables insurers to reward good drivers with lower premiums, and also promote safer driving habits. Use of mobile telematics can also be extended to detect phone usage while driving. Smart phone usage while driving is attributed to increasing frequency and severity of auto insurance losses in recent years.

Another use case is around use of smart home devices and weather data to mitigate losses and improve customer service. A survey published by ISO, found that wind and hail, and water damage are the top two causes of home owner losses. The solution utilises temperature sensors and water leak detectors, as well as weather data, to mitigate losses through proactive action before a severe weather event. It also aims to reduce intensity of losses by taking timely action after a severe weather event or a water leak. Neighbourhood-level granular weather data is used to estimate the number of impacted insured properties when planning a response and improve speed of claim reporting and settlement.

The final use case is related to worker’s compensation insurance. After a workplace injury, faster recovery and return to work is a win-win situation for the injured individual and the employer, as well as the insurance carrier. The solution uses smart phone sensors as well asa smart phone app to track and monitor physical therapy, compliance to prescription drug usage, and physician office visit schedules.

Financial IT: Going forward what are the trends and advancements that we should expect to see in the industry? 

Rahul: Aside from IoT deployments, chatbots leveraging artificial intelligence are cropping up all over the banking landscape. Indeed, banks are deploying chatbots at such a furious pace that they could well qualify as one of the single most memorable trends to sweep the industry in the next decade. Recently, Kazakhstan’s digital bank B1NK launched a chatbot that speaks three different languages (Kazakh, English, and Russian). It answers questions related to ATMs and bank locations, currency exchange rates, the customer’s history and card balance, and helps them block cards, set spend limits and makes mobile money transfers. One reason behind this trend is the rising frustration over wait times with call centre agents and bank officials. Customers don’t have the patience to wait in a call queue. They would rather get an instant response from a chatbot.

We're also seeing huge interest in blockchain amongst financial services companies. Over the next three to five years, blockchain is set to bring about as vast a transformation as the Internet, so banks are very engaged in assessing its potential to revolutionise their business.

Outside of these areas, banks are looking at ways of collaborating with the new breed of Fintech firms that we’ve seen emerge in recent years. Rather than treating them as rivals, banks are looking at how they can create a more symbiotic relationship with Fintech companies, to gain access to the technology hotbeds they have created, without needing to invest time and capital in development.

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