Fintech and the Internet of Things (IoT). These are just two of the countless buzzwords that the IT sector launches at unwary users. But it’s worthwhile learning about them because they both are growing in importance and have a lot to offer. Here’s how they work together to provide value for finance companies and customers.
Fintech and the IoT
Say the word “fintech,” and many things come to mind—an industry, a group of companies or specialized technologies. What’s the best definition? When you talk about the IoT (a group of technologies), it’s helpful to define fintech as:
Technologies that financial services organizations use to offer new or improved services and make their operations more efficient.
What is the IoT?
Think of the IoT as a global uberInternet, which can be built for the financial sector by:
- Starting with the basic Internet.
- Adding literally billions of devices connected to the Internet and each other.
- Adding huge volumes of data gathered by the devices and routed to financial institutions and customers.
The result: mobile, virtual and instant access to any person or device with an Internet connection.
Who’s in the IoT Development Game?
IoT growth is booming. There are staggering statistics, which project 25 billion devices in use by 2020 and a nearly $2 trillion global economic benefit.
You know that companies see a bright financial future for IoT development when global companies such as Google, Amazon, Siemens, Microsoft, Dell and many startups all create and connect IoT devices and build next-generation IoT software.
Pioneer IoT technology developers include:
- Google Cloud IoT is part of the Google Cloud Platform. This intelligent platform provides intelligent services by searching for fintech device networks.
- AWS IoT provides secure, two-way communications between Internet-connected sensors, actuators, embedded devices, or smart appliances and the Amazon Web Services cloud.
- Dell’s new distributed core computing model, AI, and machine learning technology, and new IoT-related development labs and partner programs that help customers develop their IoT projects more quickly.
How the IoT and Fintech Work Together
The underlying value of the IoT in the financial sector is its ability to transfer huge amounts of many types of data. The ability to do this efficiently has captured the attention and operations budgets of financial services organizations. For example.
- Banks are investing more and more resources into developing their internal infrastructure and consumer-facing services. IDC Financial Insights predicts that retail banks will spend over $16 billion on digital information technology initiatives, and this spending will continue to increase. Total IT spending by financial institutions globally is expected to exceed $310 billion by 2019.
Making Financial Services Part of a Digital Lifestyle
The IoT connects financial institutions with mobile technology and routes relevant financial data to businesses and customers more quickly than before. This makes it easier to:
- Collect, manage and share financial information.
- Respond to customer expectations of making financial services part of their digital lifestyle.
In this important new development, IoT-enabled technology provides customers with a more convenient and rewarding experience. Examples include:
- Analyzing how often ATMs are used and where new ones should be installed;
- Providing relevant location-based discounts for loyalty and rewards programs;
- Predicting customer expectations; and
- Helping customers make better financial decisions.
Maturing IoT Helps Finance Companies Grow
IoT capabilities are developing at breakneck speed, and there’s no sign of a slowdown any time soon.
The value of the IoT is to make static, physical objects (devices) engaging and smart. In the future, the customer experience will become the #1 brand differentiator. Potential customers will pick the brand—or in this case, the bank or services firm—that is easiest to work with.
Fintech + IoT = New Services and More Revenue
By connecting the financial services and retail banking environments to customer devices, financial services companies can increase the adoption rate of new services with personalized, contextual messages. Examples include:
- More contactless payment systems, such as Apple Pay and Google Wallet.
- Smartphone apps, which make it easy for customers to make cardless mobile payments, in-store.
- Beacons. These devices provide a range of uses, such as reading coupons, scanning codes, gathering customer information, and extracting payments. Add Wi-Fi, and it’s possible to conclude financial transactions between businesses and customers via beacons without mobile devices.
- Point of purchase services, such as financing a new car. When a consumer enters the dealership, for example, retail banks would alert consumers about how much financing they’ve been approved for or deliver customized loan proposals in a timely manner.
Some Issues Won’t Go Away
As powerful as IoT capabilities might be, some operations concerns won’t go away. The bigger the Internet, the more data and entry points that must be monitored, standardized and protected.
- Data security and consumer privacy. Every device connected to a network is open to manipulation. Information generated, received, processed and shared on the IoT must be made and kept secure. Financial services organizations need regulations that address security risks, comply with regulations and protect consumer privacy.
For example, controlling what data sources beacons can access and preventing their unauthorized use are vital parts of securing future IoT operations. And in the future, blockchain might track ownership of money and potentially make fintech IoT implementations safer.
- Data format standardization. Exchanging information along the IoT requires standardized data formats and methods that make the many IoT devices interoperable. Financial services organizations have started IoT standardization efforts, which are expected to grow.
Staying Relevant in the World of IoT
Financial organizations that want to stay competitive must make their peace with the need to adopt IoT. Investing in IoT-based technologies enables more efficient operations, creation of new, customer-based services and sturdy revenue growth in the future.