IoT is transforming every industry including the banking sector, which is known to be conservative and prone to bureaucracy. 4.5 billion people accessed the internet in 2019 and analysts are forecasting the number of connected devices to the internet will grow from 2 billion to 50 billion over the next few years.
The implications of this increased connectivity, along with the impacts of Covid-19 on changing consumer behavior, product priorities and need of digital transformation, is impacting banks as they strive to deliver increased value with new business models, services and products and improved operational efficiency.
Most consumer research shows that post-pandemic, consumers will continue to bank at a distance, using call center and chat services, more online and mobile banking, and contactless or digital payments instead of check or cash.
The banking industry is starting to leverage IoT advancements and digital technologies to better serve their customers. Today, 79% of their IT spend is primarily focused on the digital customer experience. Mobile banking is becoming more prevalent as the ability to bank anytime, anywhere banking is becoming an expectation, reducing the need for in-person banking.
In the current world of connected devices, mobile, wearables and cloud computing, new opportunities in banking and financial services are becoming omnipresent. During theCOVID-19 pandemic, consumers have become extremely aware of how companies are digitizing and personalizing experiences to improve their daily lives and they are expecting nothing less from their financial institution. Banks are exploring how they can use “Banking + IoT = Banking of Things” (BoT technology) to build lasting relationships by delivering more personalized services to their customers.
The potential for BoT’s applicability is immense and could extend beyond retail operations to offer products and services that would help banks build more meaningful relationships with their customers and provide additional value to them far beyond transactional offerings like simplification of digital account opening and digital engagement throughout the customer journey.
BoT could help drive an era where their products and services are designed not by banks but led by customer behavioral factors. BoT has the potential to impact traditional business processes in banking such as frictionless customer onboarding and KYC, smart banks, smart wallets, smart payments, contextualized Personal Financial Management (PFM), leasing finance automation, smart collaterals, tailor-made auto insurance, real-time life insurance and so on. Some of BoT benefits include:
- Improved customer’s Financial Habits
- Improved customer’s Banking Experience
- Expanded range of products & services beyond normal banking
- Efficient Branch Banking operations
- Enhanced Credit Card Experience
Implementation of BoT like other disruptive technology deployments, also carries a high element of risk, especially given the number of devices and sensors that will need to be secured from cyber-attacks.
As custodians of customers’ money, banks must focus on proper data management and security features while safeguarding customer information and adhering to privacy standards and compliance measures.
Another major challenge holding the banking sector back in this area is their legacy IT infrastructure. In the past, lack of customer pressure gave banks little reason to change; but now, the widespread need for digital transformation requires banks to simplify cumbersome systems and ensure that new technologies can be deployed effectively.
Data security is also a major concern for banks as they embark on their digital transformation initiatives. Data privacy and security measures need to be unquestionably firm and effectively implemented for BoTs. As a part of all transactional data collected from IoT, including information from wearables, smart watches and smart devices, banks will have access to the customer’s location information which may lead to a breach of privacy for the customers. They must find ways to adhere to privacy standards while making good use of location information. Banks also need to collect a lot of information about their customers through various channels. Any data breach can lead to severe repercussions for the banks. Data hacking or any data infringement can cause massive damage to customers and hamper their relationship with their banks. Banks must take preventive and corrective measures and should incorporate the best and latest data security technologies to make sure that the data is secure. Doing so banks can take advantage of the advances in technologies and convert IoT data into valuable information, and thus, increase their market share and provide better services to their customers.
Discover how TCS Customer Intelligence & Insights for Banking can help you address the challenges and reap the benefits of Banking of Things.