The Internet of things or IoT is continuing to grow and playing more and more of a role in everyday life. This is only set to continue and one of the industries that is set to see a big impact is finance. The key question is whether the industry is ready for this and the implications it could have on changing those traditional models?
What is the IoT?
The first point to start with is to look at what exactly is the Internet of Things. The IoT is a new way to provide value to everyday life through four different aspects: things, data, process, and people. The things being physical devices and objects which can be connected. This covers the likes of smart devices and equipments, which are becoming more of a regular occurrence in homes, offices, production sites and vehicles around the world. Data covers how it can be made useful when it comes to decision making. Process means it is delivering the right information to the right place and time. Then finally people covers connecting people in much more relevant and valuable ways.
What impact could IoT have on the financial services?
So as mentioned, IoT is all about adding value to everyday life and one of these is with financial markets. The latter is all about information, which is why IoT is set to play a major role in the process moving forward. This is down to the fact that it is based around trading decisions made through data, guesswork or intuition. Data is why it is all set to change as IoT enables for a vast amount of data to be collected with ease, then analysed and processed. This is not only going to speed up finance but now be part of the decision making when it comes to financial markets.
According to EY, the massive deployment of sensors will result in unprecedented capabilities for gathering objective data about the world around us.
The financial world is also now entering a new era with financial technology (or FinTech) companies use technology and innovation to compete and surpass the traditional financing models. This emerging industry is starting to use IoT and Artificial Intelligence to improve many aspects of activities in finance like decision making based on objective and real time data. IoT data extracted from the real world is about to play an important role for analysts creating trading models and strategies.
How can IoT enhance client value in Finance?
When it comes to the overall finance industry, IoT offers real potential for companies in banking and insurance. Looking at banking, mobile payments will more and more use IoT technologies to provide enhanced security but also flexibility through wearable devices. For example, Montblanc, the German manufacturer of luxury goods, has recently launched its own mobile wallet solution based on NXP mWallet 2GO.
Insurance is another sector within the industry that is set to go through major changes under the growth of IoT. Vehicles equipped with telematics devices allow insurance companies to deploy new services and business models. IoT-enabled cars using geolocation technology can now give insurance companies valuable information regarding a driver’s habits. This process helps with giving an accurate risk rating to each potential customer. This also allows insurance companies to offer tailored options and rates, through pay as you drive (or usage based insurance).
Banks and insurance companies have both been moving with the times and adapting to services that clients are looking for, whether in a B2B or B2C perspective. IoT is now integrated in various fields of the finance industry in order to produce valuable information, allow new business models and offer more secure services.
With IoT being more and more integrated into our everyday life, businesses can now benefit from large amounts of valuable data to enhance their processes and services. By giving access to real world data, IoT gives the companies of the finance sector an opportunity to re-think and re-design their services to create more value through a better efficiency, new business models and a better customer satisfaction.